Twice each year, Upside conducts “pulse checks” with retailers from the general population — we check how they’re feeling about their business, note challenges that they’re concerned about, and track changes in their priorities.

When we last heard from retailers in Q3 2024, the majority felt they were in excellent shape, and hardly anyone reported feeling “only fair” or worse about their financial standing. We noted at that time that retailers were moving beyond survival mode, instead thinking about how to take the next step for sustainable growth.

Our latest data suggests that economic uncertainty has tempered that cautious optimism, leading retailers to tug the reins on some growth investments while doubling down on the fundamentals. These were our three biggest takeaways from our Q1 2025 survey:

• Optimism that peaked in Q3 2024 has waned, while inflation concerns took a step forward.
• Across categories, the most significant challenges revolve around costs and operations. 
• Retailers have pulled back on prioritization of digital strategy efforts.

Financial anxiety creeps back in 

This edition of Upside’s retailer pulse survey is the fourth that we’ve done overall. In each of the previous three editions, retailers reporting “excellent” financial health was either the most common response, or tied for it.

In 2025, for the first time, “excellent” financial health wasn’t the top response. The share of retailers who felt their business was in excellent shape dropped nine percentage points from the previous survey, falling from 50% to 41%. 

Retailers who felt “only fair” or “good” became more commonplace, reaching their highest percentages since we began tracking responses. From the last survey to this one, those responses increased by four and five percentage points, respectively.  

We also asked retailers to forecast their business outlook for the next six months. While optimism dipped since late 2024, most believe they can maintain the status quo — or maybe see modest improvement. Few expect things to get worse.

As you can see, the share of retailers who think that their business will get a lot better in the next six months has decreased — but the sky isn’t falling. It’s been replaced almost entirely by retailers who think it’ll get a little better. 

What’s worrying retailers, and what are they focusing on?

When we asked retailers to report their top three concerns, the three most common responses were:

1. Inflation (44% marked it as one of their biggest challenges)
2. Hiring (33%)
3. Labor (32%)

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For the fourth survey in a row, inflation was the most popular challenge. Prior to this survey, though, inflation had been declining in these rankings; notably, it jumped back up by eight percentage points here. Now, it’s just five points shy of the highest it's been since we started measuring.

Two related issues round out the top three for retailers: hiring and labor costs. Overall, it’s clear that the rising cost of doing business is top-of-mind for retailers. 

So with those concerns in mind, where are retailers turning their attention to in 2025? In this survey, they cited the following three issues as their top business priorities: 

1. Acquiring new customers (44% marked it as one of their biggest priorities)
2. Increasing loyalty/retention (42%)
3. Reducing costs (40%)

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In response to rising costs, retailers are first looking to bring in more customers and keep those they already have. Secondarily, they’re also making an effort to trim the fat where they’re able, reducing those high costs of doing business. 

Digital and omnichannel lose momentum

Retailers are also reporting fewer challenges with their digital strategy. In Q3 2024, nearly a third (31%) said digital strategy was one of their biggest business hurdles. By Q1 2025, that number had nearly halved to 17% — the lowest share we’ve seen since we began tracking.

Likewise, retailers are thinking less about their digital and omnichannel strategies as business priorities. After a spike in 2024, responses indicating those areas would be priorities in 2025 fell dramatically. 

Together, these findings suggest that retailers are cooling on digital investment for now, shifting focus to fundamentals and cost control instead.

Retailers shift how they reach shoppers

Cost concerns are also shaping how retailers invest in marketing. More than 60% of retailers said that their marketing budget is about the same or lower year-over-year. And likewise, a majority said they were running about the same or fewer campaigns compared to 2024. 

That caution shows up in their channel mix. Retailers are leaning harder into owned channels, like their websites and email marketing while pulling back from channels whose costs are harder to control, like social media advertising.  

This shift highlights a broader survival mindset: doing more with what they already own, rather than chasing growth through costlier paid channels.

The takeaway: from optimism to discipline

Across these findings, the throughline is clear: optimism has cooled, cost pressures have intensified, and retailers are redirecting their energy back toward the basics. What we’re seeing isn’t panic — but it is a reversion to discipline.

For retailers, that means making every dollar work harder, whether in marketing spend or customer acquisition.

Get more data on the business initiatives that matter

Upside’s latest report dives deep into the issue of retention — uncovering the massive business impact when retailers get their cross-shopping, uncommitted customers to visit just once more per month. Get your copy of the report here.