January 1, 2026
PixelPower/Depositphotos.com
Is Retail Headed for Another Tough Year in 2026?
Forrester and AlixPartners both came out with gloomy retail forecasts for 2026, citing the impact of elevated interest rates, AI disruption, and a more frugal consumer amid economic unknowns.
Forrester predicted three major U.S. specialty chains will declare bankruptcy in 2026 due to high interest rates, relentless shifts toward online buying, and aggressive competition from mass merchants and value retailers.
“Retailers carrying substantial debt loads face the greatest risk,” said Sucharita Kodali, VP and principal analyst at Forrester, in a blog entry. “But even financially stable specialty chains like Dick’s Sporting Goods and Best Buy cannot rest easy — they must aggressively pursue omnichannel strategies, optimize their physical footprints, and create unique experiential offerings that online competitors cannot replicate. For struggling retailers, the priority must be debt reduction above all else. The message is clear: Specialty retail’s margin for error has vanished entirely.”
Forrester’s predictions also call for retailers to be significantly challenged by the disruption caused by AI chatbots — and finally commit to ending “generous” e-commerce returns in the face of rising processing costs, supply chain pressures, and margin erosion.
Kodali said, “Success hinges on retailers’ technology investment, operational discipline, and willingness to abandon unsustainable practices that erode margins — while building differentiated experiences that drive loyalty.”
Retail Could Face a Pullback in Spend in 2026
AlixPartners’ 2026 global consumer outlook, entitled “Spending, Disrupted” and based on a survey of more than 13,000 global consumers, forecasts a “sharp” global pullback in spending intentions, including among high-income earners who have been the most resilient spenders in recent years. The consultancy said the projected spending cutbacks reflect “persistent economic uncertainty,” with inflationary pressures and muted wage growth continuing to constrain disposable income across demographics.
“Businesses must recognize that this is not a cyclical dip—it’s a structural reset of value,” said Paul Martin, Global Retail Growth Leader at AlixPartners, in a press release. “Winning in will require sharper value-led pricing, more personalized offers, and customer experiences that justify every incremental dollar.”
Grocery is seen as the only category growing globally, although the gains are expected to be driven by food inflation rather than volume. In the U.S., consumers indicated they plan to scale back across eating and drinking out, discretionary retail, travel, and fitness categories.
Overall, AlixPartners sees a broader shift globally towards more planned, less impulsive buying as households stretch their budgets. AlixPartners said in the study, “For retailers, this means the traditional levers of promotion and ‘newness’ may be less effective. Instead, the focus should shift to loyalty and solutions that help consumers extract more value from what they already own, beyond the immediate period after purchase. Inventory planning and demand forecasting must be attuned to this evolving cadence of consumption.”
BrainTrust
Jeff Sward
Founding Partner, Merchandising Metrics
Cathy Hotka
Principal, Cathy Hotka & Associates
Bhargav Trivedi
Recent Discussions
Discussion Questions
What’s your outlook for retail and the consumer mindset in 2026?
What do you see as the biggest headwinds as well as potential tailwinds facing the retail sector?
Poll
Loading …
I’m cautiously optimistic about the outlook for retail and consumers in 2026, but that optimism comes with important qualifiers. The latest data show a resilient American consumer and a strong holiday performance, with overall retail spending up roughly 3.7 %–4.2 % this past season despite economic headwinds — even signaling the first ever $1 trillion holiday season in the U.S. — albeit with spending that matters being value-driven and selective. Consumers are prioritizing essentials and bargains, and even using technology like AI to hunt for deals — a sign of savvy rather than weakness. This suggests that demand is there, but it’s more nuanced and mission-oriented than in a boom cycle.
That said, the retail sector isn’t without significant headwinds as we move into the new year. Policy-driven pressures — especially tariffs — are already nudging up consumer prices and could deepen inflationary stress unless resolved; tariffs have lifted retail prices several percentage points above trend, and further escalation could squeeze margins and dampen discretionary buying. The unemployment outlook and broader labor market are also important wildcards: should job growth slow or unemployment rise meaningfully, even the resilient consumer could pull back, particularly on big-ticket or discretionary categories. In this environment, I share the hope that the Supreme Court will overrule or recalibrate the current tariff approach, which would remove a major structural cost burden and ease pressure on both retailers and shoppers.
