Sluggish Growth 2025: How to Optimize Retail Profitability Through the Circular Economy

Introduction: The Profitability Challenge in Times of Uncertainty

The global economy is entering a delicate phase. According to the latest forecasts from Allianz Trade, global growth is expected to be limited to 2.5% in 2025, well below historical expectations.

More concerning: recession risks now exceed 30%, creating a climate of major uncertainty for businesses.

This fragile economic climate places retailers facing a major challenge. How can they maintain their profitability in an environment where growth is slowing and consumers are becoming more selective in their purchases?

Unprecedented Pressure on Margins

The figures speak for themselves: 73% of companies plan to reduce their operational costs in 2025, according to a recent McKinsey study.

This statistic reveals the extent of the pressure on margins, particularly in the retail sector where competition is intensifying.

Retailers face a triple challenge:

• Persistent inflation on supply costs
• Declining purchasing power of consumers
• Increased competitive pressure, especially from e-commerce

The Urgency of a Strategic Approach

In this context, optimization can no longer be left to chance. Companies that will survive and thrive will be those that can combine operational efficiency and technological innovation.

"Retailers that invest in optimizing their processes see their margins improve by 15 to 25% on average, even during economic slowdowns." — Deloitte 2024 Study

This economic reality pushes leaders to fundamentally rethink their approach. It's no longer just about growing, but about growing intelligently by maximizing every euro invested.

Our Roadmap

To navigate this period of uncertainty, we will analyze:

• The global economic context and its sectoral implications
• The specific impact on retail and new consumer behaviors
• Optimization strategies proven by market leaders
• Technological solutions that are already transforming operational efficiency

This approach will enable you to transform current economic challenges into strategic opportunities, by relying on concrete and measurable optimization levers.

The Economic Challenges of Retail in 2025

The European retail sector is going through unprecedented turbulence. With European GDP growth expected at only 1.2% in 2025 according to the OECD, versus 3.1% in the United States, retailers face a triple challenge: sluggish consumption, rising costs, and increased competition.

Consumption Slowdown

European household consumption is experiencing a significant contraction. The consumer confidence index remains negative at -13.4 points in the eurozone, while it recovers in the United States (+102.9 points).

This divergence translates into contrasting retail performance. European retail sales are stagnating with 0.8% growth in 2024, versus +2.3% in the United States and +4.1% in China.

Premium and mid-range categories are particularly affected. Consumers are massively turning to "trading down": 67% of Europeans say they have changed their shopping habits toward cheaper brands according to Kantar.

Pressure on Operating Margins

Inflation in operational costs is dangerously eroding margins. Energy costs have increased by 34% on average in Europe since 2022, while wages are growing by 5.2% annually.

Geographic Area	Retail Gross Margin 2024	Change vs 2023	Energy Costs
Europe	28.3%	-3.1 pts	+34%
United States	31.7%	-1.2 pts	+12%
Asia-Pacific	26.8%	+0.4 pts	+8%

This margin compression is pushing retailers toward an accelerated quest for operational efficiency. Warehouse automation is growing by 23% annually, while adoption of predictive inventory management tools is exploding.

Labor Market Normalization

The retail labor market is experiencing normalization after the post-COVID shortage. The annual turnover rate is dropping back to 28% in Europe (versus 45% in 2022), enabling stabilization of recruitment costs.

Paradoxically, this normalization is accompanied by increased selectivity in hiring. Retailers now favor versatile and tech-savvy profiles, capable of simultaneously managing physical and digital sales.

"We are witnessing a professionalization of retail with skill requirements significantly higher than in 2019" — Sarah Chen, HR Director Europe at Zara

Training investments are growing by 18% on average, showing that retailers are betting on skill development rather than expanding headcount.

This reconfiguration of the retail landscape opens new opportunities for optimization solutions like those offered by ZIQY, particularly in predictive inventory management and process automation.

The Operational Efficiency Imperative for Retailers

In a context of monetary tightening and economic slowdown, operational efficiency becomes retailers' strategic weapon to maintain profitability.

With interest rates that have tripled in 18 months and a sharply rising cost of capital, every euro tied up in inventory now costs 3 to 5 times more than in 2021.

Distributors face a paradox: maintaining the attractiveness of their offer while drastically optimizing their financial flows. This complex equation requires a complete revision of traditional operating models.

Inventory Turnover Optimization

Inventory turnover rate becomes the king KPI of 2025. High-performing retailers now aim for rotations of 8 to 12 times per year versus 4-6 times historically.

This acceleration requires a sophisticated data-driven approach.

Carrefour thus reduced its inventory by 15% in 2024 while maintaining product availability at 97%, thanks to predictive AI and fine segmentation of its 100,000 references.

The French giant saved 180 million euros in carrying costs.

Retailers adopt zero inventory strategies for certain categories, favoring dropshipping and on-demand ordering. This approach reduces working capital needs by 25 to 40%.

Maximizing Value per Product

ARPU (Average Revenue Per Unit) becomes crucial when every square meter and every reference must justify its profitability.

Retailers rethink their product mix to favor items with high margin and fast rotation.

