From chaos to clarity: Insights to navigate 2025 ecommerce turbulence

Ecommerce isn’t just changing—it’s being reshaped in real time

Q1 2025 revealed a market caught between caution and opportunity. Inventory levels climbed 26% YoY, fulfillment rates improved, and gross margins edged upward—all signs of operational tightening as brands prepared for tariff shocks and ongoing macro uncertainty. Yet, even as brands spent more on advertising, ROAS fell across most categories, weighed down by rising CPCs and lower conversion efficiency.

Adding to the complexity, March 2025 served as a pivotal moment in ecommerce results. Following new tariff announcements, savvy shoppers began stocking up ahead of anticipated price hikes, while Amazon and other retailers aggressively grew inventory levels, nearing Q4 peak volumes. Even with stable shopper demand, value-focused consumers encountered fewer discounts, as brands began pulling back on heavy promotions to protect profitability ahead of looming cost increases.

In short: efficiency became survival.

Here’s what the Q1 data told us

1. Inventory is your insurance policy

Brands and retailers proactively built inventory buffers, pushing on-hand inventory to near holiday-season levels. This move wasn’t about overconfidence—it was a hedge against expected supply disruptions tied to tariffs and global instability.

2. Discounts are shrinking, but value still reigns

While discounting activity slowed, shoppers remained highly price sensitive, pushing average selling prices downward. Retailers who preserved value perception without slashing prices maintained an advantage.

3. Retail media efficiency > spend

Even with ad budgets climbing, ROAS declined. The takeaway? Winning isn’t about spending more—it’s about spending smarter. Media investment needs to drive incremental outcomes, not vanity metrics.

4. Margins are rising—for now

Gross margins rose to 23% in March, up from 19% in October 2023, fueled by selective promotions, stronger PO fill rates and improved operational efficiency. But this margin growth represents a temporary window: as tariff-driven cost pressures work their way through supply chains, brands will face a tougher fight to protect profitability.

Looking ahead: Preparing for a tighter, tougher market

As we move deeper into 2025, we expect gross margins to come under serious pressure. Brands will be forced to pass tariff-related cost increases onto retailers like Amazon, while Amazon will push back hard to protect its own expanding retail margins.

We also anticipate a shift in shopper behavior: more browsing, tighter wallets and even greater focus on trade dollar efficiency as Amazon scales back promotions.

Brands that are proactive—realigning pricing strategies, tightening promotional calendars, optimizing retail media for real outcomes, and staying laser-focused on operational execution—will lead in 2025.

The storm isn’t coming. It’s already here. The smart brands aren’t waiting it out, they’re building for it now. At CommerceIQ, we believe crises don’t just create challenges, they create leadership opportunities. And this quarter made one thing clear: brands that focus on operational discipline, smarter media investment and supply chain agility are the ones best positioned to win.

For all the Q1 results and insights, download our free report now.