Consumers are interested in businesses that focus on experiences. Photo by Jose Ignacio Martin Del Barco.
A successful retail strategy is grounded in a deep understanding of the national, regional, and local trends affecting businesses. Authored by Chief Impact Officer Matt Wagner, Ph.D., and Senior Director of Research Michael Powe, Ph.D., the 2025 Virginia Retail Matters report combines Main Street America’s national small business research with case studies and focus group findings from communities across Virginia to provide a detailed exploration of the state of retail in 2025.
You can use this report to:
- Understand the consumer trends that are impacting retail businesses.
- Navigate the changing tariff landscape.
- Help small business owners identify strategies for success.
Let’s dive into the report and explore some of the data. You can read the full report here >
Consumer Trends Driving Change
1. A Divided Consumer Landscape
High-Income Consumers are largely insulated from inflation and economic uncertainty. They continue to spend money on luxury goods, services, and discretionary items. Middle- and Lower-Income Consumers are significantly impacted by price increases, driving reduced spending and a focus on essential goods and value purchases.
What this means: The top 10% of U.S. households now account for half of all consumer spending — up from 36% over the past three decades. Businesses that target this segment are likely to see more success.
2. Millennials Lead Spending, Gen Z Shapes Culture
Millennials are entering their peak spending years with a focus on authenticity, experiences, and social impact. Meanwhile, Gen Z has become the trendy generation, influencing style, platform use, and cultural movements across all age groups.
What this means: To reach both generations, you need to offer experiences and stories that resonate with their interests and values.
3. “Buy Less, Buy Better” Movement
Consumers increasingly seek long-lasting, high-quality products over disposable alternatives. Fast fashion and disposable culture is out — a shift that benefits retailers focused on craftsmanship and durability.
What this means: Retailers need to select high-quality merchandise, focus on craftsmanship and longevity in their marketing materials, and make sure their products tell a story.
Retailers that target local and niche markets are finding success in 2025. Photo by Ridofranz.
Tariffs are Reshaping Retail
Shifting tariffs are having a fundamental and lasting impact on retail operations. Small retailers in particular face challenges in this environment, including:
Supply Chain Disruptions: Unlike large corporations with diversified supply chains, small businesses often lack alternatives when faced with tariff-induced cost increases.
Pricing Dilemmas: Two-thirds of small business owners report that tariffs will hurt their companies, forcing difficult choices between absorbing costs or passing them to price-sensitive consumers.
Operational Uncertainty: Many retailers have placed holiday season orders without knowing final costs, creating unprecedented planning challenges.
How Retailers Are Responding
Despite these challenges, retailers are adopting innovative strategies to find success. These strategies include:
- Emphasizing Niche and Local: Retailers are targeting specific customer segments and leveraging local connections to justify prices and drive demand.
- Integrating Experiences: Creating experiences that justify higher margins and appeal to less price-sensitive consumers.
- Leveraging Technology: Using accessible AI and social commerce tools for optimization.
- Building Supply Chain Resilience: Creating disaster recovery plans and exploring alternative suppliers.
Success in 2025 and Beyond
The 2025 Virginia Retail Matters report shows that the retail landscape is undergoing a permanent shift requiring strategic reorientation. Small retailers who successfully navigate customer segmentation, maintain operational agility, and leverage available technology tools while preserving their community-focused approach will find opportunities for sustainable growth.
These takeaways only represent a fraction of the rich, data-driven insights presented in the report. Explore the complete report to learn about consumer trends, economic shifts, and strategies that are driving success. Read the report here >
Downtown Decorations, a Main Street America Allied Member, is this quarter’s Main Spotlight advertiser. For more information about what they do to support Main Street organizations, click here.