Metric	Traditional Retail	Optimized Retail 2025
Average gross margin	35-40%	45-50%
Turnover rate	4-6x/year	8-12x/year
Storage cost/Revenue	8-12%	4-6%
Inventory ROI	15-20%	35-45%

Fnac Darty restructured its assortment by removing 30% of its low-margin references to focus on premium products and associated services.

Result: +12% operating margin despite an 8% drop in revenue.

Reducing Storage Costs

Carrying costs now represent 25 to 35% of inventory value (versus 15-20% in 2020). This explosion requires radical optimization of surfaces and processes.

Retailers are investing massively in automation: picking robots, forecasting AI, next-generation WMS. Amazon reduced its storage costs by 40% thanks to its automated Kiva centers.

The circular economy becomes a major optimization lever. Unsold, refurbished, or downgraded products generate additional revenue of 5-15% while freeing up premium storage space.

"In modern retail, a product that doesn't turn fast enough is a dead product. Velocity trumps volume." — Jean-Marc Bellaiche, Partner Bain & Company

This quest for efficiency fundamentally transforms retail economic models, favoring profitability through rotation over growth through accumulation.

The Circular Economy as a Growth Driver

In an economic context marked by sluggishness and uncertainty, the circular economy emerges as a particularly resilient alternative growth engine.

Companies adopting these new paradigms observe superior financial performance compared to their traditional competitors.

The circular economy sector shows annual growth of 11.4% globally, contrasting with the stagnation of many traditional sectors. This dynamic rests on three fundamental pillars that redefine value creation.

Monetizing Usage vs Ownership

The transition from ownership to usage models revolutionizes revenue mechanics. 47% of European consumers now prefer temporary access to goods rather than their permanent acquisition, according to the PwC 2024 study.

This behavioral evolution generates considerable financial opportunities. A rented product can generate 3 to 5 times more revenue than a single sale over its lifetime.

Pioneer companies like Grover (electronics rental) or Rent the Runway (fashion) demonstrate this superior profitability.

The B2C rental market experiences +15% annual growth, driven by millennials and generation Z. This dynamic accelerates in electronics (+22%), mobility (+18%), and home equipment (+12%) sectors.

New Sustainable Economic Models

The circular economy favors the emergence of hybrid models combining sales, rental, and services. These approaches diversify revenue sources and reduce dependence on traditional purchase cycles.

Model	Recurring Revenue	Operating Margin	Customer Loyalty
Traditional sale	0%	15-25%	Low
Pure rental	85-95%	35-45%	High
Hybrid model	60-70%	40-50%	Very high

Companies adopting these circular models benefit from stock valuations 20% higher than their traditional counterparts. This premium reflects increased predictability of cash flows and resilience to economic shocks.

Reducing Obsolescence Risks

The circular economy transforms planned obsolescence into competitive advantage. Companies better control technological evolution by retaining product ownership and managing their complete lifecycle.

Refurbishment generates margins of 40-60% on second-hand products, while reducing R&D costs amortized over larger volumes.

Apple thus achieves 12 billion dollars in annual revenue through its refurbishment program.

This approach mitigates risks linked to technological disruptions. Companies can adapt their offer gradually, test new concepts without massive investments, and maintain continuous customer relationships.

"Companies that master the circular economy today create tomorrow's profitability standards" — François Souchet, CEO ZIQY

Technology and Digitalization: Performance Accelerators

In an economic context marked by sluggishness and uncertainty, emerging technologies establish themselves as critical differentiation levers.

Companies adopting an integrated digitalization approach observe an average 25% reduction in operational costs and a 40% improvement in customer satisfaction.

This transformation no longer represents opportunity but strategic necessity to maintain competitiveness in 2025-2026.

Process Automation

Intelligent automation revolutionizes traditional value chains. Industrial IoT enables real-time equipment monitoring with 99.7% precision, reducing unplanned downtime by 35%.

Advanced automation systems now integrate artificial intelligence to optimize logistics flows. Automated warehouses achieve productivity rates 3 times higher than traditional manual operations.

Integration of collaborative robots (cobots) in production processes enables increased operational flexibility while maintaining quality. This hybrid human-machine approach optimizes labor costs without compromising adaptability.

Traceability and Product Passports

Digital Product Passports (DPP) emerge as the critical infrastructure of the post-2025 circular economy. These digital passports centralize all product data: origin, composition, environmental impact, repair and recycling instructions.

Aspect	Traditional Traceability	DPP Blockchain
Data reliability	65%	98%
Verification time	2-5 days	Real-time
Implementation cost	High	Optimized with ZIQY
Regulatory compliance	Partial	Total (AGEC/CSRD)

Blockchain guarantees data immutability and facilitates regulatory compliance. Companies using blockchain traceability observe a 45% reduction in quality disputes and a 30% improvement in consumer trust.

Predictive Optimization

Predictive artificial intelligence transforms demand and inventory management. Machine learning algorithms analyze more than 200 variables (seasonality, trends, external events) to optimize forecasts with 92% precision.

This approach enables reducing stock-outs by 60% while decreasing storage costs by 25%. Leading companies invest massively in these technologies to anticipate market fluctuations.

