A Retail Renaissance and Other 2024 Retail Insights

MarketSource Retail Leaders Share Reflections and Predictions to Help Retailers Win

Q. Customer price sensitivity left a definite imprint on retailers in 2023. Will that continue?

Steve: Yes. Customers are definitely being more careful and more selective with their spending. I think it was the promotional activity and deals that drove a lot of business in 2023. Customers wanted to make sure they got something on promotion, or the deal they got was special in some form or fashion. As long as homes and cars, for instance, remain expensive or become more expensive, people will resist those higher prices and refrain from making large purchases.

Retailers are constantly challenged to respond to economic shifts, and they should consider promotions that make customers feel that it’s a deal they can’t pass up—something to entice them to buy now. You need to generate demand by creating a strong call to action to encourage consumers to make that purchase.

Mark: Consumers are getting options and promotion offers from various loyalty programs, so retailers should also be asking themselves—beyond creating a brand impression—how valuable are their offers to the customer? Sure, customers are getting your emails, but they are getting bombarded with retail offers. If yours make them cringe, you’ve lost them. There is an opportunity there for retailers to streamline this activity, with proper implementation of AI, for instance, to gather and analyze data and determine where they can add value for the customer. Again, this is where personalization can play a role.

Q. Will retailers get any relief from the labor shortage?

Steve: The ability to attract and retain talent was a problem before the pandemic. During 2023, we saw staff turnover start to stabilize again to pre-pandemic levels, but it’s still challenging because pay rates for retail workers are still relatively low. An added challenge now is the lack of reliable transportation, particularly for the younger generation. Many young people just don’t have a car they can drive to work every day. Cars are more expensive now, so many workers are just saying, “Well, mom will drive me to work.” We’ve seen people using Uber and Lyft to get to work; others are just getting rides, walking, biking. The bottom line is that many retail workers just have unreliable transportation.

Mark: The labor shortage is really a socio-economic issue rather than a problem with the labor base itself. It’s a challenge to retain an employee in a store if they can’t maintain a living wage, and if they see higher pay elsewhere, they’ll jump. Although we’ve seen increases in hourly wages at the retail level, they’re still sub-standard. The dilemma is who’s going to pay for the increases? Will retailers take it out of their profitability? The current retail worker population is aging out, and I think there is no short-term solution to the labor shortage. This will continue to be a problem as it relates to wages. Automation may help ease the burden, and retailers can lean on personalization tools to supplement their staff.

Q. There’s a lot of buzz about AI in retailing. How will it progress next year?

Mark: No one expected AI to accelerate so fast in 2023! This all plays into personalization, which continues to be a struggle for retailers. Consumers want shopping experiences that are tailored to their individual needs and preferences. Retailers can use data and analytics to personalize the shopping experience, both in-store and online. AI can help retailers access personalized data from various sources. For instance, associates in the store will know the customer’s past purchases, their likes and dislikes, and their online reviews. The use of AI in this vein will grow slowly, but if you can help associates understand that every transaction contributes to the potential lifetime value of that customer and that if every repeat customer has a positive experience, you are creating loyalty.

From a manufacturer’s standpoint, loyalty means being in front of your consumers all the time. Of course, some customers are super loyal to brands, and some just don’t care. To be effective, programs have to be personalized and meaningful to consumers and create value at the same time.

Steve: Some people think AI will take their jobs, but it’s more of an innovation similar to when computers came along. Traditional secretaries weren’t needed anymore, but their roles evolved. I think retailers are on a similar trajectory. For the most part, AI will be an enabler to get more things done, faster. AI can establish algorithms to identify what products you may be interested in and can make those recommendations quickly. We may get to a point where customers feel AI is reading their minds. In the meantime, retailers can tap into it to meet customers where they are and enhance their experience.

Q. Are manufacturer promotions playing a greater role in the retail sphere?

Steve: Over the past year, we’ve seen continued growth in in-store interactive brand marketing and purchases. Retailers are still recovering from the labor shortage of the last couple of years, and brands are figuring out that they need to do a lot of marketing themselves in stores. And brands have realized they must capture the interest and engagement of customers, on the floor, to differentiate themselves from their competitors. And they can’t necessarily count on retail stores to do that for them. So, we’ll see more interactive displays and POP and working demos.

Mark: MarketSource partners with clients where the manufacturer takes over the last three feet of retail sales. We close the gap between manufacturer and retailer by providing virtual brand sales experts to assist shoppers while they are in the store. This continues to prove to be a successful strategy.

Q. What do you foresee happening with social commerce in 2024?

Mark: The impact of influencers is beginning to wane, while micro-influencers—those who have a specific niche—are beginning to gain. There are mixed results with social purchasing: TikTok is allowing influencers to present a purchasing option, but I’m not sure where that is going, and it’s such a small part of overall retail volume now that it’s just a blip on the radar. Voice commerce will grow quicker than social commerce, especially in commodity businesses where you ask Alexa or Google to load up a shopping list and have DoorDash, say, deliver it.

