Understanding the need for continuous innovation and adaptation in the evolving retail landscape to connect with consumers effectively.
The retail industry is constantly evolving, and while 2023 was no exception, here are six predictions for the retail industry in 2024 from Sally Lange, founder and principal of Slang and member of the Consumer Technology Association Board of Industry Leaders and Retailer Council.
1. Elections Impact Buys, Retail Media Networks Gain Traction
We are about to enter the most expensive political cycle of all time, according to AdImpact, with spending expected to break records of over $10B. This means smaller emerging brands will face difficulties breaking through via traditional advertising that is overpowered by political ads.
Will this make Retail Media Networks (RMN) more important? They will already capture $52B in spending in 2023, with mixed reviews. On its face, the concept makes sense…consumers see an ad on a retailer’s website or app and immediately jump from media to marketplace.
As the cost of traditional advertising rises, retailers are amping up their own media networks as a more cost-effective way to reach consumers. Networks, such as Walmart Connect and Target Media Network, offer advertisers access to a wealth of data on consumer behavior, making them a powerful tool for reaching targeted audiences. More than 30 percent of Instacart’s value is from advertising, Walmart disclosed over $3.1B in ad revenues in their new RMN and of course, Amazon leads the pack with brands buying over $30B in advertising each year.
2024 might be the time to optimize RMN strategies—with the added benefit of reducing competition from endless campaign ads.
2. Direct-to-Consumer Brands Embrace Brick-and-Mortar
After years of focusing on online sales, many direct-to-consumer brands now recognize the value of brick-and-mortar stores. This is because physical stores provide a way to reach new customers and build brand loyalty. For example, Warby Parker found that when the company opens a physical location in a new market, online sales in the area roughly triple. The company that started cutting out the middleman to sell directly to consumers now believes they could have 900 stores in the U.S. (from 200 today) over the long term.
Increasingly, DTC (Direct-to-Consumer) is being seen as a channel, not a complete go to market strategy. DTC companies are having a challenging time growing beyond the customers they have already captured. Leveraging brick and mortar—as a standalone store or within an existing retailer—brings new eyes and new customers to traditional digital brands and challenges the traditional DTC model.
Expect to see omnichannel retail continue growth in 2024. The Consumer Technology Association 2022 Retail Innovation study showed over half of consumers aged 18 to 34, particularly those living in urban areas, and those with children living in their household, said it is important or very important for retail to have a physical and digital presence.
3. Retailers Invest in Loss Prevention Technology
Retail theft is a major problem, consumers pay for it, and retailers are investing heavily in new technology to prevent it. Organized retail crime and shrink is no joke. In fact, the National Retail Federation says it’s a $94.5B problem.
With a loss of that size, it’s no wonder retailers are taking extreme measures to lock down inventory and protect associates—often at the cost of sales. From tethering products, to reducing access via cabinets, to displaying chit cards and keeping inventory in the backroom, these methods can slow down theft, but demonstrably reduce sales.
In 2024, we will see creative concepts for making products available and accessible, while reducing theft or making them less easy to resell. It is a retailer priority, with over 50 percent of retailers increasing their budgets to purchase new tech and equipment focused on loss prevention. These new technologies, including artificial intelligence, facial recognition, and RFID tags, can work together to identify potential shoplifters before they commit a crime.
Watch for innovations from top to bottom of the supply chain. Things like stand-alone kiosks, products that are locked until activated, next generation AI-informed video surveillance, autonomous shopping solutions and even security robots will make their way into your local stores.
4. Sustainability Takes Center Stage
Consumers are increasingly concerned about the environmental impact of their purchases, and retailers are responding by making sustainability a priority. This is leading to several initiatives, from establishing aggressive and public environmental goals, to overhauling operations, to more definitively promoting sustainable products and holding suppliers to a higher standard across their supply chain.
Consumer electronics offer increased challenges for sustainability, including short product lifecycles and fast upgrades, e-waste and a complex supply chain. While the consumer may not need to know every nuance of the energy or cybersecurity label, such as the Good Housekeeping Seal, a clear mark and scannable e-label will demonstrate that a product is going to perform as promised.
A clear sustainability message by retailers and manufacturers can appeal to new consumers, improving the ROI of efforts like EV fleets and meeting carbon emission targets.
Retailers and companies will lean into 2024 tackling fragmented, uncoordinated industry solutions and regulatory measures to increase consumer awareness and demonstrate transparency in addressing sustainability goals, without fear of being seen as greenwashing.
5. Investments in Digital Infrastructure Continue
Customer experience and acquisition, data management and privacy and, of course, AI, are driving investments for retailers. The need to automate, streamline and reduce costs is equally important as retail business models shift and require new innovations to stay relevant.
The evolution of digital goes beyond creating a marketplace to creating a location for information, education and discovery that ties back to each customer touchpoint. Expect increased investments in e-commerce, mobile apps, and in-store technology, allowing retailers to maintain control over the customer experience.
6. Returns and Resale Become a Growth Engine
Returns are a major cost for retailers, but many now see them as a potential growth opportunity. Retailers are increasingly investing in resale programs, which allow them to sell traded-in, returned or gently used merchandise. This is a win-win for both retailers and consumers as it reduces waste and provides consumers with more affordable options.
According to CTA research Exploring the Secondary Mobile Device Market, 30.5 million smartphones or cell phones in circulation were purchased on the secondary market. This number has only risen as retailers like Amazon, Apple, eBay and even wireless carriers promote refurbished and used devices. Device trade-in programs also have robust appeal and can encourage upgrades or new customers to visit.
Building the infrastructure to manage this process—or partnering with experts focused on the resale market—is becoming critical to support all types of consumer electronics.
7. The Convergence of Tech and Wellness
The consumerization of healthcare has made headlines over the past few years as many seek to reimagine health and wellness outside of a traditional healthcare setting. Retailers are increasingly adding on health-related services and expanding into over the counter (OTC) medical products like OTC Hearing Aids, in-home health monitors, connected medication dispensers and more.
These are complex, emerging categories, the complexity lies in the buying cycle, which is so different from selling traditional tech. It’s a long reach to inform consumers these products exist outside of a medical office and to provide the extra insights, information and education that come with products that are both tech and health focused.
Expect continued convergence in 2024, and more efforts to educate consumers on the new and complex categories available at retail—just as retailers and manufacturers did to simplify the wireless sales process.
These are just a few of the trends to watch that will shape the industry in 2024. This year promises that technology, both inside and outside of retail doors, will continue to be part of the retail evolution. The retailers and brands that adapt to these changes will be well positioned for success.