At the same time, there are potential tailwinds worth noting. Retailers more adept at marrying value with convenience — especially discounters and off-price players — have outperformed this season, underscoring how adaptable formats can thrive even amid uncertainty. Broader macro forecasts, including anticipated interest-rate cuts and strategic nearshoring, could temper cost pressures and support consumption if realized. So while 2026 is unlikely to be a runaway growth year in the traditional sense, a narrative of decline seems overstated — particularly if retailers continue to align assortments to consumer missions, leverage data and technology to sharpen relevance, and remain disciplined on price and execution. In that sense, cautious optimism — grounded in resilience but aware of intensity — seems the most realistic posture for what lies ahead.
With health insurance premiums skyrocketing today for millions of American households, I have to think that consumers will be ever more cautious about spending in the new year. Continued tariff impacts don’t help.
Retail in 2026 looks less like a rebound year and more like a reset. Consumers are becoming noticeably more intentional, even in higher-income segments, and are planning purchases instead of reacting to promotions or novelty. This shift feels structural, driven by prolonged economic uncertainty, high interest rates, and inflation fatigue.
For retailers, that means inefficiencies will surface quickly. Debt loads, fulfillment costs, and returns continue to pressure margins, making once-popular practices harder to sustain.
Technology and AI will be a defining factor, but only when applied with discipline. Retailers chasing AI as a headline feature risk adding cost without solving real problems. The real advantage will come from using technology to improve forecasting, inventory accuracy, and personalization that reduces friction rather than pushes more offers.
Loyalty will matter more than constant newness, and experiences that help customers extract value over time will resonate more than aggressive promotions. Omnichannel will remain important, but only when it simplifies the journey and gives physical stores a clear purpose.
Ultimately, 2026 will reward retailers that move fast but spend smart, using technology to operate leaner, respect tighter consumer budgets, and consistently deliver value that earns trust and repeat engagement.
Yes, 2026 is going to be anouther tough year. How could it possibly be anything else? Where is the relief going to come from? “Resilience” only has so much elasticity. Debt levels and default rates (even on BNPL) suggest that resilience has it’s limits. Holiday spending may be pushing those metrics to their limits.
I like how the article used the term “structural reset”. It’s not just a structural reset of value. It’s a structural reset of both prices and disposable income. Tariffs are raising prices and siphoning billions of dollars out of the economy that would have been spendable disposable income. Part of those billions are coming out of retailers margins, but another part is simply evaporating out of choppers wallets. And what’s happening in healthcare is about to siphon additional billions out of many households disposable income. That has to effect discretionary spending at some point. Higher prices + lower disposable income is not the kind of equation retailers look forward to. So yes, 2026 is going to be another tough year.
“Retailers carrying substantial debt loads face the greatest risk,
Gosh, the year isn’t even a day old, and we have a strong contender for DUH! of the Year Award (the envelope please…)
I think this year, like every one for the past 412 – oh to be back in 1614 again – will be viewed by retailers with trepidation…well, ‘cuz that’s what retailers do; so should we join them? There’s certainly reasons for angst: income distribution is increasingly moving from that nice bell shape to more of a “U”, people are finally catching on to the fact that “disruption” isn’t all good (particularly if you’re on the losing end of the disruption), and the government has moved from being a stabilizing – or at worst irrelevent – influence to actively negative. And yet…
and yet, there’s nothing to say all these simmering pots will boil over this year. The economy is a big beautiful thing that shows remarkable resilience (even if it might mean things will just get worse from putting off dealing with them).
Yes, “reasons for angst” with no solution on the horizon.
2025 was a challenging year, but it was not a disaster. There were plenty of retail success stories -off-price, department stores starting to get their houses in order, Walmart and Amazon, and so on. While demand was meager (in volume terms), most of the retail failures came from operational stumbles: high debt, poor propositions, weak pricing, and so forth. I expect 2026 will bring more of the same.
