Small Business Predictions for 2025
In this episode, Matt Wagner breaks down seven key predictions that will impact Main Street businesses and entrepreneurs in 2025.
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As Chief Innovation Officer and host of our Main Street Business Insights podcast, I have a unique opportunity to observe first-hand what is happening in small business and entrepreneurship and participate in primary and secondary research through Main Street America’s work. Combining these experiences and macroeconomic, technological, and social trends, I share annual predictions that I believe will impact our work in downtowns and neighborhood commercial districts and the businesses we seek to nurture and support in these places.
Making predictions is always risky; you can go back and check to see where I’ve missed and hit over the years (2024, 2023, 2022). For example, last year, I predicted AI would have a much greater impact on small businesses. Our Fall 2024 Small Business Survey demonstrated that there is still limited use and a growing disparity in technology adoption that we’ll need to overcome moving forward. Perhaps I should have waited until 2025 for that prediction! Nonetheless, I hope this can be a valuable tool to help you think ahead and plan around the likely issues, topics, and shifts in the coming year. You can also listen to a deep dive of my 2025 predictions in this week’s episode of Main Street Business Insights.
In this episode, Matt Wagner breaks down seven key predictions that will impact Main Street businesses and entrepreneurs in 2025.
Since the pandemic, the U.S. retail economy has been fueled by consumer spending’s resiliency. However, some early signs and potential policy shifts signal changes in that sector.
Credit Card Delinquencies: During the first nine months of 2024, lenders were forced to write off $46 billion in credit card balances. That’s a 50% jump from 2023 and the highest rate since 2010 (which some of you may recall was the height of the Great Recession). And in the third quarter of 2024, 10.75% of active credit card accounts paid only the minimum balance, the highest rate in 12 years, according to the Philadelphia Federal Reserve Bank.
Tariffs: Potential tariffs are unknown, but even smaller Main Street businesses have globalized supply chains. Even if the disruption is not direct, it could impact inventory delivery and further inflationary pricing pressures.
Pace of Change Challenges: There may be faster growth potential, but the bulk of the retail sector is primarily made up of smaller mom-and-pop retailers. Much of the limited growth gains in 2025 will necessitate harnessing technology like strengthening e‑commerce presence and AI adoption to drive hyper-personalization through social media and inventory.
Market forecasters estimate that nearly 10% of the population (30 million) will take a GPL‑1 weight loss drug by 2030. This increase in usage may have multiple impacts on Main Street communities and businesses, including:
Last year, I talked about how the retail economy was shifting to a bifurcated but linked market between “experiential” and “transactional” purchases. These two things might blur as technology creates more of a seamless experience, essentially combining the physical and digital worlds – thus “Phygital.” Some examples include digital ordering kiosks that can provide convenience and speed to ordering and checking out and digital live shopping experiences where people can speak to real salespeople while browsing virtually.
This chart outlines how the shopping experience is enhanced through both an in-store and digital offering through each stage of a purchase. For example, a Main Street small business could improve the customer journey and ensure there are both in-store and digital touchpoints by maintaining both a strong social media strategy while supporting ads on local radio and newspapers or selling through a third-party app like Etsy as a small-scale producer while also wholesaling through a series of independent specialty stores.
Twilio’s research shows that 90% of organizations surveyed in the nonprofit, education, and healthcare sectors leverage AI for one or more engagement and marketing use cases, including customer engagement platforms, contact centers, survey platforms, customer analytics, and more. At Main Street America, I’ve used it occasionally to write a podcast introduction or outline a project plan.
One of the most frequent comments I get from Main Street directors centers around the need to collect and report data. AI is expected to impact data collection significantly and reporting for small non-profits by automating data entry, analyzing large volumes of data quickly to identify trends and insights, creating more targeted reports, and streamlining the reporting process, allowing staff to focus on core mission activities rather than manual data management. Key ways that AI can impact data collection and reporting for small non-profits include:
Automated data entry: AI can extract information from various sources like emails, forms, and social media, automatically populating databases with relevant data, reducing manual data entry time and errors.
Personalized donor engagement: By analyzing fundraising data or event ticket sales, AI can identify individual giving patterns and preferences, enabling tailored communication and fundraising appeals, much like hyper-personalization in retail sales.
Improved grant writing: AI tools can assist in researching potential grant opportunities, identifying relevant data to support proposals, and even generating draft proposals based on past successes.
Predictive analytics: While still likely another year away for most organizations, AI can predict future trends based on historical data, allowing your organization to plan for resource needs and program adjustments proactively. For example, Microsoft Excel has already embedded AI functions, including features like “analyze data,” which uses AI to provide insights about your dataset, and “forecast sheet” for predicting data trends.
Streamlined reporting: AI can generate standardized reports with visualizations and key metrics, simplifying the reporting process and making data more accessible to stakeholders. Several design and presentation-related software tools, like Canva, already have embedded AI tools.