The impact will be especially strong in grocery businesses, where you might have a recurring list and you just check off what you need. The downside of voice commerce for retailers is whether consumers who are shopping from an established list will be willing to accept impulse suggestions Shoppers in stores often leave with things they don’t need, but that doesn’t happen in voice or social commerce. Whether the trend impacts retail profitability remains to be seen. And while social commerce is a generational thing, voice commerce has real legs.

Q. What does the future of stores look like? Is the comeback of in-store shopping expected to continue?

Mark: In-store shopping is still strong; certain product categories, such as higher-end home electronics, will have to be examined in person. Not too many people are comfortable buying a fridge online—they want to experience it before they buy it. But, if a customer can’t find adequate help or assistance as they shop in store, they have two choices: power through and make guesses about the product they’re interested in or leave. If, on the other hand, they can speak with a brand expert, either in person or virtually, that will positively impact the experience.

And that’s one reason why QR codes have made a total resurgence—because they enable the customer to connect with a live brand expert via their phone or other device. AskMe® by MarketSource is one such tool. People are grateful to talk with a person who’s knowledgeable about and equipped to walk them through the product, and surprisingly, store associates like using live-expert access tools, too. Besides gaining valuable product information, customers can use QR codes to access virtual product demonstrations, troubleshooting support, and more. We will likely see AI playing a bigger part in directing consumers to the right department or store area to get their questions answered.

Q. Is sustainability still top-of-mind with consumers?

Mark: Sustainability is still an emerging trend. Consumers are concerned about product sourcing and whether brands are manufacturing them in a responsible way. They also want to know if products are recyclable. Many retailers are on top of this, but returns remain a big problem, as many returned products are simply thrown away. Fast fashion creates a lot of waste, too, and lots of stuff ends up in the trash. As a result, many retailers are tightening up their return policies.

Steve: Sustainability is especially important to millennials and Gen Zers. It doesn’t completely drive their purchase decisions, but it definitely matters to them. And when they have the ability to choose between two products, they will pick the one with sustainable manufacturing—that they can confirm. They are getting more savvy about sustainability claims and are beginning to discern between the hype and what is truly sustainable.

Q. What will be the key drivers of retail success in 2024?

Mark: Omnichannel will continue to grow, and some retailers are doing better with it than others. As for consumers, they expect a seamless, cross-platform shopping experience, such that whatever they’re shopping for online should be in the store. And they expect the voice of the manufacturer to be reflected on the retailer’s website and in the store, from both a chat and transaction perspective. But not all retail departments are talking to each other.

In addition, customers want shopping to be convenient, whether that means being able to shop online and pick up in store, pulling into a parking lot and getting their goods, or having their purchases delivered to their home or office.

Using data to get more customers is a big issue. There exists such a huge volume and crush of information that no matter how many analysts retailers have, they can’t get on top of it. Retailers are asking whether they should toss out generational marketing and focus on customer demographics. That’s because—using omnichannel as an example—you want to create the same customer experience for all customers throughout their journey. On the other hand, if you spread your generational marketing strategies across all aspects of retail, you can broaden your market.

A recent article I read argued that because society is so segmented today, it’s a challenge to reach all customer segments, and that many customers often come into stores more informed than the retail associate.

Steve: In general, retailers have made progress in assuring customers they have products in stock at the local store and can get them shipped. But retailers need to figure out how to engage with those customers who pick up items in the store or from their car and attach to the purchase. To make this happen, retailers need to do some post-purchase promoting.

Inside the store, when a customer buys one item, the salesperson can suggest an additional product or accessory that’s sitting right next to what the customer is buying. For example, if I’m buying a computer, I might want a keyboard, a mouse, a second power supply, or a new router. As a customer, I’m not going to see that need unless someone engages with me and unless it’s marketed to me. And some products are not even fully enabled without certain accessories, which means without them, the customer will be disappointed. If I drop my new phone on the ground and it shatters, I’ll wonder why they didn’t sell me a protective case along with the phone.

Q. How can retailers stand out from their competitors in 2024?

Mark: Those who create a positive customer experience beyond the initial purchase will stand out. Currently, there’s a gap that exists between purchases—there’s no follow-up with the customer, which would be a positive loyalty move. When there is the potential for a follow-on or supporting purchase, for instance, or when a product comes to the end of its lifecycle, you should contact that customer with some kind of offer or suggest a new, relevant purchase. Our AskMe platform can help make that happen, but retailers need to realize the importance of making that loyalty move.

Let me give you an example. In a pilot test we conducted, we found out that after a customer makes a speaker purchase, they often come back to that same retail store in three months to purchase another one. We discovered these customers through their product registration. That gave us the opportunity to put customers into a loyalty loop. The key to this strategy is timing: You have to get in front of the customer before they go into the research stage, because otherwise, they may drift to a competitor.

In summary, I think we’re experiencing a retail renaissance.