Retailers are ringing in 2024 with optimism and momentum
Retailers were prepared for a slowdown in 2023 that never fully materialized. Despite inflation and higher prices, customers kept clicking “add to cart.”
Retailers that embraced omnichannel selling and e-commerce did especially well in 2023. Consumer goods companies used direct-to-consumer channels to stand up e-commerce operations quickly and find buyers outside the traditional brick-and-mortar distribution channels.
Salaries and hourly rates rose to match inflation, which encouraged spending. Savings rates dropped, however, and credit card debt increased — which may signal pandemic-era savings are gone. But right now, customers have money to spend.
Demand was relatively stable across the industry, with some segment-specific hiccups. Higher-priced ticket items were down slightly among the mass market (although luxury goods did well). And customers started pulling back on casual eating toward the end of the year.
Early figures on Black Friday suggest a record-breaking holiday season is possible. Economists are predicting small interest rate drops in the coming year, which could carry over some of the holiday momentum and help avoid a hard recession.
Generative artificial intelligence (AI) tools are making it easier for brands of every size to drive e-commerce through marketing and social media. As generative AI capabilities move from concepts to concrete strategies, retailers will be able to create more personalized shopping experiences and improve key operations, like demand forecasting.
2024 priorities for U.S. retailers
There’s a lot to look forward to in 2024. Retailers are optimistic, which means they can spend their strategic energy on areas that grow, rather than stabilize, their businesses.
Here are five priorities for retailers in the coming year:
1. Omnichannel and digital strategies
Retailers need to invest in omnichannel capabilities, so the customer experience is consistent and on brand from start to finish, even if it crosses multiple channels, multiple times.
Digital channels and strategies produce more data, which retailers can use to draw a clearer picture of the customer journey. With deeper insight into shopping patterns and customer needs, retailers can close gaps between channels and create smoother handoffs.
Retailers also need to reward customers via omnichannel. Successful retailers are using apps and online ordering to trigger in-store rewards and other brand experiences. Loyalty programs that are easy to use and have clear and attractive benefits are adding value for retailers.
2. Personalized selling
AI tools made it easier to tailor shopping experiences based on browsing history, past purchases and other behaviors. Now, customers expect brands to know them and their preferences every time they shop.
With the amount of data that’s available, retailers can create smaller customer segments. They need to understand the value of each customer relationship and how it affects the business overall.
Influencer marketing is reaching thousands of customers in (what feels like) one-to-one outreach. Buyers feel like they have a personal relationship with sellers on social media apps like TikTok. Bigger brands are challenged to create that same level of intimacy in an authentic way.
Meanwhile, in-person experiences are equally important — and poor shopping experiences show up in sales data and customer churn.
Retailers also need strategies to address two divergent demographic groups. By the numbers, younger, tech-savvy consumers are a dominant force. But baby boomers, with a nest egg of approximately $75 trillion, are spending freely and driving a large segment of retail sales.
Ultimately, retailers need to recognize their various customer personas and serve each individual how they want to be treated. No more one size fits all.
3. Digital capabilities
Retailers need to explore more advanced analytics. Reporting on shopping patterns isn’t good enough anymore; retailers need to start predicting them. They need to reliably forecast which products to carry, when and where.
Retailers also need to lean into automation. From a labor perspective, there aren’t enough employees available to put on registers and work the floor and restock shelves and respond to inquiries or complaints. Retailers need to find the right places in the customer journey to insert automation so they can keep prices down, move goods quickly and make customers happy.
Whether retailers have little customer data or a lot — they have data. If they’re not using it to make better decisions about how to sell or serve customers, they’re letting a valuable asset go to waste. Every retailer, regardless of size, needs a strategy around data.
4. Environmental, social and governance (ESG) priorities
Consumers are using their dollars to reinforce their values, such as sustainability and social justice. And they’re researching companies before they decide to buy from them.
Leaders need to establish clear environmental, social and governance (ESG) platforms, then reinforce them through operational decisions — not just a slogan or brand promise. They should keep an eye on social trends and anticipate how they affect the company all along the value chain.
5. Resilience
While the outlook is predominantly sunny for retailers, there are a few storms to watch for: the supply chain and the labor market.
Retailers need to focus on supply chain optimization to build resilience against any downturn in demand. They need to manage their suppliers and reduce supply costs to widen margins and get the most out of every sale.
They also need to build more transparency into the supply chain to appeal to more eco- and socially conscious consumers.
Like everyone else, retailers are struggling to find and retain employees. Retailers can look at pay rates, benefits and bonus structures in the short term while they explore more creative solutions (such as automation) for the long term. If wages keep increasing, they will eventually drive up prices and lower demand.
Culture is another longer-term strategy that can help retailers retain workers. Employees want to work for brands that “do the right thing” in terms of sustainability or social causes. In some cases, your brand’s ESG position could be just as important as compensation.
How Wipfli can help
Keep the momentum going with Wipfli. Our advisors can help you plan growth strategies through digital transformation, supply chain optimization, people management and more. We help retailers, manufacturers and distributors navigate change and come out ahead. To learn more, contact us today.
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