Today’s retail landscape features several key themes that have been shaping the industry’s overall trajectory. As economic conditions continue to evolve, retail brands are looking to capitalize on a few macro trends to stay ahead of their competitors and top of mind for customers. Looking more specifically at the leaders in the apparel and footwear industries, several brands showcased their resilience and adaptability, leading to their success over the past year.
Reflecting on the retail trends that were highlighted midway through 2023, certain central themes played vital roles in current success and continue to lay the foundation for future strategy. The ongoing integration of omnichannel customer experiences – utilizing new opportunities emerging from advancements in AI – has shown huge returns for retailers. Additionally, commitments to innovation in the form of new product offerings and new methods of reaching customers enabled businesses to form more inclusive and more versatile business practices. Overall, looking back at how 2023 unfolded, there was and still is significant emphasis on the customer-centered approach. The retailers that remained committed to elevating customer experiences are seeing huge returns and will look to continue this throughout 2024.
As 2024 begins, five key areas have been identified as trends that will shape the retail industry in the coming year. The following sections will elaborate on the state of consumer expectations, the next innovations in commerce, and the potential influences current economic conditions may have on the industry. With 2023 retail sales increasing 3.2% from the previous year, it’s expected that this upward trend will persist as optimism prevails in many areas of the economy, making it more vital than ever for retailers to have a grasp on the trends guiding the industry and determining their success.
2024 Retail Industry Trends
Trend #1: Heightened Customer Expectations
As innovations and improvements continue to sweep across the retail space, the ever-changing customer has developed heightened expectations heading into 2024. Many of these expectations are similar to the trends we’ve seen developing over the last couple of years. However, as they become normalized, how retailers execute on fulfilling these expectations is becoming a crucial determinant of success. Some elements highlighted in this section include same-day delivery, free shipping, personalization, and sustainability.
Even with the effects of the pandemic largely subsiding, customers still look to online shopping for many of their retail needs. A huge component of the online experience is the speed and cost of delivery. In terms of speed, 80% of shoppers want same-day delivery, and 61% want to receive their orders even faster than that. Feeling these demands, retailers are adjusting their order fulfillment operations to offer this, with 99% of retail companies saying they will offer same-day delivery by 2025.
At this point, same-day delivery should be viewed as a necessity, and methods to optimize last-mile delivery should remain a focus for retailers. For many, this entails evaluating internal processes and testing solutions, such as warehouse locations, delivery driver routes, and integration of new supply chain software. Not only do customers expect prompt delivery times, but they also continue to expect free shipping on many of their retail purchases. From a retailer’s perspective, free shipping has shown promising returns, resulting in 30% higher average order values and a 90% increase in eCommerce sales. For online shoppers nationwide, free shipping and same-day shipping are two key parts of retail success. Taking the shopping experience to the next level, customers are looking for new levels of tailored personalization. This most commonly comes in the form of recommendations based on expressed interests. With new methods for collecting consumer data through first- and third-party cookies and site heatmap tracking, retailers should be looking to increase conversion and average order value through targeted promotions.
Another avenue for retailers to win customers over is through sustainable claims, products, and production methods. With 77% of shoppers holding retailers responsible for sustainability, gone are the days when customers were deterred by slightly higher prices for sustainable products. Instead, shoppers are actively seeking purchases that promote sustainable practices. Customer demands such as those mentioned in this section are giving new meaning to the old adage that “the customer is always right.” The current retail marketplace shows huge returns for the companies walking this talk and, by comparison, a stark future for those that don’t. As these trends continue, retailers must evaluate their current supply chain, sustainability, and marketing practices. At Clarkston, we can assist in identifying the key areas that may be inhibiting your business from delivering differentiated customer experiences, giving you an advantage in preparation for this year and beyond.
Trend #2: Artificial Intelligence & Authenticity
Recent reports estimate that retailers plan to spend $7 billion on AI-enabled tools in 2024, with this number growing to almost $30 billion by 2028. While it might seem advantageous to start investing in the latest AI-enabled tools to get ahead this year, it’s best to take a step back and ensure that your data foundation is solid to get the most out of these tools. When utilized in a meaningful way, AI can help to personalize and cultivate shoppers’ experience. The right balance of personalization is key, though, in winning over customers.
While AI is becoming more commonplace, only roughly 40% of consumers fully feel comfortable with AI personalizing their experiences. It’s important to strike the right balance between utilizing AI in a way that is meaningful to customers without overstepping any boundaries. One key place shoppers have been more open to AI personalization is in pre-purchase situations. One study shows that 44% of shoppers have stated that they are open to utilizing chatbots for product information. These chatbots can help to personalize the shopping experience, which has led 63% of companies to see an increase in conversion. Continue reading by downloading the full report below.
Read last year’s Retail Industry Trends Report here.
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Contributions from Aaron Messer