Pitfalls like data quality, our own technical expertise and/or time to learn, cost considerations, and privacy concerns remain important considerations for many organizations.
Ever find yourself sitting in a diner with that huge 10-page menu and struggling to choose what to order? How many of you dread sifting through page after page on a Google search? I suspect most don’t go beyond two pages. One of the greatest falsehoods in marketing is that the consumer wants more choices. When it comes to shopping, consumers are moving toward hyper-personalization. As such, I would contend that curation will become a winning business formula. Focusing on your strengths as a business model is much more efficient, eases inventory control, and increases customer service and satisfaction. It can even save on space needs. But it does necessitate greater sophistication around knowing your customer.
As we look ahead, more businesses will dedicate greater time to getting to know their customers by conducting surveys, using social media analytics to understand what messages are hitting the mark and for whom, and not being afraid to slim down inventory and replace it with testing or pop-up displays.
The “silver tsunami” is a term used to describe the aging of our population, particularly the retirement of baby boomers. Some have also called the last couple of years “Peak 65” to describe the aging of many more people into retirement. In fact, according to the US Census, in 2020, there were 55.8 million people aged 65 and over in the United States (16.8% of the total population), up 38.6% from 40.3 million in 2010. And the share of the population aged 65 and over more than doubled between 1940 and 2020, from less than 7% to nearly 17%. In the past, we’ve discussed the impacts on real estate and small business transitions over the coming years. However, several more latent or trailing shifts will become more evident in 2025. I want to focus on two in particular that will be felt in our Main Streets:
Housing market: only a couple of decades ago, as people aged, they typically downsized to a smaller home or entered a senior living facility, thus freeing up the housing market for new entry buyers. But over the past 20 years, we’ve seen a rise in “aging in place.” While I don’t foresee a tsunami, I suspect there will be greater developer interest in transitional housing nearer walkable downtowns and neighborhoods. One of the greatest risks for the overall health of seniors is loneliness. Seniors will seek out places where they are not isolated but feel connected to the community, where they can walk to restaurants and shops and volunteer at local civic and non-profit institutions.
Wealth: according to Statista, despite representing only around 21% of the US population, Baby Boomers own roughly half of the nation’s total wealth. This concentration has many potential impacts, including:
There has been a great deal of dialogue in the health and civic sectors around the loneliness epidemic centered on an extensive report from the US Surgeon General entitled Our Epidemic of Loneliness and Isolation. A more recent article in The Atlantic by Derek Thompson, The Anti-Social Century, suggests there may be a more conscious choice at work as we think about the quest and desire for more “solitude.”
This impacts our downtowns and neighborhoods and shifts in retail, restaurants, and services. In 2023, 74% of all restaurant traffic came from “off-premises” customers — from takeout and delivery — up from 61% before COVID, according to the National Restaurant Association. This profoundly impacts restaurant design and layout relative to sitting and waiting space, staffing, and the potential for decreasing civic connectivity by sharing eating space. This is consistent with other data highlighting declines in drinking and dining out with friends, dating, obtaining a driver’s license, time spent and number of friends, and annual cinema ticket sales.
Additional impacts are likely to be felt in increased sales of home furnishings, décor, and even kitchen gadgets as more individuals burrow into their homes, as well as fitness equipment and connected exercise programs for at home.
Main Streets have a significant role to play in fostering social cohesion. According to Thompson, families and friends give us love and security, while our community gives us shared affinities. These diverse connections help us bridge gaps and relate with empathy. I see Main Streets as critical places for everyone to engage with one another, see their neighbor, and understand their circumstances, differences, and similarities. On our Main Streets, we attend events and parades, volunteer, and bump into strangers and locals alike in the park, the library, or the local café. Main Street’s purpose goes beyond economics; it is critical for renewing our human connections.
Over the coming year, I’ll continue to monitor my predictions and the underlying trends, taking opportunities to expand in other forms with upcoming blogs and on the Main Street Business Insights podcast. Do you have questions about these predictions, economic trends, or small business ownership? Submit them by emailing me at mwagner@mainstreet.org to have them answered on an upcoming episode of Main Street Business Insights.
If you’re looking for additional data and insights for small businesses, check out this report from Retail Matters. Produced in partnership with Virginia Retail Alliance, the 2024 Retail Matters research report features the economic, consumer, and technology trends impacting a wide spectrum of entrepreneurs and small business owners. In addition to providing a broad overview of macro trends, it examines some of the key impacts, challenges, and shifts occurring in the retail sector across specific topics including Artificial Intelligence (AI), Small Business Finance, and Workforce Development. Main Street America leveraged the organization’s primary research with Main Street communities, entrepreneurial ecosystem builders, and small businesses throughout the publication. Read the report here >