If you’re a retail supplier, 2025 probably felt like you were fighting margin with both hands tied behind your back.

Not because demand disappeared. Not because your product suddenly got worse.

Because the “cost to serve” quietly got heavier. Tariffs made costs unpredictable. Retail deductions (and the labor to dispute them) kept piling up. Retail media networks became more embedded in the go-to-market plan. And retailers leaned heavily into artificial intelligence (AI), which accelerated decisions—and consequences.

From a Consumer Packaged Goods (CPG) broker’s perspective, that’s the headline: retail didn’t get softer in 2025. It got faster and less forgiving.

1) Tariffs turned pricing into a weekly conversation

Tariffs weren’t an abstract policy headline this year. They showed up as real dollars in your landed cost, and real friction in your pricing files.

The Budget Lab at Yale estimated that the 2025 tariffs would imply a near-term increase in consumer prices (around 1% in the short run, depending on the snapshot), translating into a meaningful hit to household purchasing power. Reuters also covered an analysis suggesting that overall tariff rates remained historically elevated even amid pauses and changes. 

Here’s what that meant inside supplier teams:

• More “re-costing” cycles mid-year.

• More pressure to shrink pack sizes, adjust assortments, or re-source components.

• More promo planning risk, because price points were less stable than the promo calendar.

Punchline: tariffs didn’t just raise costs. They raised the penalty for being slow.

2) Retail layoffs + restructures changed how problems got solved

Retailers tightened their belts in 2025. And when retailers run lean, suppliers feel it in slower exception resolution and greater process rigidity.

Challenger, Gray & Christmas reported that retail companies announced 91,954 job cuts year-to-date through November 2025, up 139% from the same period in 2024. Retail Dive summarized the same trend and the month-to-month increase in November. 

From the supplier side, that often translated into:

• More shared inboxes and ticketing systems.

• Fewer “tribal knowledge” people who could fix edge-case issues quickly.

• More delays on disputes that require human judgment.

This matters for deductions. A deduction that takes 45 days to resolve is annoying. A deduction that takes 180 days becomes a cash-flow problem.

3) Retailers used AI to move faster—and suppliers had to match that speed

AI wasn’t just a shiny innovation story in 2025. Retailers put it to work in ways that changed supplier expectations.

Walmart: AI for merchants and “agentic” retail

Walmart described “Wally,” a generative AI assistant designed to help merchants automate time-consuming work and speed decision-making. Walmart also outlined its strategy for “agentic” AI—tools tailored to retail tasks and to preparing for a future in which shopping agents influence discovery and purchase decisions. 

Target: AI for in-stocks, merchandising, and marketing

Target shared that it is using AI to spot items running low earlier and expanding AI agents across merchandising, inventory, and digital marketing. Retail industry coverage also noted Target’s exploration of generative AI for merchandising ideation and faster collection creation. 

What this changed for suppliers (practically)

• Content is no longer “nice.” It’s operational. If the retailer’s systems can’t confidently “read” your item (attributes, claims, imagery, pack/case details), your item suffers in search, discovery, and even internal decisioning.

• Faster reviews mean less patience for fuzzy answers. “We’ll get back to you” became more expensive in 2025.

• Retail readiness became measurable. AI thrives on clean inputs—perfect files, consistent data, strong proof.

Punchline: When retailer systems decide faster, your errors get processed faster too.

4) Retail deductions grew—and the hidden cost exploded

Most suppliers understand deductions as a line item. 2025 made them feel like a business model.

Industry estimates indicate deductions and chargebacks can account for 5%–15% of gross sales in CPG and underscore the “hidden costs” that manufacturers often underestimate. Even if you debate the exact percentage for your business, the directional truth is hard to ignore: deductions are not just leakage. They are the workload.

And the workload is the cost.

The new cost-to-serve reality

When deductions rise, you pay three times:

1. The deduction itself (the cash you don’t get).

2. The labor to research and dispute (often across sales, finance, and logistics).

3. The cycle-time tax (delayed recoveries, weaker cash flow, noisier forecasting).

Fictional example (for illustration only): A supplier gets hit with $180,000 in shortage and compliance deductions across two large retailers in Q3. The team disputes 60% of it. They win half of those disputes. On paper, they “recovered” $54,000. But they also burned 250+ hours across customer service, supply chain, and finance—while delaying other work that actually grows sales. That’s the hidden cost-to-serve problem.

Why 2025 amplified deduction pain

• Retailers operating lean had fewer rapid escalations.

