What changed in retail in Q3?
What’s up:
🔺 Agentic advertising as a retail CFO’s fantasy
🔺 Inflationary pressure on companies & consumers
🔺 Investment in physical stores
🔺 Structural & systemic change
What’s down:
🔻 The status quo, of course
🔻 The Canada-U.S. friendship index
AI x Retail Media Evolves as Agentic Advertising
When retail media and AI icons team up, you know retailers, brands and agencies are paying close attention to the rapid evolution of agentic advertising. Especially their CFOs.
- Amazon Ads partnered with OpenAI, allowing select U.S. advertisers to buy and manage conversational ad placements inside ChatGPT using the Amazon demand-side platform (DSP)
- Amazon is also building advertising into Alexa, including Alexa+ Agentic Ads, which use AI to improve outcomes for brand advertisers
- Walmart prioritizes AI as the next growth phase for its retail media network Walmart Connect. It is testing ads in its AI shopping assistant Sparky and rolling out AI tools to help advertisers create, manage and measure campaigns
- Kroger reported a 24% profit spike in its retail media network driven by AI assistant integration and expanded digital inventory
Strategic implications for retailers and brands
AI traffic rose 393% YoY in Q1, as more consumers used AI assistants for online shopping and it converted 42% better than traditional search. Now the fusion of AI and retail media is a structural shift that unites retailers, brands and agencies around a more collaborative model for mutual benefit.
As a result, AI is quickly evolving from product discovery to a shopping assistant and advertising channel.
Retail CFOs are paying attention, as AI x Retail Media protects margins by boosting B2C product sales and B2B advertising sales, while also supporting efficient ad buying and selling.
Practical next steps
Retailers and brands need to shift their strategies from business-to-consumer to business-to-*BOT*-to- consumer. Expect AI agents to filter product options according to price, consumer preference and other product criteria, which affect whether your offerings remain visible across AI platforms.
Data transparency is emerging as a differentiator. AI agents recommend brands that provide accurate, up-to-date, structured product data, which can include exact sizing and real-time inventory. Brands now expect more than advertising impressions from retail media networks; they want measurable outcomes of their ad spend, making agentic conversions an important new metric.
New Tariffs & Trade War Complexity
Canada-U.S. relations promptly swung from cheerful co-hosts of the 2026 World Cup to fierce opponents due to new tariffs.
50% tariffs on Canadian products and retaliatory tariffs ranging from 15% to 50% on American goods now apply to specific items across categories like grocery, home, apparel, beauty and sports equipment, as well as inputs like steel and aluminum.
Retailers had to act with agility to respond to the latest tariff jolts:
- Amazon and its third-party sellers altered cross-border logistics, adjusted supply sourcing and managed new Canadian counter-tariffs
- Walmart raised prices on select imported goods while absorbing costs in other departments; these pressures are partially offset by federal tariff refunds
- Loblaw faced supply chain shifts as consumers shifted their buying habits. Customer backlash led the Canadian grocery giant to bring back T symbols to its shelf labels and country-of-origin labelling on produce signs to signal products affected by tariffs
Strategic implications for retailers and brands
New rounds of tariffs add to those imposed last year on Canada and >90 more countries around the world, which disrupted supply chains across retail categories.
The deepening trade war represents a structural shift after decades of warm Canada-U.S. trade agreement. Canada continues to look abroad for new trade partners and the announced a new offer for Canada to be the first associate member of the EU
Tariff threats have shifted consumer habits, including switching brands to substitutes like private label, buying less and buying local.
Practical next steps
Retailers and brands need to review their trading partners and supply chains to map their tariff exposure. Companies can identify which items are subject to tariffs and isolate them rather than raising prices uniformly.
To earn consumer loyalty, retailers can promote local and domestic brands as alternatives to imports subject to tariffs. Retailers can promote their private labels as affordable options and offer deals as value-seeking behavior is on the rise. Brands affected by tariffs can source from elsewhere, change their inputs and revise their forecasts to reflect the latest market factors.
Inflation Squeezes Our Wallets
93% of U.S. consumers have adopted at least one cost-saving behavior amid the high cost of living. Price-conscious consumers seek deals and discounts to stretch every dollar.
- Target and Walmart are proactively reducing prices for the rest of the year in response to rising anxiety as more households feel financially-strapped
- Dollar General and Dollar Tree are reinvesting tariff refunds back into lower prices and operations to give shoppers some relief
- Leading retailers’ annual promotions offer consumers timely solutions for essentials and upcoming holiday shopping:
- Amazon Prime Day runs October 6-7
- Target Circle Deal Days runs October 6-7
- Walmart’s Fall Deals run October 5-11
- Costco raised the price of its Kirkland Signature synthetic motor oil to $57.99 from a typical price of ~$30 and limited purchases to 2 units, as disruption to global oil supplies drives up costs
Strategic implications for retailers and brands
Macroeconomic factors like inflation directly affect consumer spending and retail profit margins. Economics experts say ongoing conflict in the Middle East, tariffs and the inflationary impact on global prices, which make essentials like groceries and gas more expensive. Inflation affects retailers’ and brands’ pricing, promotion, assortment, and even expansion and hiring strategies.