After spending the holidays with young parents, I believe “structural reset of value” is the key factor in the continuing evolution of consumer preferences. The treasure hunt is moving to the “gently used” world. Not for everything, but furniture and apparel are part of the mix.
I asked a few of my clients about 2026 and here’s what they came back with-
Matthew Brogie, CEO of Repsly:
Neighborhood Planograms Replace National Aisles. The shift from one national planogram to neighborhood-specific shelves stops looking experimental and starts feeling normal. Retailers lean into clustering stores by income, household mix, culture and missions, then let algorithms fine tune assortments by store. One location gets big packs and bundles; another gets smaller formats and premium flavors.
Sustainability Quietly Redefines ‘Best Value’. Sustainability will merge with value instead of sitting off to the side. Shoppers under pressure want less waste, not lectures, so retailers start folding “how long it lasts” and “how much gets thrown away” into their idea of value. Shelf tags highlight concentrates, right-sized packs and refills that become cheaper after a couple of uses.
Julie Lyle, President-North America, TCC Global:
AI will boost retail loyalty programs. Retail loyalty, gamification and shopper continuity programs in 2026 will focus on hyper-personalization, immersive digital engagement and fluid brand relationships. AI-powered, gamification and suggestive selling mechanics will play a defining role in shaping customer retention and engagement strategies.
Gamification will take hold in retail. Gamified incentives like challenges, badges and milestone-driven rewards will further integrate the customer online/in-store shopping journey, while boosting customer acquisition and conversion rates. Gamification will also facilitate rich, contextual first-party data collection and deepen emotional connections through memorable shopping experiences.
Philippe Bottine, Senior Executive Vice President, and Jim Nored, Chief Commercial Officer of VusionGroup North America:
Transformation of the “omni shopper” towards Agentic Shopping. Large incumbents (Amazon, Walmart) and new entrants (Google, OpenAI) will start disrupting the shoppers / retailers / brands ecosystem by increasing personalization and enhancing the ability to search for deals. This will lead to decreased loyalty to retailers and brands.
AI driven personalization will grab a bigger foothold. Tools will not just recommend products, they will anticipate needs using real-time data on browsing history, social signals, weather patterns and more. This will enable hyper-personalized experiences.
Patrick J. Hughes, CEO of eGrowcery:
App Overload. There is a growing trend that doesn’t appear to be slowing and that is the onslaught of new “app” solutions. Of greater concern is that many of these app offerings are “Box Apps” or mobile vessels designed for singular reason (i.e. retail media or coupon clipping) rather keeping the entire shopper experience in the forefront. Retailers could be coerced into making decisions focused on a short-term objective, rather than preparing for the long term with a multifaceted app that will evolve as the strategy evolves.
“Gamification will take hold in retail”
Is it with purpose and value to EACH customer segment? or maybe not.
To the consumer segment who are ok with it, yes.
But what is the split off content/functionality for the segment of your target that wants streamlined purchase and NO additional screen hours.
For years retailers have been shouting they “do personalization” without actually providing 1 to 1 value. (eg every supermarket that has my data fails to show me promos tailored to my history).
Gamification is a type of personalization.
This is where talking with, interviewing and listening to customers is vital. Ongoing basis.
Get to know the subsegments.
Co-create with the ones who want gamification & learn from them exactly how it impacts 1) their shopping and 2) positive view of the brand,
Do the same with the time-strapped, fast moving customers. Those who only wants pure retail- and who are annoyed by a brand wanting time (for reviews, games, points building tasks).
Gamification is a type of personalization. A lot of retailers still do not nail the basics… including asking their own customers what they value most.
Consumers’ behaviour is a lagging economic indicator. It takes time for people to change habits and only do so when they are hit with a realization. Habits are very slow to change. While way too many headlines seem to highlight what is good, like the stock market, investment in AI, and revenue measures, consumers tell the real story. The realization is just starting.
