The first quarter of 2025 was defined by turbulence, as brands braced for tariff shocks and economic uncertainty by building inventory and tightening operations. The second quarter, however, defied expectations. The anticipated fallout of rising prices and falling conversion has not yet materialized. Instead, the data reveals a surprisingly resilient market where the fight for profitability has shifted to a new battleground.

The cost of doing business is undeniably rising, but not in the ways many predicted. The real story of Q2 is one of a methodical squeeze on brands from all sides. 

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Here’s what the data told us

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1. The squeeze is on: Rising costs and shifting consumers 

The primary challenge for brands is no longer just external economic pressure, but a tightening vise of operational costs and changing consumer behavior. Retailer margins continued to improve in Q2, while advertising became more expensive and less efficient. At the same time, consumers began actively trading down to lower price bands. This triple threat puts a direct squeeze on brand profitability, making every dollar of investment and every operational decision more critical than ever.

2. Conversion is the new growth engine 

In the face of these pressures, winning brands are focusing on what they can control: the digital shelf. For the second consecutive quarter, sales growth has outpaced the growth in traffic and glance views. This proves that a relentless focus on optimizing the customer journey and improving conversion rates is the most effective strategy for driving real growth in the current landscape. Brands that master the art of turning browsers into buyers are pulling away from the pack.

3. Operational excellence is now table stakes

 Even as sales volumes grew, retailer supply chains showed surprising stability, with out of stock rates remaining flat. This indicates that major retailers are operating more efficiently, which in turn raises the bar for brands. Flawless supply chain execution is no longer a competitive advantage; it is the price of entry. Brands that cannot keep pace with the retailer will see their profitability eroded by preventable stockouts and fulfillment issues.

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Looking ahead: the path to profitable growth

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The first half of 2025 has made one thing clear: the old playbook of simply driving top of funnel traffic is no longer sufficient. The ecommerce landscape has not collapsed under economic pressure, but the battleground has shifted.

Success now depends on mastering the levers of profitability. Brands must manage the rising costs of advertising, navigate changing consumer price sensitivity, and achieve a new level of operational excellence to protect their margins. The winners in this new environment will be those who can connect their commercial strategy directly to their operational execution, ensuring that every decision made on the digital shelf contributes to the bottom line.

For all the Q2 results and insights, download our free report now.

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