Although inflation is down from its 2022 highs, it is falling slowing and wage growth isn’t keeping up, which affects consumer purchasing power. Inflation has a global influence, as world food prices rose in July to their highest in >3 years
Practical next steps
Amid ongoing inflation, companies can re-evaluate their pricing, procurement and scenario planning strategies. Brands can rationalize their SKUs to retain profitable, popular items and product lines. Retailers can revisit their private label strategies to look for new growth opportunities and gaps to fill to stay competitive as attractive brands in their own right.
K-Shaped Economy is More Pronounced
U.S. shoppers increasingly choose premium or value products, which leaves mainstream brands caught in the middle, reports NIQ.
- “Intensification of bifurcation will be an issue for retail in K-shaped economy,” according to Oliver Chen, TD Cowen senior equity research analyst
- Procter & Gamble CFO Andre Schulten stated, “Lower-income consumers … are really managing paycheck-to-paycheck”
- Walmart and Costco remain in-demand among consumers and investors alike as more consumers seek value for money
- Ross Stores announced its comparable sales rose 10% on its latest earnings call
- Loblaw’s deep-discount grocery banners drastically outperformed its conventional stores due to rampant consumer deal-hunting
- On the other side of the retail spectrum, luxury brand Coach sales recently jumped 24% YoY, making it the majority revenue driver for parent company Tapestry
- Chanel‘s comparable revenue jumped ~16% in the first half of 2026, outpacing rivals
- Ralph Lauren’s recent quarterly revenues rose 14% year-over-year
Strategic implications for retailers and brands
This global, structural shift of retail bifurcation matters because retailers the middle market gets squeezed. Companies that remain stuck in the middle face risk facing irrelevance and declining revenues.
As such, companies are deciding whether to pursue value or premium shoppers, as a growing number of high-income households benefit from remarkable investment gains while lower-income groups face rising essential costs.
Practical next steps
Retailers and brands must revisit their business strategies and models to decide whether to serve shoppers with scale-driven value or highly differentiated premium offerings. Investing in automation to keep costs down and value-tier private labels helps with value for money offerings. Transforming stores into welcoming oases offering personalized service can attract discerning shoppers.
Stores Score Big Investments
Corporate real estate companies might be popping Champagne in celebration of brick-and-mortar expansion among many retail chains.
- Toys R Us plans to open 120 standalone U.S. stores in time for the all-important holiday shopping season
- Barnes & Noble announced it will open 60 new physical bookstores as part of its turnaround plan
- Loblaw bumped its 2026 expansion target up to 75 new stores (up from 70), heavily focusing on its hard-discount banners, No Frills and Maxi
- Target’s comeback includes 8 new stores opening in October, which are part of its strategic plan to launch >300 new stores by 2035
- Nordstrom Rack: The discount apparel division announced 25 new store locations, which will open across the U.S. during this Fall
- Dollar Tree just announced it will open 400 new stores
- Dollar General announced earlier this year that it plans to open 800 new stores this year, including 30 under the Popshelf banner
- Aldi already announced it will open 180 new U.S. grocery stores in 2026 alone
Strategic implications for retailers and brands
Despite our increasingly digital fluency and the rise of agentic, shoppers still crave brick-and-mortar for benefits that e-commerce can’t match.
Multisensory experiences, social interaction, certainty of fit and immediate access to products are among the reasons physical retail stores remain vibrant arenas where about 80% of total retail sales still take place.
Practical next steps
Retailers of all sizes can consider how to make their stores more delightfully experiential, operationally intelligent and media-enabled to attract store traffic and revenue growth. Work with brand partners to create interactive experiences and hyperlocal campaigns to bring more customers to inviting spaces that inspire them to buy and keep coming back.
What other Q3 retail trends stood out for you?
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Sources:
Adobe, BBC News, Business Insider, CBC News, CityNews Ottawa, CNBC, dunnhumby, The Economist, eMarketer, Fast Company, Financial Post, Grocery Dive, Marketing Dive, Modern Retail, The New York Times, NIQ, Politico, Radio Canada, RBC Capital Markets, Retail Brew, Retail Customer Experience, Retail Dive, Retail Insider, Reuters, The Robin Report, Store Brands, TechCrunch, Today, United Nations – Food and Agriculture Organization, USA Today, Vogue, Yahoo Finance
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