The Top 10 Retail Predictions for 2024
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No-one wants to read about omnichannel, personalisation and convenience yet again. Take those as a given for the next 12 months – just as they were the last year and the one before that.
In our list of 10 retail predictions for 2024, we’ve tried to go a little deeper than single word concepts to get to the heart of what’s going to be affecting the industry, the customer, and the way you do business.
Some of our predictions for 2024 in retail are large shifts. Some are smaller and quieter trends that will have a big impact. Some are an opportunity to get ahead of the competition.
All of them should be on your radar for the coming year.
Consumer Behaviour
1. Calculated Spending
With the economic outlook for 2024 not looking any brighter, shoppers will remain conscious about what they are spending over the coming year.
Value for money is the name of the game, but the definition of value will be different for individual shoppers and may change depending on the product category.
Discounts and deals will still be a priority for many. Retailers like Tesco and Boots are tying their best prices to their loyalty schemes, which sees consumers trading their data for a better deal. It’s likely that other brands will follow the same approach.
For some consumers value for money will lie in product longevity and durability, which creates an opportunity for brands with a reputation for quality and reliability. Others will treat more expensive purchases as investments, looking for items that hold value and can be resold in the future.
Product story is another way brands will prove value to the consumer. With shoppers being more calculated with their spending, retailers may need to make a strong emotional case for non-essential purchases.
The economic environment will also fuel the ongoing growth of re-commerce – not only consumers buying second-hand but also more and more moving into selling unwanted items to make money.
The visibility of re-commerce will grow as retailers look to expand the options for customers to keep buying from them – even if they can’t justify constant new purchases. H&M has just added pre-loved items to its Regent Street store in London, including brands and designers outside of its family of brands, and we expect other mainstream names to do the same.
2. Unconscious Shopping Takes Over
Shopping used to be a conscious action. The consumer was deliberately looking for something they wanted or needed – whether shopping in store or online.
Now consumers are increasingly buying and discovering products while doing other things, such as browsing social media, playing games, and streaming content. This shift towards unconscious shopping will continue to grow in 2024.
Unconscious shopping is all about discovery, so brands and retailers will increasingly develop content and experiences that have this in mind. Humans also love to talk about the things they find and love, so creating community spaces where consumers can share discoveries will also be key.
Although a lot of unconscious shopping happens digitally, it also includes in-person events where the store is a stage, like the raves held by IKEA in Milan and Flannels’ Beyonce exhibition.
Notably, Netflix has recently announced plans to open themed spaces in 2025 that combine retail, dining, and live experiences related to its most popular content. The media giant already hosts a pop-up restaurant –Netflix Bites – in Los Angeles that serves a special tasting menu from the chefs behind its biggest food shows.
Instead of ‘experiential’ retail stores that function like a traditional store with a small experience added on, retailers embracing unconscious shopping will increasingly flip this model and put the experience first.
AI
3. AI as a Co-Creator
Artificial intelligence was the talk of 2023 and it’s set to continue to dominate conversations over the next 12 months.
One area where AI’s role looks likely to grow is in product development. Both Coca-Cola and Becks have experimented with designing new flavours in partnership with AI.
Meanwhile, online jewellery brand J’evar uses artificial intelligence to help speed up the process of designing a piece for a customer. Its in-house AI is trained on its historical data and metrics for materials, allowing the brand’s designers to provide a list of specifications and generate numerous possible designs.
With more and more brands looking at applications for AI in their retail businesses, AI-designed products will start cropping up everywhere.
However, we won’t be seeing AI taking over product development and design jobs entirely – at least not in the near future. The technology is best as a co-creator and a way to generate lots of ideas quickly.
A human element is still essential to determine if something looks or smells or tastes good in real life. Likewise, artificial intelligence can’t tell which concepts are physically possible to manufacture or if they are practical for their intended purpose.
4. AI & Consumer Data
Another way that brands are using AI is to help customers find what they are looking for more effectively.
Walmart has announced several new AI-powered search tools, including a shopping assistant that customers can get personalised product recommendations from or ask questions – similar to the experience of visiting a physical store and talking to a member of staff.
Walmart clearly is not alone in incorporating generative AI to help customers discover products more easily. But as more retailers introduce similar tools, we are likely to see concerns around consumer data.
Notably, Google is supposed to stop the use of third-party cookies in Chrome by the end of 2024. With privacy and consumer data protection so high on everyone’s agenda, we are likely to see some pushback against AI in the next 12 months.
Brands who are using generative AI will need to get their AI data policy straight and clearly communicate to consumers about what data they are collecting and if it is being used to train AI.
We may even see that retailers need to clearly label any AI-powered tools that they use, so that consumers can identify them when shopping online.
It’s likely that brands who lead the way in consumer data and AI policies will set a standard that consumers expect others to match or exceed, so at this early stage of AI it’s worth considering if you want to lead or follow.
5. Retail Media Comes to the Store
Retail media networks – where retailers sell ad space on their digital channels to third parties – are a growing part of many retailers’ income.
This is now spilling over into the physical store as retailers look to monetise these spaces. From shelf edges to checkouts and even cooler doors, ad space opportunities are everywhere within the store and 2024 will see more and more retailers take advantage of these.
Retail media networks are all about selling access to the audience that a retailer has. With online visibility only becoming harder to buy – and maintain – and 80% of all shopping still happening in stores (according to the National Retail Federation (NRF)), stores offer brands a huge - and very attractive – audience.
The more captive that audience is the better, which is why places that sell needs – like grocery stores and pharmacies – are prime candidates. Specialist retailers with large, engaged audiences also have the potential to sell in-store ad space to brands whose target customer crosses over with them.
