The retailers set to get ahead in 2026 will be the ones undeterred by disruption and willing to embrace change. They aren't just cutting costs, they're reinventing what efficiency means. Rather than chasing omnichannel, they're creating seamless experiences that transcend channels altogether. And they're not sticking with yesterday's promotion model, they're using AI to deliver hyper-personalised value and relevance to customers.
Leading retail analyst and host of the Retail Disrupted podcast, Natalie Berg, recently joined North Highland and a group of C-Suite executives to offer perspective on what it'll take to thrive in retail's perfect storm of rising costs and falling consumer spending.
Below are some of the actionable insights related to retail's most pressing challenges.
Retailers are facing enormous cost pressures in 2026. How are the most successful companies responding?
Even the most resilient retailers are finding life difficult; the winners are those who still find ways to protect the customer experience while driving cost efficiency. Retailers are facing a multi-billion-pound cost challenge from multiple angles, including rises in National Insurance, minimum wage, business rates, and packaging taxes. Against this backdrop of escalating costs, consumer spending power has contracted for the majority of UK households. The imperative to reduce costs is clear, but successful retailers recognise there's a critical line beyond which cost-cutting activities damage the very experience that drives customer loyalty.
While some major players have been disciplined in cost reduction for years, others are just beginning this journey. What's clear is that there's a limit to how much you can reduce costs without damaging the customer experience, especially in stores. Many retailers are already at this threshold, leading to tough decisions.
The focus needs to be on sustainable business value creation with customer and employee experience at the heart, rather than a basic ‘slash and burn’ approach.
What specific cost optimisation strategies are proving most effective?
Scale remains a powerful lever. Where possible, retailers are pursuing scale to manage costs, leveraging increased volumes with suppliers to mitigate inflation. We're also seeing renewed focus on shrinkage and theft reduction, which not only improves the bottom line but can increase stock availability, particularly in fashion and non-food settings.
Another pressure we can’t ignore is the increased cost of capital, making investments harder to justify. Major technology investments must be rigorously challenged to focus on what will truly move the needle for consumers. Learning to say "no" is becoming a critical skill for retail leaders. Value realisation needs to be at the heart of everything they do.
How is the concept of unified commerce evolving as we approach 2026?
That said, e-commerce often still feels overly transactional and, dare I say, joyless. Future investments should focus on making online shopping more immersive, personalised, and engaging – particularly in categories like beauty, fashion, and home. Technologies like AI and augmented reality are making this dream a reality.
Meanwhile, for grocers, the focus should be on taking the chore out of the weekly food shop. This is a highly predictable shopping mission - 60-70% of shopping baskets online don't change week to week (Kantar Worldpanel) - and an area that is still ripe for disruption.
What role is technology playing in unified commerce strategies?
Quick Commerce (Q-Commerce) is growing rapidly in grocery with increasingly large basket sizes going through platforms like Deliveroo and Just Eat. This initially caused operational challenges in picking and resource planning, but improvements in unified technology across intermediary partners and better AI-driven forecasting are easing those pressures.
As fast as technology is moving, a healthy scepticism remains about how successful AI-driven shopping assistants could be, with most leaders believing customers will want to retain control over their shopping baskets. The focus instead is on using technology to enhance rather than replace the human element of shopping.
How is the traditional peak trading period evolving?
Still view ‘Black Friday’ or ‘Cyber Monday’ as a couple of peak trading days? Think again. Now it’s vital for retailers to plan for an extended promotional period. Today, Black Friday stretches from Halloween through to December. But when extended promotional periods risk exhausting customers, retailers must be mindful that each campaign provides genuine value and doesn't necessarily just shift sales to earlier in the season.
Four key trends are influencing the peak trading season:
What promotional strategies are proving most effective?
What should retail leaders prioritise now to prepare for 2026?