Entering into a new year often brings a combination of old and new, and the Retail & CPG industry is no exception to that rule. There will be recognizable consumer behavior and expanding perspectives on trends that are not necessarily new but new to the priority list for 2024. The undercurrent throughout each trend for the new year will be value — the value of goods and services, the value of convenience and purposeful spending, and the value companies derive from integrating and embedding technology into the value chain.
As we look forward to 2024, we can expect consumers to feel continued financial pressure from the ripple effects of inflation while requiring retailers and brands to deliver value without sacrificing quality or a personalized touch to the shopping experience. These will be unchanging from the previous year but intermingled with an evolving view of sustainability and an increased application of AI in everyday business processes and decisions.
For each purchase consumers make and each action companies take, all must yield tangible benefits and a return on investment (ROI) in order to prove successful. So how does this take shape in 2024 for both consumers and businesses? Let’s walk through it.
Consumers Are Redefining Value
The financial pinch continues at a global scale. Despite inflation forecasted to decelerate this year, prices remain high. Consumers are spending more now than in the past three years without a similar increase in income. And with a recent survey revealing that just over 50% of consumers view their personal finances as worse now than prior to 2020, it is no surprise that budgets are feeling the squeeze. As a result, consumers have augmented their behavior to include:
- Leveraging multiple channels to find the best options and deals.
- Budgeting for the necessities only.
- Approaching both product discovery and purchase with intentionality.
These behaviors, of course, have direct implications for retailers and brands alike, with value taking center stage. The onus is on companies to not only deliver value to consumers but also ensure that their business strategies fully incorporate the weight of value. A key aspect of value is getting creative with messaging, promotional activity, markdowns, and everyday pricing in order to implement a holistic approach that is personal to the consumer and drives differentiated returns.
The value expectation this year hinges on expanding and maximizing the marketing toolkit to deliver unique customer trials, bundles, payment plans, special offers with tailored messaging, and the list goes on. Though consumers will spend in 2024, they will do so with tighter wallets and an eye on reducing their overall spend while extracting the most value from their purchases. So, in turn, retailers must respond with real-time value creation and delivery in a memorable way.
The Definition of Value Has Expanded
Today’s increasingly informed consumers define value as more than just price alone. Value encompasses lifestyle, along with health and wellness priorities for both individuals and the collective. Therefore, consumers are scrutinizing how brands show up and demonstrate a clear and transparent commitment to doing what is right across the entire value chain; consumers will demand in 2024 that brands meet expectations on sustainability, philanthropy, and ethical causes.
This will require brands to strike the right balance between delivering value and aligning to what consumers personally value. And the right balance means building trust, demonstrating purpose, carving out convenience, and crafting meaningful experiences. Brands have already put into motion circular retail models that extend the use and life of products. In fact, the second-hand apparel market is expected to reach $350 billion by 2027.
Circular retail is not the only step that brands have taken and can take in the value-with-a-purpose age we are in now. Adding visibility throughout the supply chain and making good on sustainability pledges that impact the retail value chain are also non-negotiables for today’s consumers. Brands that are found to greenwash or give a false impression of their environmental claims suffer a significant decrease in their customer satisfaction scores.
This, in turn, affects revenues and profit. So to counter these effects, it is imperative that brands are genuine in their pledges and supply a level of transparency that makes visible how they conduct business and manufacture products. And one key element to ensuring visibility is achieved is AI-driven technology. AI-driven tech will continue to transform the marketplace and is now table stakes for businesses.
Generative AI Will Continue to Transform the Retail Landscape
We cannot skip the mark AI made — more specifically Generative AI and those who flocked to try ChatGPT — in 2023 and the undeniable mark it will continue to make as we cross into a new year. AI touches every area of unified commerce, and it has proven to yield strong results for companies that have adopted it, yielding 2.5 times growth in profits for the year 2023 versus their competitors. And this success is sure to move into this year, as companies heighten their focus on extracting the most value from AI capabilities. McKinsey found that 75% of the value Generative AI use cases can deliver are found in customer operations, marketing and sales, and R&D. All of which meet 2024’s call for price value and the demand for value with a purpose.
From automation to hyper-personalization and driving efficient decision making, the benefits of employing Generative AI are tangible and must flow into the lives of consumers seamlessly. This can be achieved by companies proactively creating value that resonates with today’s consumers and adaptively supporting the consumer journey all under the guidance of AI Governance.
Capturing the value of AI this year means embedding capabilities that accelerate innovation, unlock consumer insights that enhance personalization, create process efficiencies and promote process transparency, as well as reduce costs while driving growth through targeted customer interactions. These are all elements that will underpin the importance of value in 2024 and will show to be most effectively realized through the output of AI.
Reliance on Technology Is Here to Stay
The bandwagon for AI in retail is getting fuller each day, and it will continue to pick up more willing passengers as the year progresses. From AI newcomers to organizations that have successfully implemented and scaled AI projects, all will look to unlock transformative benefits from the specific use cases that lead to greater personalization and are also tied to price, promotion, and stronger returns on marketing and sustainability investments. Ultimately this year will be dominated by consumers, retailers, and brands alike prioritizing the critical element of value.