However, retailers will need to be careful to not to reduce the quality of the customer experience by using too much in-store advertising.
6. Increase in Medium Term Pop-ups
The pop-up store has become a permanent fixture in the retail mix. But while pop-ups were originally all about the very short-term, we’re increasingly seeing a trend towards medium-term pop-ups.
Instead of just a few days or a week or a month, pop-up spaces are opening for 2-3 months or even a whole year. For example, the Prada Caffè at Harrods is set to close in January 2024 after 10 months.
There are a few factors behind this trend. Brands know the value of physical retail but in a changeable world, a long-term commitment to a fixed store can be a risk. A medium-term pop-up offers the benefits of physical retail without the pressure.
Short-term pop-ups can have a big environmental footprint if the materials, fixtures, and fittings can’t be – or aren’t – recycled. A longer-term pop-up also allows brands to invest a bit more in the quality of the space, making it a better experience for the consumer.
We’re also seeing some brands using pop-ups as a test bed for concepts that could be used in permanent stores. A medium-term pop-up offers enough time for them to gather enough insights into customer behaviour to make an informed decision, compared to just a handful of days.
While short-term pop-ups will still have a place – particularly around creating buzz and driving footfall – medium-term pop-ups look to become more common over the next 12 months.
Sustainability
7. Radical Transparency
Brands are going to be more transparent than ever over the next 12 months in a bid to build better customer relationships. With consumers still watching their spending, customer perception will be a crucial factor in which retailers get their business. This means brands need to get honest.
Sustainability is an area that brands are happy to shout about when they’re making an improvement, but many aren’t very good at sharing the details of their journey. This is starting to change as seen recently when LEGO announced that its 100% recycled PET plastic bricks had higher carbon emissions than the traditional ABS plastic ones. The brand is now changing tack and looking to make ABS plastic more sustainable.
This radical transparency will also extend to calling out other brands and even government policy where necessary. For example, we’ve seen Iceland call for changes to a law that prevents it from telling consumers they’re the cheapest for baby formula at a time when customers are struggling to afford to feed their babies.
In France, Carrefour started labelling examples of ‘shrinkflation’ at the grocery shelf, so that customers know they are paying more for less. While it was a tactic as part of contract talks with suppliers, the move gave shoppers visibility of a widely used practice.
A digitally savvy and well-informed population means that brands and retailers can’t hide from customers. Those that embrace radical transparency – even when the news isn’t good – will be in a better position than those who choose not to.
8. Brand-led Positive Change
Sustainability will remain important to many consumers in 2024 but rather than just being told all the issues with the world, many want brands to offer some positivity.
This is not a case of ignoring sustainable issues or minimising their importance, but following years of consumer change, such as recycling, switching to reusable cups and bottles, not choosing plastic straws, there is a growing expectation that brands should put in more work.
This feeling is made even stronger by the fact that many consumers are struggling with the cost of living and may not have the budget to choose more sustainable options – but still want progress to be made.
Brand-led positive change will be about helping customers to deal with the challenges they face through a brand’s products, services, or initiatives. Consumers expect brands to help them to be more sustainable without huge price rises, which puts pressure on brands to make their products more environmentally friendly at the same cost.
Operations
9. Supply Chain Resilience
If the last few years have shown the retail industry anything, it’s that supply chain is everything. Not only can supply chain issues cause a business to grind to a halt, but a good supply chain is also crucial to fulfilling growth ambitions.
Although the specific issues change, the global situation continues to be volatile and the next 12 months aren’t likely to be any different. Retailers need to build agility into their supply chains and make them more resilient so they can deal with whatever comes next.
Investment into supply chain automation will form part of many retailers’ strategy for 2024 as they look to reduce costs, increase efficiency, and manage inventory better.
Brands will continue to explore local sources of raw materials over the coming year to reduce reliance on overseas suppliers, but we may also see more and more explore non-traditional sources as well. This could include other companies’ waste.
Last year, Tesco launched a new online marketplace, Tesco Exchange, for its suppliers to sell or donate surplus stock or products to each other. This could be too much of a certain crop, a by-product, ingredient, or packaging. For example, a pickled beetroot manufacturer is left with tonnes of beetroot peelings that could be used as cattle feed.
Not only is this a more sustainable system that helps reduce waste, but it also highlights the opportunities for retailers to help brands to build better supply chain resilience by bringing them together. And a more resilient brand supply chain makes for a more resilient retailer supply chain as there will always be products to go on the shelves.
10. Inventory Management will be Under Scrutiny
Shifts in consumer behaviour mean inventory management will need to be closely monitored in 2024.
Customers are causing buying seasons to become longer around big holidays and key buying events as they look to spread out their spend. This could see deals becoming polarised with the best prices for those who buy very early or very last minute.
Longer buying seasons are also causing many retailers to extend their return periods, so that consumers have the confidence to buy. But with the returns window for Christmas as long as September to January for some retailers, this leaves them vulnerable to receiving stock back over an entire quarter.
Not only does this make it hard to get an accurate picture of performance, but it also means the retailer could be left with out-of-date or out-of-season stock that will need to be stored, passed onto another retailer, or disposed of.
Retailers will continue to invest in inventory management technology and real-time stock data to better manage these issues. This includes the potential to dynamically price items, reducing those where it looks like there will be excess stock.
Businesses are also adopting a little and often buying behaviour to help manage inventory and cash flow. Some of this is driven by excess stock in the market due to consumers buying less and delaying larger ticket purchases.
Likewise, container costs are back at pre-Covid levels and demand no longer outstrips supply, which means shorter delivery timeframes from international markets. This gives retailers confidence to buy what they need as they need it and avoid the issue of overstocking.