• More automation meant more auto-issued claims and less flexibility.

• More complexity (omnichannel, more compliance programs, more routing rules) meant more ways to fail.

If you’re heading into 2026 with the same deduction workflow you had in 2023, you’re going to feel behind. Not because your team isn’t good—because the system got heavier.

5) Retail media networks: “trade spend” got a new neighbor

Retail media became a bigger piece of the retail growth conversation in 2025, and it’s not slowing down.

eMarketer projected U.S. retail media ad spending of $58.79B in 2025 and $69.33B in 2026, with much of the incremental growth concentrated among the biggest networks. 

Retailers also kept pushing media beyond the website:

• Walmart Connect promoted in-store “Store ads” across digital screens, audio, and experiential placements.

• Target’s Roundel said it would test new in-store ad experiences, including demos, sampling, and digital screens, in 2025.

• Kroger Precision Marketing expanded off-site retail media managed services (including programmatic audio and connected TV).

What suppliers learned the hard way

Retail media can absolutely work. But 2025 made one thing clear:

You can’t buy your way out of operational problems. If in-stocks are broken, if content is weak, if pricing files are messy—media amplifies the mess faster.

6) Government changes to SNAP became a new demand variable

The Supplemental Nutrition Assistance Program (SNAP) conversation shifted meaningfully as 2025 closed.

USDA’s SNAP waiver list shows multiple states approved to restrict purchases of categories like soft drinks, energy drinks, candy, and other items, with effective dates rolling through 2026. Reuters reported that the administration approved additional state waivers as part of a broader “Make America Healthy Again” initiative, with restrictions set to take effect next year. 

For suppliers, this isn’t just a policy story. It’s a planning story:

• Category exposure (which SKUs face demand risk?)

• Item setup and eligibility accuracy (data discipline matters)

• Innovation pipelines (better-for-you, reformulation, pack strategy)

• Promotional strategy (value messaging vs. restricted categories)

Fictional example (for illustration only): A beverage supplier that leans heavily on value-channel velocity in a few states realizes that certain high-volume SKUs may face eligibility restrictions in 2026. The smartest move isn’t panic. It’s scenario planning: which items to defend, which to pivot, and how to protect the retailer relationship with clean data and compliant claims.

Looking ahead: what suppliers are carrying into 2026

Because this post runs before 2025 ends, here’s the “carry-forward list” we see the strongest suppliers already building into their 2026 plans.

1) A cost-to-serve model by retailer—not just a sales plan

Not a complex MBA spreadsheet. A real-world view of: gross margin minus trade spend, minus freight/fulfillment, minus deduction,s minus dispute labor.

If you can’t explain where margin went, you can’t protect it.

2) Deductions treated like a business KPI

Weekly visibility. Top codes. Top roots. Top repeat offenders. Recovery rate. Cycle time.

Identifying hidden costs is the right mindset: if deductions are large enough to matter, they’re large enough to manage like a performance metric.

3) “AI-ready” item data and content

Retailers are investing in AI across merchandising and operations. That pushes a simple supplier truth:

Clean inputs win.

• accurate attributes

• strong images

• consistent pack/case data

• claims that match compliance requirements

• fewer “we’ll fix it later” files

4) Retail media budgets tied to operational readiness

Media is becoming more embedded in retail growth. The suppliers who win will be the ones who can say, “Here’s where media supports incrementality,” not, “Here’s where we’re spending because we’re nervous.”

5) Tariff scenario planning that triggers decisions fast

The Budget Lab’s ongoing estimates highlight how tariffs can affect prices and purchasing power.  In 2026, suppliers will keep “if/then” playbooks handy:

• alternate sourcing options

• pack architecture changes

• pricing triggers and communication templates

• promo guardrails

6) A SNAP exposure review (even if you’re not “a SNAP brand”)

If you sell categories that restrictions could impact, you don’t want to discover that in Q2 2026. Start now. 

7) Institutional memory built into documentation

With retail job cuts and churn elevated, supplier organizations that rely on “who you know” will struggle more than organizations that rely on “what you can prove.” 

Closing thought (broker-to-supplier, friend-to-friend)

2025 didn’t just pressure margins. It tested operational maturity.

If there’s good news, it’s this: the suppliers who tightened data, built deduction discipline, and got honest about cost-to-serve didn’t just survive 2025—they built an advantage for 2026.

Our team at Woodridge Retail Group spent the year in the middle of these realities with suppliers—watching what works, what breaks, and what needs to change before the next calendar flips. Need help? Let’s talk.