Retail Trends and Predictions for 2024
The fate of the retail sector remains uncertain with consumers continuing to turn to e-commerce to purchase both necessary and luxury items. As shopping habits evolve, so do the channels that customers return to time and time again for their items of choice. In a year that saw social commerce boom and channels like Instagram and TikTok influencing how consumers choose to shop, consumerism through e-commerce has evolved and is set to transcend the retail industry even more in 2024.
E-commerce by its very nature offers more choice and is now being impacted by the rise of trends. For example, the "recommerce" market is estimated to be worth more than $188 billion. That number is forecasted to reach $276 billion by 2028, as customers embrace sustainable habits.
With retail habits evolving and new trends becoming viable ways to shop, what does the year ahead look like for e-commerce and order fulfillment?
The Digital Retail Experience
Channel strategies will be challenged this year as social commerce booms and consumers continue to be engaged through a variety of retail channels. This makes it vital for brands to drive consistent messaging across channels. With more choice comes more expectations of engaging with a product in the same way both digitally and physically. By harnessing data to understand where the consumer is researching and where they're converting, and then being able to deliver a personalized experience in each channel is critical to driving sales. This is something that's done particularly well in the health and beauty market, with the likes of Charlotte Tilbury embracing immersive marketing and creating a digital retail experience. The virtual store experience and branded "world" is the primary focus, and the product is secondary. Artificial intelligence and predictive analytics will play an increasingly important part in establishing personalized experiences by their ability to predict trends based on commonalities across consumer groups, how brands can best connect with them, and how they can deliver content in a meaningful way.
Economic Impact vs. Income and Spending
As inflation starts to moderate, discretionary income will continue to be impacted. Data is showing that inflation is softening, but consumers say food still costs too much. 2024 will see brands being hyperfocused on what's uncertain for the upcoming season, whether that's a cost-of-living crisis or an increase in household bills that might impact the consumer. To counteract this, the supply chain will need to moderate to make sure inventory is balanced in both retail stores as well as e-commerce so as not to create a profit-and-loss drag and ensure brands have inventory in the right place for where the customer is. When the time comes to convert an online sale, it has to feel seamless. While the consumer focus continues to be placed on value and looking at the best price, retailers will need to try and balance value with basket size, offering discounts or free products, or developing their strategy around free shipping. They'll do it in a way to intentionally drive incremental basket size to protect their margins, utilizing "buy more, save more" incentives both in-store or online.
Primarily for e-commerce, a further shift will take hold that continues to be driven by value. We will also see consumers starting to care less about the speed of receiving their product vs. the predictability of exactly when they will receive it. We could see "three to five business days" disappear with exact delivery days becoming the new norm, even if that means slower delivery.
The Physical and E-Outlet vs. Recommerce
The theme of sustainability, vintage items and apps designed to support this trend are on the rise. Recommence is now a key focus for any large retailer in both Europe and North America because it solves two very important problems. The first is the intense pressure on sustainability in the apparel market in general. The second is managing returns and the impact it has on sales. Returns are one of the largest P&L challenges a brand must navigate and overcome. This lends to an opportunity to marry the two in a unique recommerce experience that delivers the objective of minimizing waste.
There’s still discovery around what should be marketplace vs. owned in the space and whether brands have enough customer attention to effectively drive recommerce in an owned channel rather than removing new sales on the product. Ultimately, recommerce is driven by the consumer. Younger generations are increasingly opposing fast fashion, and instead advocating for the global impact purchasing clothes has from a sustainability perspective.
The Returns Model
There’s a shift happening in how retailers approach returns which will carry through this year. Return requirements vary from one retailer to another and consumers should no longer assume they have an extended return period. For example, there are apparel companies that now require returns be made within seven days of delivery. This process is ultimately designed to get the unit back while it’s still in a sellable state before it hits a markdown cadence, acting as a margin protection program. This year we will continue to see a significant focus on returns in the apparel market to solve the challenge of getting an item back too late and then taking it to markdown.
While the retail industry's growth forecast remains unknown, it's safe to say that the rise of e-commerce and social commerce will continue to take hold of the industry in 2024. The year ahead offers a prime opportunity for brands to get ahead of the competition by planning and preparing for factors that impact customer spending. Furthermore, they must continue to stay agile, keeping the customers’ needs at the center of their business model.
Jamie Saucedo is senior vice president, business operations at PFS, now part of GXO.
As Vice President of Business Operations, Jamie Saucedo is responsible for PFS' global portfolio of 70 brands. Throughout her 10+ years at PFS she has served in various roles across the organization, giving her a wealth of industry knowledge across verticals. Jamie applies her expertise to guide our clients to successful eCommerce operations.