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April 2026 | Newsletter No. 33
Baker Retail Rundown
Stay in the know with monthly retail challenges and our rundown of top retail industry news, curated by our talented Penn student analysts.
GLP-1 weight loss drugs are already changing apparel demand as consumers change sizes and lifestyles. Nearly a quarter of U.S. households are using these medications, with most expecting to buy new clothes, and over half already have. Early signals show declining demand for larger sizes and rising sales in smaller and mid-size categories, especially in intimates. Beyond sizing, shoppers are updating wardrobes to show their new routines and confidence, increasing purchases in categories like activewear, jeans, dresses, and footwear. While overall apparel growth may stay the same, demand driven by GLP-1 is emerging as a tailwind for wellness- and comfort-focused segments. At the same time, plus-size retailers are already feeling pressure, with companies like Destination XL and Torrid reporting sales declines, showing a broader structural change in the industry rather than a temporary trend.
Deloitte’s Retail Industry Outlook reveals that retailers are entering 2026 with cautious optimism: even as consumers face tariff pressures and stay selective in spending, most executives still expect revenue growth and margin expansion, supported by steady U.S. GDP and spending increases. Shoppers across different income levels are now a structural trend. They chase deals through affordable stores and loyalty points, and are changing value to encompass quality, service, and easy checkout beyond mere low prices. AI is entrenched in core operations like fraud detection, cybersecurity, and pricing optimization, while retailers prepare for agentic commerce where autonomous agents make purchases using machine-readable data. Marketing is also evolving toward AI-supported personalization, specialized campaigns, and loyalty programs. Leaders emphasize adaptability as a core strategy, especially as AI accelerates change alongside geopolitical uncertainty and macroeconomic volatility.
Inflation has pushed dollar stores to rethink their pricing models—and it’s changing who shops there. Dollar Tree began expanding beyond its $1 price point in 2021 due to squeezed margins, leaning into a multi-price strategy that allows for a wider range of products. That shift has made these stores more appealing to higher-income shoppers, who are also feeling the effects of inflation and seeking affordability, but are willing to pay more than $1 for slightly better perceived quality. As Jessie Handbury, associate professor at The Wharton School and a Research Associate at the National Bureau of Economic Research, explains, “The interesting thing is that in the data, we have always seen that … upper middle income people tend to be those who are more likely to take advantage of coupons, sales, just as a more general point… Higher-income people taking advantage of lower prices is not a new thing.” Other discount chains, including Dollar General and Five Below, have also reported growing penetration with higher-income households as the macroeconomic environment pushes consumers to be more value-conscious. With the war in Iran potentially impacting gas prices, further growth for these retailers is possible as consumers look to cut everyday costs.
Digital retail media —such as the banner ads that appear while browsing on websites like Amazon or Walmart-– may be heading towards major disruption as AI/agentic commerce positions itself to reshape how consumers shop. Retail media, which gained momentum with Amazon’s advertising platform launch in 2012, is a relatively new marketing channel that changed the advertising game when it emerged. However, with the rise of agentic commerce, brands are increasingly focused on how to show up when AI agents shop, rather than when people visit retailers’ websites. John Krepon, President of Global Digital at Steve Madden, believes only Amazon’s retail media business will survive as agentic AI pushes out other forms of digital advertising. One area agentic AI may leave untouched? In-store retail media. Ad spending in this space is expected to be more resilient and is projected to hit the billion-dollar mark by 2029. As retail media industry analyst Kiri Masters explains, “While digital retail media faces existential questions from AI agents, physical stores remain largely untouchable…People will still visit stores, still see shelf displays, still respond to the theatre of in-store retail.” Brands with a strong physical presence have a natural hedge—if they invest in making those in-person moments matter. Best Buy, for example, is gearing up to capitalize on the 2026 World Cup as a major advertising opportunity.
Dubai has become a major global beauty hub, driven by strong luxury demand, influential creators, and expanding international brands. Many companies have recently invested in the city and the wider GCC region, seeing it as a key growth market amid slower performance elsewhere. However, drone attacks linked to regional conflict have disrupted travel, reduced airline capacity, and shaken the perception of Dubai as a safe destination. Despite these challenges, brands like Ulta Beauty are continuing with expansion plans, though with more subdued launches and cautious optimism. Overall, companies are balancing short-term uncertainty with long-term confidence in Dubai’s resilience and importance to the global beauty industry.
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