Cash-strapped shoppers, unpredictable weather, political jostling, and international turmoil dominated headlines last year and 2024 is set to bring another year of instability for the retail sector.
We are still refining our position on the big trends and watch-outs of significance for the coming 12-18months. As we move into a new year, it's essential to anticipate the transformations that will shape the retail industry in 2024. The sector remains in a state of flux, with consumer habits continually evolving, technological advancements accelerating, and the economic landscape fluctuating. Below we have collated a list of the emerging trends internationally and predictions for the retail industry in 2024. Some of these we have been talking about for close to a decade. But alas, retail doesn’t move that fast while at other times it feels breakneck.
1. Embracing Hyper-Creativity for Growth
There has been a clear focus on driving topline sales, cutting costs and reducing inventory for many in 2023. For retailers focusing on growth in 2024, creativity in promotional strategies is crucial. You can’t just keep cutting costs out of the business. While broader innovation is necessary, in the immediate future it's essential for retailers to craft promotions that maintain healthy margins for themselves, brands, and consumers. More than ever, it is key that retailers return to data management and utilisation of post-promotion analytics to understand what is happening (in as real time as possible).
As inflation continues to impact discretionary income, retailers must strike a balance between delivering value and increasing basket size. Incentives like "buy more, save more" can protect margins while driving up the total value of each transaction. This balance must be achieved both in-store and online to effectively cater to the consumer's need for value.
2. The Rise of Seamless Retail
The fusion of digital and physical retail strategies to create a seamless customer journey will continue as a trend set to dominate in 2024. (Just how much longer is this going to take?) This approach acknowledges that consumers transition effortlessly between digital and physical touchpoints when shopping. Retailers should therefore strive to deliver a consistent, personalised experience across all platforms.
3. The Evolution of the Returns Model
The way retailers handle returns is likely to undergo significant changes in 2024. Some retailers are already implementing stricter return policies, requiring items to be returned within a week of delivery in the US. This approach aims to get the product back while it's still in a sellable condition, thereby protecting margins.
While this model may help retailers safeguard their profits, it requires a delicate balance with customer experience. Retailers need to ensure that their return policies don't deter customers. Finding this equilibrium will be a key challenge for retailers in the upcoming year.
4. The Expanding Role of AI in Retail
AI is set to play a central role in retail in 2024, particularly in delivering personalised experiences. With the younger generation being incredibly comfortable with AI, retailers can use this technology to offer personalised rewards and recommendations based on consumers' past purchases.
AI can also deliver faster and more precise decision-making in the retail sector. It can swiftly analyse vast amounts of data in real-time, leading to increased efficiency, a reduction in human errors, and the automation of routine tasks. However, the quality of data used is crucial [sh*t in, sh*t out] - if the data fed into AI systems isn't accurate, the outputs won't be reliable.
5. The Emergence of Re:commerce
Re:commerce is again the buzz in 2024, the practice of selling used or refurbished goods, is set to continue to be a significant trend in 2024. With sustainability becoming a priority for consumers, recommerce provides an opportunity for retailers to align with this trend while also addressing the challenge of managing returns.
One of the key challenges for retailers in this space is determining whether to operate within a marketplace or to own the recommerce channel. Retailers need to ensure they can attract sufficient customer attention to drive sales in recommerce without cannibalising new product sales.
6. Enhancing the Retail Experience
With competition intensifying the in-store experience will become a key differentiator in 2024. If you remember past decades, it was all about cookie cutter delivery to ensure efficiencies of scale. Next retailers tried to make their stores a replica of their website. Stores should not do what websites do. Stores do one thing, websites do another thing, and stores can do things that websites can’t.
Remember you don’t have to go to a store, you need a customer to want to go to a store – so it’s critical to create an environment shoppers want to visit.
Retailers need to enrich the in-store experience. Discovery, inspiration, and interaction this is what gets shoppers off the couch and into the store.
Digital integration is another key area of focus and is now much more economically viable. Retailers should deliver a seamless digital experience that complements the in-store experience. This can be achieved using apps, AI, and other digital technologies that enhance customer engagement. But the ability to use digital to enhance how the store looks, feel and communicates is certainly much more within reach.
7. The Impact of Social Commerce
Social commerce, the use of social media platforms for buying and selling products is set to continue its upward trajectory in 2024. It’s well known our younger consumers increasingly turning to social media for shopping inspiration. Retailers need to invest in creating engaging, personalised content on these platforms. But don’t just repurpose the same messages everywhere. Shoppers are looking for authentic and relatable content – your digital ad for Facebook isn’t going to cut it on TikTok! Leveraging influencers can also help to boost brand relevance and growth.
8. The Experience Economy will continue to grow
It is important to contextualise where we have come from. 2021 was still a year of uncertainty that pushed us into the year of possibility. As we have continued to be impacted by international unrest and economic pressure (to name only a few) has nurtured customers who want to experience and favour brands that present clear solutions to everyday challenges. This opportunity for retailers specifically comes to life in the provision of service (yes thank you Countdown, please put that shopping in my boot) to services (thank you for grooming my dog/doing my nails/servicing my car).
9. Tackling Retail Crime
Concerns over retail fraud are set to continue in 2024, with theft and ramraids having a significant financial impact on retailers. Retailers will need to leverage technology, including AI, RFID technology, image recognition, and various sensors, to support their efforts to tackle this issue.
AI technology can help retailers detect patterns and prevent attacks before they happen. By integrating AI into their strategies, retailers can stay ahead of potential threats and protect their businesses.
As RFID technology becomes cheaper and more accessible, retailers have begun to adopt RFID to regulate inventory control and identify theft and trends in product movements.
10. Back to Basics
The past 12 months have seen businesses cut, cut, cut. Following a period of doing often more with less. If you made it through covid and didn’t really feel the heat, you certainly felt it in 2023. That means 2024 is a reset of getting back to basics and ensuring they are delivered. Getting the processes and systems reviewed [not overcomplicated] and right sized for the business [perhaps with a helping hand from AI], means our resources and talent are focused where they will make the most impact. We expect not to see as much “excitement and innovation” in 2024 and more of a “let’s get back to the business of our customers” and executing with elegance. The framework that are systems and process within a business enable flow. Flow delivers execution and only then can we layer in innovation of value.
2024 isn’t going to be easy by any accounts in our part of the world. We anticipate seeing more businesses close as they simply cannot continue to support fractured businesses and rising costs. If anything, ensuring the framework is stable and the foundations solid will be key. But retailers need to move forward simultaneously – stand still and you go backwards. With the rise of AI, the continued merging of digital and physical retail experiences, the focus on sustainability, the shortage of good labour, and the evolving economic landscape, retailers must stay agile and adapt to these changes. By understanding these trends and predictions, retailers can prepare for the challenges and opportunities that lie ahead, ensuring their businesses thrive in the dynamic retail landscape of 2024.