Retail Rebounds, But Consumer Confidence Is Shakier Than Ever

Retail’s Uneven Recovery

In March 2020, as COVID-19 spread across the globe, retailers faced an unprecedented crisis. Nonessential stores shuttered, shopping habits shifted overnight, and supply chains became strained. While vaccines and government stimulus helped stabilize the economy, the pandemic negatively affected consumer behavior and the retail landscape, according to Retail Dive.

Today, five years later, stores are open, and spending remains strong, yet many aspects of retail have not returned to pre-pandemic norms. Work-from-home trends mean fewer office workers shopping during lunch breaks or commuting past stores. Once eager to return to brick-and-mortar locations, consumers are now more selective, often prioritizing experiences over discretionary purchases.

According to Nikki Baird, vice president of strategy and products at Aptos, retailers were initially slow to adapt to these changes. “I was definitely worried the last couple of years, particularly ’22 and ’23—I thought retailers could really screw this up if they don’t reinvest in stores,” she said in an interview with Retail Dive. “Fortunately, consumers are giving retailers more and more chances, and they’re telling them what they want.”

Shoppers Are in Control Again

Before the pandemic, technology had given consumers significant power over how, where, and at what price they purchased. That dynamic shifted temporarily when supply chain issues limited options and inflation increased prices. Now, shoppers have regained their leverage.

“Even up to 10 years ago, technology gave the consumer all the power in terms of where they buy, how they buy, and at what price they buy,” said Joe Schmitt, managing director at BRG. “The pandemic really derailed that and took some of that power away from the consumer. But now that power is there and stronger than ever.”

Consumers are becoming more discerning, with inflation still a concern and discretionary incomes being squeezed. They expect value for their money and are not as willing to tolerate high prices without justification. As Schmitt put it, “They truly are fed up with how much stuff costs and what their perceived value is that they’re getting out of it.”

Economic Instability Weighs on Sentiment

Although inflation has cooled in 2025, new challenges have emerged. Consumer sentiment has dropped significantly this year, with economic concerns—including tariffs and shifting trade policies—adding to the uncertainty.

The University of Michigan’s consumer survey reported an 11% drop in confidence in March and a 22% cumulative decline since December, marking the lowest level in three years. Regardless of age, education, or income, consumers across demographics feel less optimistic about the economy.

The anxiety isn’t unfounded. Federal Reserve Chair Jerome Powell recently warned that tariffs could slow economic growth and contribute to inflation, noting that ongoing policy shifts have created “really high uncertainty.”

What’s Next for Retail?

Retailers are still adjusting to this evolving landscape. Many are focusing on experience-driven strategies, recognizing that shoppers now expect more from in-store visits than just transactions. Others are refining pricing strategies to ensure they meet consumer demand for value.

However, the retail industry must remain flexible with the persisting economic and political instability. As Greg Portell, a senior partner at Kearney, put it: “If you would have been having this conversation a year ago, I think you would have a lot more comfort around this concept of a ‘normal.’ But the pace at which we’re experiencing these changes almost precludes a normal from existing.”

For now, while retail has moved past the immediate disruptions of the pandemic, a stable and predictable “normal” remains elusive.