NEW YORK — This year will usher in a new era as retailers and consumers alike navigate a tight labor market, higher long-term interest rates, and overall economic volatility. This is according to Deloitte’s 2024 Retail Outlook, released today, which examines how retailers can rebuild trust to drive loyalty and rekindle profitability through experiences, personalization, and trust.
The 2024 Retail Outlook also includes a brief summary of the US economic forecast from Deloitte economists.
Key insights include:
- Economic forecast impact on retail. Deloitte’s baseline forecast anticipates continued growth in consumer spending at a rate slightly below GDP growth due to falling inflation, low unemployment, and increasing productivity growth. While the aftermath of the pandemic led to a shift in consumer spending patterns, the forecast suggests a slower growth trajectory for durables spending relative to consumption and income over the next five years.
- Inflation has left its mark. Three in four consumers still feel concerned about rising prices, even as inflation moderates. Consumers consider trade-offs, try out the competition, and hunt for the best deals to maximize their budgets. One-half of retail executives expect consumers to value price over loyalty, and 64% expect consumers to purchase fewer goods. What’s more, consumer spending at discount retailers increased 26% year-over-year.
- Leaning into loyalty programs. Nearly two-thirds of consumers belong to between one and five loyalty programs. However, most of these consumers use half or less of their membership, creating a challenge for retailers to develop engaging programs that convert these members into regular, profitable users. Retailers should look towards rekindling profitable loyalty through personalization, co-branding, and data monetization.
- Creating experiences in-store. Most customers (three in four) say they are more loyal to stores that show consistent customer service and experiences. As retailers are challenged to do more with less, they cite four opportunities for growth: strengthening loyalty programs (54%), reinforcing digital commerce offerings (44%), enhancing in-store customer experience (36%), and boosting omnichannel experience (32%).
- AI gets personal. As consumers hunt for deals and seek out bespoke experiences, half of retail executives are prioritizing AI-driven personalized product recommendations in 2024. But only five in 10 retail executives are confident in their company’s ability to use AI effectively. While trust in a brand drops 144% for customers who know a brand is using AI, building AI with trust in mind can help quadruple market value.
The full report is available online.