"Predictive AI is no longer a competitive advantage, it's a survival condition in a volatile market." — ZIQY Expert in Digital Transformation

Predictive systems now integrate external data (weather, social events, economic indices) to refine their projections. This holistic approach enables anticipating demand variations with unmatched temporal and geographical granularity.

Adopting these technologies requires a progressive approach and sharp technical expertise. ZIQY solutions support this transformation by offering integrated and scalable tools, adapted to circular economy and operational performance challenges.

Winning Strategies Against Economic Uncertainty

In a context where 87% of executives anticipate sluggish global growth in 2025-2026 according to McKinsey, leading companies redefine their economic models around three strategic pillars.

Revenue Diversification: Hybridization as a Shield

Sale/rental hybridization emerges as a major defensive strategy. Decathlon revolutionizes its approach with its rental service, now generating 15% additional revenue in certain segments.

This diversification enables:

• Reducing dependence on purchase cycles
• Capturing value over the entire product lifecycle
• Building loyalty through recurring touchpoints

Patagonia perfectly illustrates this strategy with Worn Wear: 40% growth of the program in 2023, transforming repair into a profit center while strengthening customer engagement.

Operational Flexibility: Agility as Competitive Advantage

Leaders adopt a modular operational architecture enabling rapid adjustment of production and distribution capacity.

Strategy	Traditional Approach	Agile Model (Leaders)
Supply Chain	Fixed stocks, long-term contracts	Flexible partnerships, just-in-time
Distribution	Proprietary channels	Adaptive multi-channel
Production	Fixed capacity	Rapid scaling up/down

This flexibility translates into 3x superior resilience during economic shocks, according to a Boston Consulting Group 2024 study.

ROI-Driven Investments: Reinforced Financial Discipline

Facing uncertainty, investments focus on measurable short-term ROI (12-18 months) while preserving strategic innovation.

Priority Management Metrics:

• Payback period < 18 months for new projects
• Customer Lifetime Value/Customer Acquisition Cost > 3:1
• Customer retention rate maintained > 85%

Strategic partnerships become the preferred acceleration lever: risk mutualization, access to new markets without heavy investment, expertise sharing.

"In times of uncertainty, we favor alliances that make us stronger together rather than building everything internally." — Strategy Director, Carrefour Group

This three-dimensional approach enables leaders to transform economic uncertainty into sustainable competitive advantage, with growth rates 2.5x higher than their less agile competitors according to the latest sectoral data.

How to Maximize Profitability with ZIQY

Facing the economic sluggishness announced for 2025-2026, retail companies must rethink their profitability model. The ZIQY technological suite offers an integrated approach that transforms every product into a source of recurring revenue.

The ZIQY Ecosystem: 4 Synchronized Growth Levers

ZIQY's strength lies in the synergy between its four complementary modules. RENTAL generates recurring revenue, REFIT extends product lifespan, REUSE valorizes returns, and DPP optimizes regulatory traceability.

This systemic approach enables increasing ARPU (Average Revenue Per User) by 30% on average, according to our internal analyses. A product sold for €1000 can generate up to €1300 in total revenue through additional services.

Concrete Financial Impact: Key Figures

Implementing the ZIQY suite generates measurable benefits across three major financial axes:

Indicator	Before ZIQY	With ZIQY	Improvement
Revenue per product	€1000	€1300	+30%
Storage costs	€100/m²/month	€75/m²/month	-25%
Inventory turnover	4x/year	6x/year	+50%

These performances are explained by the 40% reduction in dormant inventory thanks to rental, and return valorization that transforms a cost into a profit center.

Economic Model Transformation

ZIQY revolutionizes the traditional retail financial equation. Instead of suffering margin pressure, companies create new recurring revenue streams.

The RENTAL module transforms seasonal demand peaks into opportunities. High-value products generate revenue even out of season, significantly improving operational cash flow.

REFIT capitalizes on preventive maintenance to create high-margin services. Our clients observe a 60% service margin versus 25% on pure sales.

"With ZIQY, we transformed our after-sales cost center into a profit center. Our service revenue now represents 35% of total revenue." — CFO, European retail group

Resource Optimization and Compliance

The integrated ZIQY suite optimizes existing resource utilization. DPP automates AGEC compliance, avoiding regulatory penalties estimated at 2-5% of revenue for non-compliant companies by 2026.

Data interconnection between modules enables increased revenue predictability. ZIQY algorithms anticipate refurbishment needs and optimize rental cycles.

This holistic approach positions companies to navigate the 2025-2026 uncertainty period with reinforced financial resilience and diversified revenue sources.

Frequently Asked Questions

1. How to Calculate ROI of a Rental vs Sale Model?

Calculating ROI for rental models requires a differential approach considering customer lifetime value (CLV) versus immediate unit profit.

For a rental model, the formula becomes: Rental ROI = (Recurring Revenue × Average Rental Duration - Operational Costs) / Initial Investment

Criteria	Traditional Sale	Rental (ZIQY)
Year 1 ROI	15-25%	8-12%
Year 3 ROI	15-25%	180-220%