Even as the economy reverses (will it?), it will take time for the
consumer to readjust. We are talking about changes in behavior and value judgments. Slow, slow, slow.
2026 is likely to be challenging, but not in a uniform way. The pressure is coming from higher costs, tighter consumer spending and less tolerance for mistakes. Customers are becoming more deliberate, which exposes weak value propositions quickly. Retailers carrying heavy debt or relying on promotions to drive volume will feel that strain first.
At the same time, tougher conditions tend to reward discipline. Clear pricing, tighter inventory control and loyalty built on consistency can still perform well. Technology and AI can help, but only when they support better execution rather than add complexity. The year ahead looks less like a downturn and more like a test of fundamentals. Retailers that stay focused and adaptable will find stability even as others struggle.
In 2026, retail is facing a “structural reset” rather than a total collapse. While real GDP growth is steady at 2%, the industry is splitting in two.
Luxury brands and deep discounters (like Ross and Aldi) are doing well, but mid-tier stores are getting squeezed. Shoppers are “volatility numb”—they aren’t panicking, but they are incredibly intentional, ditching brand loyalty for private labels to save money.
The big challenge? A “perfect storm” of higher labor costs and new tariffs. To survive, winners are moving past AI hype into “agentic commerce,” using smart bots to automate returns and personalize deals instantly.
More Discussions
Did Holiday 2025 Mark a Shift Into the ‘Agentic Shopping’ Retail Era?
Salesforce data suggests that holiday 2025 was the retail period in which agentic shopping turned the…Should Facial Recognition for Theft Get Another Look?
Retailers and consumers are hotly debating facial recognition tech: theft deterrent, privacy overstepping, or both?Will Retail Bifurcation Persist (or Intensify) in 2026?
Recent Placer.ai data indicated a deepening divide within retail, at least pertaining to foot traffic.
I’m cautiously optimistic about the outlook for retail and consumers in 2026, but that optimism comes with important qualifiers. The latest data show a resilient American consumer and a strong holiday performance, with overall retail spending up roughly 3.7 %–4.2 % this past season despite economic headwinds — even signaling the first ever $1 trillion holiday season in the U.S. — albeit with spending that matters being value-driven and selective. Consumers are prioritizing essentials and bargains, and even using technology like AI to hunt for deals — a sign of savvy rather than weakness. This suggests that demand is there, but it’s more nuanced and mission-oriented than in a boom cycle.
That said, the retail sector isn’t without significant headwinds as we move into the new year. Policy-driven pressures — especially tariffs — are already nudging up consumer prices and could deepen inflationary stress unless resolved; tariffs have lifted retail prices several percentage points above trend, and further escalation could squeeze margins and dampen discretionary buying. The unemployment outlook and broader labor market are also important wildcards: should job growth slow or unemployment rise meaningfully, even the resilient consumer could pull back, particularly on big-ticket or discretionary categories. In this environment, I share the hope that the Supreme Court will overrule or recalibrate the current tariff approach, which would remove a major structural cost burden and ease pressure on both retailers and shoppers.
At the same time, there are potential tailwinds worth noting. Retailers more adept at marrying value with convenience — especially discounters and off-price players — have outperformed this season, underscoring how adaptable formats can thrive even amid uncertainty. Broader macro forecasts, including anticipated interest-rate cuts and strategic nearshoring, could temper cost pressures and support consumption if realized. So while 2026 is unlikely to be a runaway growth year in the traditional sense, a narrative of decline seems overstated — particularly if retailers continue to align assortments to consumer missions, leverage data and technology to sharpen relevance, and remain disciplined on price and execution. In that sense, cautious optimism — grounded in resilience but aware of intensity — seems the most realistic posture for what lies ahead.
With health insurance premiums skyrocketing today for millions of American households, I have to think that consumers will be ever more cautious about spending in the new year. Continued tariff impacts don’t help.
Retail in 2026 looks less like a rebound year and more like a reset. Consumers are becoming noticeably more intentional, even in higher-income segments, and are planning purchases instead of reacting to promotions or novelty. This shift feels structural, driven by prolonged economic uncertainty, high interest rates, and inflation fatigue.
