SMEs forge ahead with product innovation: The opportunity for retailers

Many of the innovation trends will take center stage at the upcoming CoCreate London event. (Source: Supplied)

By Alibaba October 31, 2025

Text Size

A new study from Alibaba.com surveying 1000 UK small and medium-sized enterprise (SME) leaders reveals a striking trend: Nearly half (48 per cent) plan to boost investment in product innovation over the next 12 months, despite rising costs and economic uncertainty. For retailers and suppliers, this signals powerful momentum and new opportunities for collaboration.

Conducted by Censuswide on behalf of Alibaba.com, the research found that 86 per cent of UK SMEs see innovation as vital to their growth. While 35 per cent are focused on improving existing products and one-third are responding directly to customer needs, another 27 per cent say innovation is their key to staying competitive.

Yet innovation doesn’t come easily. Many SMEs say high costs and sourcing challenges threaten their progress. Over half cite the expense of innovation as their biggest barrier, while others struggle with the speed of change, limited in-house expertise, and resource constraints.

To overcome these hurdles, many are turning to technology – with 59 per cent of SMEs expressing confidence in using AI to drive new product ideas and streamline sourcing.

What this means for retailers and product leadership

For retailers, brands and product teams, the study’s findings are a clear signal to how SMEs are choosing to tackle a difficult global business environment. With so many SMEs doubling down on innovation, the competitive landscape is intensifying. Smarter product design, faster time-to-market and leveraging tech like AI are essential to thrive in today’s marketplace.

Here are some of the key implications:

Quality-led innovation pays: With 35 per cent focused on enhancing existing products, it’s a reminder that innovation doesn’t have to result in net new products. Retailers should partner with suppliers and manufacturers who emphasize a commitment to continuous product quality and improvement.
Customer-centric design is rising: 33 per cent of SMEs say they’re innovating based on direct customer needs. For retail teams, this means investing in understanding buyer behavior, feedback loops and rapid iteration. Being responsive to shoppers will distinguish winners.
Innovation is increasingly tech-enabled: AI is rapidly becoming foundational to business success. From concept generation to sourcing and supply-chain intelligence, AI tools are enabling smaller teams to do more with less and 59 per cent of surveyed SMEs feel confident using AI for product innovation. Retailers should explore what AI means for their private-label, sourcing and product-development functions.
Barriers still matter: Costs, sourcing challenges and resource constraints are real. Retailers who address those pain points through partnerships, supply-chain optimization, and platforms that reduce friction will have an edge.

With nearly half of UK SMEs signaling increased investment in product innovation despite mounting cost pressures, the message is clear: Innovation isn’t being delayed, it’s being accelerated. It’s essential for retailers to align with that momentum to maintain an edge in a challenging business environment.

Join the conversation at CoCreate London, November 14

These findings set the stage for the upcoming CoCreate London event, where many of these innovation trends will take center stage. Hosted by Alibaba.com, CoCreate brings together the very SMEs, suppliers, and retailers driving this next wave of innovation, supply-chain resilience and the power of AI in product and sourcing strategies.

Highlights include:

Insightful keynote sessions and panel discussions on how to future-proof your product strategy in a cost-constrained environment.
Access to Alibaba.com’s cutting-edge tools, supplier network and AI-powered sourcing tools AI Mode and Accio platform that automate the entire sourcing process, connecting buyers with 200,000+ verified suppliers across 76 industry categories and 200 million product listings.
The world’s largest product-based pitch competition: CoCreate Pitch, where 30 finalist SMEs will present their innovations, and ten winners will split $20 000 in prizes and credits, with one grand winner receiving $200 000.
Networking opportunities with peers, investors and supply-chain experts, giving retailers and brands a chance to engage in the innovation ecosystem.

Whether you’re a retailer seeking smarter sourcing, a product team looking for fresh ideas, or a brand ready to harness AI for faster innovation, CoCreate Europe offers the insights and connections to make it happen.