January 31, 2024
4 min read
As the retail industry continues to evolve, it is crucial for businesses to stay ahead of the curve and embrace new trends and technologies. This blog article explores the outlook for retail in 2024 and how businesses can adapt to this changing landscape to stay competitive in the market.
Retail’s Outlook For 2024: The Year Of Human-By-Design
The second weekend in January means only one thing for me. It’s NRF, retail’s “Big Show” in New York. Having attended for over three decades now, NRF is a pivotal moment in my retail calendar. It’s a chance to connect with clients, partners, startups, and industry visionaries, reflect on the year just gone, and shift the focus to the opportunities ahead.
Resilient consumers but for how much longer?
So, what was everyone talking about this year? It’s clear the retail challenges of 2023 haven’t gone away. Last year was characterized by deep-rooted uncertainty about the impact on consumer spending of potential recessions, geopolitical instability, inflationary pressures, and general economic anxiety.
The good news? There was a sense at NRF that many retailers have been able to ride out these challenges. This was in no small part down to their customers, who’ve displayed amazing resilience in the face of their own economic challenges.
According to the Commerce Department’s Census Bureau, retail sales ended 2023 up 5.6% over a year-over-year basis. While these numbers are not adjusted for inflation, sales indicate consumer spending remained relatively robust throughout the year, especially in the United States. It’s why, as we look to the year ahead, there’s a sense of cautious optimism across retail, albeit tempered by the need to avoid complacency.
Generative AI sets the pace
A strong driver of that optimism is the fact that we’re living through such an extraordinary period of technological progress. Nothing exemplifies this more than generative AI, which continues to impress and improve in leaps and bounds.
Consumers are waking up to the possibilities too. A recent Accenture survey found that two thirds of consumers are already using, or would consider using, an AI shopping assistant that recommends other products that pair well with their purchase. A similar number say they are already using or would consider using an AI shopping assistant that recommends products within their budget.
Unsurprisingly, its impact on retail dominated discussions at NRF. While AI has long been central to retail forecasting and supply chain management, leaders recognize that generative AI offers something new and potentially much more powerful. Arguably, it’s the first digital technology to be truly human by design.
In particular, its ability to provide very relatable and relevant experiences gives retailers new opportunities to get closer to consumers through “conversational commerce.” This technique reflects the fact that people are hardwired for more natural, conversational, human-to-human interactions, especially when it comes to inspiration and product discovery.
But what does conversational commerce actually mean in practice? Imagine, for example, you’re planning a dinner for six people. You have a budget of $200, but you’re stuck for recipe ideas because one guest is vegan, and another is a fussy eater.
We all know by now how good generative AI can be at providing recommendations in this kind of situation. Just look at Walmart’s new generative AI search tool to help shoppers search for products using specific use cases instead of by brand names or items. For instance, “a Superbowl watch party,” and receive a curated list of products, instead of individually searching for beer, chips and hotdogs. The key here is to keep the consumer in your brand experience and not have to go out to the wider internet for recipes or ideas.
And in Europe, French home improvement retailer, Bricorama, launched ‘pAInt,’ a generative AI-powered shopping assistant to help customers with their painting projects, from inspiration – by suggesting trending styles – to the purchase of materials and best practice guides on the painting process.
But there’s a broader retail opportunity here too. If they can get their data together properly, they can keep the consumer within their branded experience by linking these recommendations to inventory that in-stock and ready to be added to the shopping cart, as well as a launchpad for driving online purchases of ingredients or products. Not to mention the opportunity for loyalty programs, upselling opportunities, and more.
For customers, it opens up the possibility of having truly individualized personal shopping assistants, who can not only offer recommendations but also see them through into actual purchases and experiences.
For retailers, it’s a chance to capture the entire retail journey, from inspiration to ideation to transaction, as part of a single, seamless, natural conversation. In essence, generative AI becomes the language of conversational commerce, aligning retail strategies with consumer expectations and driving more personalized shopping experiences.
While AI’s great acceleration is undeniably exciting, good retailers know that face-to-face interaction remains a cornerstone of retail engagement. Having happy, thriving store associates creating memorable experiences for customers is one of the most powerful retail drivers there is.
And it’s not an easy thing to do well. Frontline retail can be a wonderful working experience, a point several CEOs at NRF, made when recalling their career journeys to the “top seat” started from working the shop floor. But it can also be challenging and draining, both physically and emotionally. This burden can fall especially hard on women, who often also have to shoulder a greater share of caregiving outside of the workplace.
It's why I love the work that non-profit organizations like Catalyst are doing to correct this. Their recent report sets out various steps retailers can take, including investing in physical wellbeing, being more flexible around scheduling practices, having more structured avenues for career growth, and leading empathetically.
Reinventing retail for a new era
As we navigate the year ahead, the hard work of delivering continuous reinvention in an environment of ongoing uncertainty will continue to challenge retail leaders.
But there are lots of reasons for optimism. On the one hand, emerging technologies are opening up extraordinary possibilities for retail productivity and customer engagement. On the other hand, a human-focused emphasis on workforce development and sustainability will continue to pay dividends.
By bringing this all together, retailers can make 2024 the year of truly human-by-design retail.