Retail continues to reinvent itself
While retailers collectively embraced technology to usher an industry-wide transformation in 2023, the impact of economic challenges on the industry’s growth can hardly be denied. The forecasted slowdown in GDP growth was offset by a relatively healthy labor market, but global inflation and supply chain disruptions caused by geopolitical factors had a marked impact on the retail industry.
However, ecommerce sales are estimated to have grown by 12% in 2023, and 70% retailers are now confident about their ability to deliver in a multichannel world. These are indicators that investments in technology have helped retailers find success even in a dull macroeconomic environment. As the global economy recovers over the course of 2024 and thereafter, market leaders will score big wins in the evolving retail landscape.
In a digitally-driven world, technological transformation and innovation is not a one-time project. Instead, it is a continuous process, where new technologies and trends warrant strategic responses from businesses. For retailers, this has been the formula for success in the 2020s, and it is not going to change in the coming years.
Nonetheless, a lot has changed over the last year. And what’s coming in 2024, is of paramount significance for retailers. As physical retail makes a final comeback, retailers need to reconsider how their in-store experiences will stand out against the information overload afflicting digital channels. From shifting demographics to changing expectations from the physical store, and the impact of AI on competitive dynamics. Here are five key retail trends that will define the future of commerce in 2024 and beyond.
Consider these five key retail trends that will shape 2024.
Trend 1 – Physical stores, more than just a distribution channel
2023 saw renewed interest in physical retail, after customers were forced to shop from digital channels due to the pandemic. While customers have now fully embraced digital channels, this has only refined the purpose of physical stores, and what customers expect from them. In 2024, physical retail is due for its final comeback, and footfall will rise in retail stores this year.
As a result, retailers need to tailor their physical retail strategies to meet the needs of the digitally-satisfied customer. Physical retail takes the customer away from the information overload of digital channels, making it possible to deliver truly immersive and therapeutic experiences. With physical stores, retailers can deliver high-quality products by engaging all five senses of the customer.
This makes physical stores more than just a distribution channel. That said, the size of the average store is shrinking in the US, and customers are no longer attracted by “megastores.” This has been attributed to the rising popularity of e-commerce. This trend is likely to unfold in the European and global markets, as ecommerce activity remains strong across both Western and Eastern European states.
In addition, customers now expect more sophisticated and technologically driven retail experiences in the physical store. In this context, self-checkout experiences have gained traction, and will find increased adoption in busy stores with a high footfall. In addition, ready availability of AR and VR devices from electronics leaders like Apple will also impact the relevance and the function of the physical store, while expanding the possibilities of ecommerce experiences.
Trend 2 – AI adoption is unveiling new competitive dynamics
The retail industry is the second biggest spender on AI technologies, and this shows in the strategic benefits that AI has delivered in retail. From supply chain optimization to personalization, AI has enabled retailers to cater to the most demanding consumers.
However, the access to these technologies stands democratized, thanks to enterprise software that embeds these technologies into business processes. This means that with regards to AI, the playing field has almost been leveled – almost. In 2024, businesses that succeed in obtaining highest quality data in massive volumes will be more successful in capitalizing on their AI investments.
In other words, data quality and data quantity will be the name of the new game. With ample computing power at fingertips (thanks to cloud), businesses will compete on their ability to exploit their AI investments to the fullest, by enticing customers to share more relevant data in exchange for better experiences.
Trend 3 – In ecommerce, customer experience still rules
While most retailers have invested in ecommerce capabilities to expand the scope of their business, the volume of noise on platforms is on the rise. With generative AI (GenAI) in the picture, the velocity of content production will increase further, making it even more difficult to stand out online.
Because convenience is a key driver of ecom activity, CX will remain the key to succeeding in the digital economy. In 2024, this will mean different things – for instance, adopting community-based selling (social commerce) strategies to tap into the networks of loyal customers, or leveraging social media capabilities to bring purchase experiences to the users’ platforms of choice.
Moreover, retailers will have more opportunities to lower operating costs. GenAI will find ample applications, as it can be leveraged in marketing, sales, and service functions. Retail businesses can make their chatbots smarter with GenAI, accelerate personalized content production in marketing, and empower sales reps with GenAI capabilities to turn them into “supersellers.”
Trend 4 – Changing demographics will unlock new opportunities
While the demographics of the European population have been changing steadily, 2024 offers a lucid view of what lies ahead. In 2022, the median age in Europe was 44.4 years, and a consistent decline in birth rates implies that older populations will rise in numbers in the coming years.
Moreover, the age of first time mothers has increased to over 29 years, and the number of births to women over 40 has more than doubled over the last 20 years. This data points to a clear rise in demand for categories that cater to older people.
Retailers looking to capitalize on this trend will need to adapt their marketing strategies to this target group. Some tactics include staying away from hard-sells, offering easy-to-read text on direct-to-consumer (D2C) channels, and employing human agents to offer more empathetic experiences.
Trend 5 – Recommerce, sustainability, and the rise of circular economy
Retailers have demonstrated awareness of climate change issues in the past years, and some have committed to doing their share with Net-zero pledges. But scientists, governments, and consumers are now coming to the realization that current efforts are not enough.
2024 will therefore be the year of action. Sustainability targets will be redefined, regulations will tighten, and new technologies will now enable retailers to track the impact of each product on the environment. These evolving European regulations and sustainability strategies were a key subject of focus of this Nextrday webinar on sustainability.
While sustainable products have commanded a premium in the market so far, consumers will now consider options like purchasing reused items and repairing instead of replacing. This will make recommerce a key driver of both sustainability and profits for retailers. By 2025, recommerce will be a €120bn market, growing 20x faster than the retail market.
Recommerce, along with sustainable business practices, will give rise to innovative circular business models. In fact, circular models will find greater applicability in retail, as the industry accounts for a high materials footprint – and 2024 will be a significant starting point in this regard.
What’s next for retail?
Analysts forecast an optimistic outlook for the retail industry in 2024. That said, the year will bring some paradigm shifts in consumer expectations, competitive dynamics, and the role of technology in physical and digital retail.
By keeping a close watch on the above five trends, retailers will be well-positioned to take on the challenges and opportunities of 2024 head on, and translate them into business growth.
Interested in more news coming out of the consumer goods industry? Read our blog post on 5 key medtech trends that will reshape the industry in 2024.
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