H1 2025 retail results: Volatility, tariffs, job market hit hard; make for uncertain H2
Retail sales blinked in H1 2025 as cracks in the economy are beginning to reveal themselves. 2025 H2 projections reflect this reality.
There’s much more to the current U.S. home sales decline than meets the eye. Just ask companies in industries from durable goods to home improvement to construction.
The sharp downturn in annual existing home sales from pre-pandemic averages that approached 5.5 million to a projected four million in 2025 “isn’t just a story about potential buyers and sellers, its (sic) impact ripples through the broader economy,” Odeta Kushi, deputy chief economist at First American Financial Corp., said in a recent blog post.
As home purchases decline, so, too, does spending on durable goods like furniture, appliances, and electronics, and services such as remodeling, moving and mortgage origination.
The effects are reverberating across industries and supply chains and forcing companies to make changes to offset the impact on their business.
Home sales decline: 4 ways to manage the fallout
From logistics companies to retailers and consumer products companies, the slump in U.S. home sales is taking its toll. On the logistics side, JB Hunt Transport Services cited sluggish demand for its last-mile services due to weakening sales of bigger-ticket durable goods.
Meanwhile, retail and consumer goods companies like RH, Lowe’s, Home Depot and Whirlpool are attributing lower-than-expected sales during the first half of 2025 to what RH termed “the worst housing market in almost 50 years.”
With little to suggest a reversal is on the horizon, at least in the near term, how can companies in those industries reckon with the ripple effects of the housing market downturn?
It starts with innovating on the following fronts:
- Develop new business model and markets
- Double down on experiences
- Tap into new AI-driven channels
- Lean into intelligent models
1. Explore new business models and markets
In August, the home furnishings giant Ikea unveiled plans to open pop-up shops in select Best Buy stores around the U.S., an example of the kind of creative moves companies are making to cultivate new customers and markets to mitigate the impact of falling home sales on their business.
Lowe’s earlier this year rolled out a revamped version of its pro rewards program for contractors in an effort to gain a stronger foothold outside the DIY market.
Besides developing new business models and revenue streams, diversifying the customer base outside the U.S., into areas where housing sales are stronger, is another way for companies with global aspirations to mitigate the home sales decline stateside. Home Depot is an example, having announced plans earlier this year to invest $1.3 billion to grow its footprint in Mexico.
2. Offset the home sales decline with new retail experiences
In an effort to build customer connections and community, more retailers are evolving stores “from single-purpose retail points into multi-function market hubs that serve local customer needs efficiently while maximizing every square foot of investment,” Incisiv observed in a recent retail market report.
Not only does this emphasis on in-store experiences cater to consumers who increasingly value authentic, localized brand experiences, it also maximizes a key asset, physical real estate, a wise move considering that 97% of Generation Z say they shop at brick-and-mortar stores, according to ICSC.
By transforming stores into community hubs, companies can host immersive events and deliver concierge-level services that transcend the traditional retail experience.
How about a furniture retailer holding an invitation-only in-store event where customers get free consultations with professional interior designers, supported by visualization tools that enable them to envision their spaces with certain products?
Unified commerce benefits: Powering retail renewal and marketplace AI
As shopper expectations grow, retailers are turning to unified commerce technologies and AI-powered marketplace tools to centralize operations, personalize journeys, and scale with agility across platforms.
3. Tap into new AI-driven channels
An emerging generation of independent, generative AI-driven shopping services could be the next big thing in the retail world — and a potentially huge new channel through which electronics, home furnishings, home improvement and other retailers can connect with consumers.
If they aren’t already, companies should be developing strategies for getting noticed by shopping agents such as Remark, Rufus, Muse. These agents hunt for products on behalf of consumers who want to furnish a newly remodeled space, for example.
4. Lean into intelligent modeling
With supply, demand and other market signals shifting rapidly and unpredictably, it’s critical that companies use sophisticated scenario planning tools to dynamically model various scenarios, so they can adjust on the fly as market conditions change.
How would a quarter-point reduction in interest rates by the Fed likely impact demand for building materials, home goods, and other products? Similarly, what impact would another 5% drop in sales of existing homes in 2026 have on demand for those types of products?
Using advanced predictive analytics and simulation capabilities, companies can get a sense for how developments like these will impact sales, supply chains and their bottom lines. That insight leads to better-informed demand forecasts, supplier strategies and pricing structures.
Taking steps like these positions companies impacted by a decline in home sales to manage business risks more proactively, so that when the housing market does rebound, they’re poised to take advantage.