For retailers, that means inefficiencies will surface quickly. Debt loads, fulfillment costs, and returns continue to pressure margins, making once-popular practices harder to sustain.
Technology and AI will be a defining factor, but only when applied with discipline. Retailers chasing AI as a headline feature risk adding cost without solving real problems. The real advantage will come from using technology to improve forecasting, inventory accuracy, and personalization that reduces friction rather than pushes more offers.
Loyalty will matter more than constant newness, and experiences that help customers extract value over time will resonate more than aggressive promotions. Omnichannel will remain important, but only when it simplifies the journey and gives physical stores a clear purpose.
Ultimately, 2026 will reward retailers that move fast but spend smart, using technology to operate leaner, respect tighter consumer budgets, and consistently deliver value that earns trust and repeat engagement.
Yes, 2026 is going to be anouther tough year. How could it possibly be anything else? Where is the relief going to come from? “Resilience” only has so much elasticity. Debt levels and default rates (even on BNPL) suggest that resilience has it’s limits. Holiday spending may be pushing those metrics to their limits.
I like how the article used the term “structural reset”. It’s not just a structural reset of value. It’s a structural reset of both prices and disposable income. Tariffs are raising prices and siphoning billions of dollars out of the economy that would have been spendable disposable income. Part of those billions are coming out of retailers margins, but another part is simply evaporating out of choppers wallets. And what’s happening in healthcare is about to siphon additional billions out of many households disposable income. That has to effect discretionary spending at some point. Higher prices + lower disposable income is not the kind of equation retailers look forward to. So yes, 2026 is going to be another tough year.
Gosh, the year isn’t even a day old, and we have a strong contender for DUH! of the Year Award (the envelope please…)
I think this year, like every one for the past 412 – oh to be back in 1614 again – will be viewed by retailers with trepidation…well, ‘cuz that’s what retailers do; so should we join them? There’s certainly reasons for angst: income distribution is increasingly moving from that nice bell shape to more of a “U”, people are finally catching on to the fact that “disruption” isn’t all good (particularly if you’re on the losing end of the disruption), and the government has moved from being a stabilizing – or at worst irrelevent – influence to actively negative. And yet…
and yet, there’s nothing to say all these simmering pots will boil over this year. The economy is a big beautiful thing that shows remarkable resilience (even if it might mean things will just get worse from putting off dealing with them).
Yes, “reasons for angst” with no solution on the horizon.
2025 was a challenging year, but it was not a disaster. There were plenty of retail success stories -off-price, department stores starting to get their houses in order, Walmart and Amazon, and so on. While demand was meager (in volume terms), most of the retail failures came from operational stumbles: high debt, poor propositions, weak pricing, and so forth. I expect 2026 will bring more of the same.
After spending the holidays with young parents, I believe “structural reset of value” is the key factor in the continuing evolution of consumer preferences. The treasure hunt is moving to the “gently used” world. Not for everything, but furniture and apparel are part of the mix.
I asked a few of my clients about 2026 and here’s what they came back with-
Matthew Brogie, CEO of Repsly:
Neighborhood Planograms Replace National Aisles. The shift from one national planogram to neighborhood-specific shelves stops looking experimental and starts feeling normal. Retailers lean into clustering stores by income, household mix, culture and missions, then let algorithms fine tune assortments by store. One location gets big packs and bundles; another gets smaller formats and premium flavors.
Sustainability Quietly Redefines ‘Best Value’. Sustainability will merge with value instead of sitting off to the side. Shoppers under pressure want less waste, not lectures, so retailers start folding “how long it lasts” and “how much gets thrown away” into their idea of value. Shelf tags highlight concentrates, right-sized packs and refills that become cheaper after a couple of uses.
Julie Lyle, President-North America, TCC Global:
AI will boost retail loyalty programs. Retail loyalty, gamification and shopper continuity programs in 2026 will focus on hyper-personalization, immersive digital engagement and fluid brand relationships. AI-powered, gamification and suggestive selling mechanics will play a defining role in shaping customer retention and engagement strategies.
