By Howard Meitiner, Managing Director
The retail industry is undergoing a period of significant transformation, driven by changes in consumer behavior, the continued evolution of e-commerce strategies and the proliferation of new technologies, especially artificial intelligence. As we approach the holiday season and head into a new year, here are six key trends that are influencing and shaping the future of the retail industry.
An Expanded Holiday Shopping Period
For the most enlightened retailers, the holiday selling season began in October, kicking off with special online days/events from mega-retailers including Amazon, Target and Walmart. While once considered the most critical day on the retail calendar, Black Friday now falls in the middle of the holiday shopping season. Partly due to an evolution in how people shop, consumers and retailers alike now treat the holiday season as a three-month period, and October sales figures reflect this.
Even though there are five fewer days between Black Friday and Christmas Day in 2024, the NRF predicts a 2-3% increase in revenues during the holiday period, so there will simply be a higher concentration of spending. Consumers do not think in terms of the number of shopping days available, because there are plenty of days available for them to make their purchases – and getting items when and how they want them has never been easier.
A Cautious Consumer
According to NRF estimates, 28% of consumers expect to spend more, 27% expect to spend less, and 45% will spend the same amount in 2024 as they did in 2023. While discretionary spending is not expected to decline, consumer debt levels are high, and shoppers have become increasingly cautious and price conscious.
A recent Boston Consulting Group survey echoed similar sentiments from consumers, with 52% of consumers prioritizing price and promotion this holiday season, followed by 36% prioritizing convenience, and 33% for product availability.
2024, therefore, will be all about perceived price value and inflation busters. As inflationary pressures, geopolitical tensions, and continued economic uncertainty are driving a shift towards value, retailers must adopt strategies that balance affordability with quality and exclusivity.
Evolving E-commerce Strategies
Online market share will only continue to grow because it provides convenience and timely delivery, especially on busy weekdays. Online sales represent 40% of weekday sales, but only 28% of weekend sales. As Christmas approaches, however, the percentage of in-store revenue will increase, driven by last-minute shoppers, longer holiday hours, and concerns about online purchases arriving on time.
Still, consumers are increasingly finding brick and mortar experiences during busy trading periods somewhat chaotic, confusing and tiring, compared to the more seamless online environments. Stores find it difficult to provide an efficient service proposition in peak seasons, so the most adept retailers will continue to prioritize more integrated, intuitive omnichannel strategies that deliver less stress and meet consumers wherever they may be. One must remember on-line only businesses struggle to make a profit, because of customer acquisition costs and the cost of managing returns.
Customer Experience
In a highly competitive environment, where customers have a dizzying array of choices and more information than ever at their fingertips, customer service can be the ultimate differentiator, whether online, through contact centers or in stores. Simplification and efficiency of services plays a more critical role than ever in driving sales, providing there is a credible value proposition and solid promotional and pricing strategies.
Retailers should prioritize factors such as:
- Streamlining the checkout process, both online and in-store
- Offering a variety of fulfillment options, including buy online pick-up in-store (BOPIS) and curbside delivery
- Leveraging data analytics to tailor product recommendations and marketing messages
The Power of Strategic Partnerships
Strategic partnerships can help retailers enhance their offerings and unlock new customer segments. By collaborating with complementary brands or service providers, retailers can also create unique value propositions and improve operational efficiency. Kohl’s/Sephora and Target/Ulta are two great examples of strategic partnerships that have had a major impact. We should expect to see more partnerships of this type, where large retailers essentially outsource a segment of their business to specialty brands to increase store traffic and expand their customer base.
The Rise of AI and Automation
Artificial intelligence and automation are still in their relative infancy but have already played a massive role in revolutionizing the retail industry. By leveraging AI-powered tools, retailers are optimizing inventory management, micro-targeting their marketing campaigns, and improving their customer service experiences. Those retailers who are not exploring the opportunities for AI across all areas of their business will only fall further behind in 2025. AI’s impact will be analogous to the Internet’s impact. Retail winners will be those who find the right balance between human interaction and automation.
As the retail industry continues to evolve, retailers must adapt to changing consumer preferences and technological advancements. Retailers that invest in improved in-store and online customer experience and create greater operational efficiency through strategic partnerships and automation will be best placed to take advantage of the opportunities ahead.
