Melissa Minkow, Director of Retail Strategy at CI&T
Prices remain high and purse strings remain tightened as we look to 2024. However, there’s more stability inherent in the current retail environment compared to this time last year, which was marred by extreme excess inventory and increasing inflation. With the latest ONS retail sales figures suggesting the sector ‘turned a corner’ ahead of the key Christmas period, and a bigger focus than ever on operational efficiencies and consumer connection, things are looking brighter.
So, what can we expect from retailers in the year ahead?
Right-sized Demand & Discounts
Despite retail sales higher than expected in the build up to Christmas, consumers are still feeling the pinch of the economic environment. In 2024, we can expect a similar story of modest growth – consumers are spending, but spending more strategically as they have adjusted to navigating higher inflation. Black Friday weekend was the boost that retailers needed ahead of the holidays – in 2024, and with inventory in a better spot compared to last year, retailers will look to emulate that success across the year, enticing shoppers with more discounts which happen on new items versus outdated, unwanted items to help drive demand. Finely-tuned demand forecasting and management tools will experience improved accuracy due to inventory stabilization and more integrated AI.
AI Investment
Generative AI and AI will help drive efficiencies for mission-driven consumers and overworked employees in the year ahead. While it is already all the rage, in 2024 the most impactful ways generative AI will likely show up are through advancing search functions far beyond what we’ve experienced in the past, maximising logistical routes and optimising efficiencies for store associates. Generative AI will also support flexible, real-time discounting approaches, as well as devise the most compelling product descriptions. Expect to be able to drop in extremely specific, detailed product queries, and to find far more suitable options when searching.
With respect to optimising employee efficiencies, generative AI could be used by store associates on handheld devices to think up product recommendations when advising customers, and AI will hopefully be deployed in order to achieve the most ideal sales floor schedules.
Tailored Customer Experiences
Online, we can expect to see retailers creating more personalised experiences for shoppers beyond straightforward filters. For example, rather than shopping “for Mom/brother/sister/partner” edits, more retailers will start implementing recommendation mechanisms designed for whom the shopper says they’re buying for – helping create a one-stop shop to occur digitally within the same retailer. Additionally, with an increased importance on brands to know consumers’ ideal prices, smart, AI-driven recommendations for different desired spends would resonate well, extending to bundling different items within an overall budget, versus desired price points for just one item. In stores, more mobile POS technology to achieve faster checkout and the ability to virtual queue for fitting rooms in advance of need would help to alleviate brick and mortar bottlenecks during busier shopping periods.
Increased Loyalty Perks
We’ve seen loyalty cards reach new heights in recent years – with several retailers moving from schemes which build up points, to ones resembling ‘clubs’ where consumers save money on the spot. In 2024, smart retailers will be those who take loyalty perks to new heights and move beyond price point – in particular, upping these around seasonal moments in the calendar year to entice new customers. Establishing alternate, extra, quieter store hours, creating exclusive livestreams for members to snag limited edition products, “skip the line” benefits, and building in members-only opportunities to customise purchases are just a few of the ways retailers could boost the loyalty experience further in the year ahead.
The shift in retail hot topics from the metaverse to AI characterizes the recent attitudinal shift in retail strategy. As we enter 2024, the best investments made will be the ones that further optimise infrastructure, while also enhancing the experience for shoppers. Shopping should be rewardingly seamless for everyone involved.