Gamification will take hold in retail. Gamified incentives like challenges, badges and milestone-driven rewards will further integrate the customer online/in-store shopping journey, while boosting customer acquisition and conversion rates. Gamification will also facilitate rich, contextual first-party data collection and deepen emotional connections through memorable shopping experiences.
Philippe Bottine, Senior Executive Vice President, and Jim Nored, Chief Commercial Officer of VusionGroup North America:
Transformation of the “omni shopper” towards Agentic Shopping. Large incumbents (Amazon, Walmart) and new entrants (Google, OpenAI) will start disrupting the shoppers / retailers / brands ecosystem by increasing personalization and enhancing the ability to search for deals. This will lead to decreased loyalty to retailers and brands.
AI driven personalization will grab a bigger foothold. Tools will not just recommend products, they will anticipate needs using real-time data on browsing history, social signals, weather patterns and more. This will enable hyper-personalized experiences.
Patrick J. Hughes, CEO of eGrowcery:
App Overload. There is a growing trend that doesn’t appear to be slowing and that is the onslaught of new “app” solutions. Of greater concern is that many of these app offerings are “Box Apps” or mobile vessels designed for singular reason (i.e. retail media or coupon clipping) rather keeping the entire shopper experience in the forefront. Retailers could be coerced into making decisions focused on a short-term objective, rather than preparing for the long term with a multifaceted app that will evolve as the strategy evolves.
“Gamification will take hold in retail”
Is it with purpose and value to EACH customer segment? or maybe not.
To the consumer segment who are ok with it, yes.
But what is the split off content/functionality for the segment of your target that wants streamlined purchase and NO additional screen hours.
For years retailers have been shouting they “do personalization” without actually providing 1 to 1 value. (eg every supermarket that has my data fails to show me promos tailored to my history).
Gamification is a type of personalization.
This is where talking with, interviewing and listening to customers is vital. Ongoing basis.
Get to know the subsegments.
Co-create with the ones who want gamification & learn from them exactly how it impacts 1) their shopping and 2) positive view of the brand,
Do the same with the time-strapped, fast moving customers. Those who only wants pure retail- and who are annoyed by a brand wanting time (for reviews, games, points building tasks).
Gamification is a type of personalization. A lot of retailers still do not nail the basics… including asking their own customers what they value most.
Consumers’ behaviour is a lagging economic indicator. It takes time for people to change habits and only do so when they are hit with a realization. Habits are very slow to change. While way too many headlines seem to highlight what is good, like the stock market, investment in AI, and revenue measures, consumers tell the real story. The realization is just starting.
Even as the economy reverses (will it?), it will take time for the
consumer to readjust. We are talking about changes in behavior and value judgments. Slow, slow, slow.
2026 is likely to be challenging, but not in a uniform way. The pressure is coming from higher costs, tighter consumer spending and less tolerance for mistakes. Customers are becoming more deliberate, which exposes weak value propositions quickly. Retailers carrying heavy debt or relying on promotions to drive volume will feel that strain first.
At the same time, tougher conditions tend to reward discipline. Clear pricing, tighter inventory control and loyalty built on consistency can still perform well. Technology and AI can help, but only when they support better execution rather than add complexity. The year ahead looks less like a downturn and more like a test of fundamentals. Retailers that stay focused and adaptable will find stability even as others struggle.
In 2026, retail is facing a “structural reset” rather than a total collapse. While real GDP growth is steady at 2%, the industry is splitting in two.
Luxury brands and deep discounters (like Ross and Aldi) are doing well, but mid-tier stores are getting squeezed. Shoppers are “volatility numb”—they aren’t panicking, but they are incredibly intentional, ditching brand loyalty for private labels to save money.
The big challenge? A “perfect storm” of higher labor costs and new tariffs. To survive, winners are moving past AI hype into “agentic commerce,” using smart bots to automate returns and personalize deals instantly.