5 Key Retail Trends to Look for in 2024
With all the buzz surrounding artificial intelligence in the retail industry, it’s no surprise that its embrace is one of the top trends as the industry begins 2024. The rapid growth of AI, machine learning and predictive technologies is opening up new worlds of opportunities. However, AI isn’t the only key trend in retail. Here are five others to watch this year:
1. Sustainability Moves Into Core Functions
Retailers know sustainability is on customers’ minds, and they've made progress in compliance, reporting, emissions estimations, ingredient transparency, materials sourcing and other areas. In 2024, we’ll see retailers weaving sustainability into core processes such as using technology to optimize complex supply networks to lower their costs along with their ecological footprints. Such optimization will apply to both outbound and inbound goods, where returns processes also offer opportunities for more sustainable operations.
2. Recommerce Becomes a Channel Unto Itself
Recommerce can be about more than providing incentives for returning passé items to stores and then lining up third-party marketplaces to offload them. Look for retailers to get creative about recommerce as they weave it into the fabric of their core businesses. Some may create their own pop-up sales channels and harness many of the same capabilities and technologies that they do in retail store and e-commerce channels. To capitalize on consumer trends around thrifting and sustainability, others may spark new partnerships with marketplaces and other digital channels specializing in vintage goods.
3. Social Commerce Sales Supplant Social Media Promotion
Social media has been about marketing to and engaging with customers via influencers, generally leaving the choice of retailer and channel up to the shopper. We’re going to see more retailers push toward social commerce, through which the social media channel itself facilitates the purchase. Influencers will be incentivized to not just promote, but to convert sales on TikTok, Instagram and elsewhere.
4. Insourcing Moves in on Outsourcing
Instacart-style outsourcing made sense when the trend was fresh and the technologies still unfamiliar. But retailers have caught up on the technology front, and the cloud-based tools now exist to enable retailers to bring an increasing breadth of services in-house — and boost margins as well as their brands by doing so.
5. Retailers Embrace AI
The coming year will see AI expanding its role in areas where it already has a foothold — inventory management and demand forecasting being prime examples — while retailers experiment with its effectiveness in customer-facing realms.
Retail industry AI technologies no longer need teams of data scientists to run them. They've become increasingly business-grade, so planners, buyers, supply chain analysts and other users can now apply AI algorithms to data of interest to refine or even rethink how they’re marketing, promoting and assorting their businesses. 2024 will see the widespread embedding of AI algorithms at the point of business decision.
The degree to which AI benefits business users and the bottom line is still an open question. A recent Incisiv study on transforming retail with AI settled on six areas the digital transformation consultancy expects to be the most financially fruitful in the near term: price optimization, assortment planning, personalization, inventory management, demand forecasting, and route planning. Tech predictions being infamously fraught, some will surely bring more benefit than others, and it’s certainly not an exhaustive list.
In most cases, AI won’t be making business decisions yet. However, if today’s analytics can tell you that prices are trending up and leaving the rest up to you, tomorrow’s will suggest an appropriate response with your own pricing. The same will hold in other contexts, such as how to adjust for low stock at particular locations, or how to react to consumer demand shifts under different scenarios.
Also look for 2024 to bring increasing comfort among retailers that want to leverage AI in customer-facing applications, be it service, engagement, marketing or sales. It’s still early days, so retailers may choose to experiment and pilot in some of these customer-facing areas of their businesses. Replacing legacy customer service chatbots with generative AI-powered versions are one way to dip a toe in the water before diving into AI.
AI will continue to be the biggest story in retail in 2024, but it won't be the only story. Sustainability, recommerce, social commerce, and insourcing will continue to be key focus areas for retailers this year. Of course, AI will play a growing role in all those areas — as it probably will, with time, throughout the retail sphere.
Kristin Howell is the global vice president of retail marketing and merchandising at SAP.