Reset, protect, and grow: the top retail priorities for 2024 and beyond

In 2023, it was price and private brand. The year before, we pondered the growing importance of issues like food waste and the metaverse. While we might not always get things 100% correct when making our annual retail predictions (and who could?), then if nothing else, they serve as a useful record of just how fast the world is turning.

This year, rather than educated guesses about the retail industry’s immediate future, we’re taking a slightly different approach to our predictions. Below, you’ll find a breakdown of what we see as being the key priorities for retailers around the world in 2024. Regardless of market, regardless of size, these universal issues will demand the attention of any ambitious retail brand.

Before we get into the detail on each of those themes, though, let’s take a moment to consider the context in which we believe they’ll play out.

2024’s key political, economic, social, and technological issues

Progress and stagnation will clash head on over the next 12 months, with the potential for growth tempered by the legacy of recent events.

• Politically, global uncertainty is expected to decline[1]. At the same time, the biggest election year in world history will likely lead to much more talking than doing[2].
• Economically, inflation will continue to ease, making room for deflation in some cases. Volume growth will return, but year-on-year sales will slow in kind[3]. High interest rates and active wars will only compound a weak trading environment[4].
• Societally, GenZ will begin to overtake Boomers in the workforce, while the elderly will remain the largest part of the population in many Western countries[5]. More widely, consumer confidence will continue to remain low[6].
• Finally, from a tech standpoint, the adoption of AI will continue to accelerate[7]. Accompanying that will come even greater scrutiny of the risks it presents[8].

How will these macro shifts will impact the grocery industry?

These high-level global shifts won’t be the only changes that retailers need to be ready for, however. Customer behaviours will continue to evolve, and retailers will see significant changes in their own circumstances too. For instance:

• Shoppers will find themselves less likely to be taxed by extraordinary situations. At the same time, their current focus on value, health, and sustainability is unlikely to dwindle. From a demographic standpoint, retailers will need to cater both to a growing segment of elderly shoppers, and an increasingly affluent group of GenZ customers.
• As the global economy begins to stabilise, retailers will inevitably see less inflation-driven growth. In response, they’ll continue to experiment with AI as a way to deliver efficiencies and improve the customer experience. Private Label will be seen as a way to drive core growth, personalisation will help them to differentiate, and diversification will drive new forms of revenue.

With the context for the year ahead established, let’s now look at the five things that retailers will need to make a priority in 2024.

1.  Reset their value proposition

We’re not there yet, but there can be few doubts: the age of inflation is finally coming to an end. The International Monetary Fund expects global headline inflation to fall to 5.2% this year[9], and it may dip even lower in some countries[10]. This shift will present retailers with an opportunity to reset their value perception, relinquishing their fixation on price for something more nuanced.

What that means in practice will be different from market to market. In the UK, for instance, one recent study shows that good value is seen mainly as a combination of price and quality. In the US, on the other hand, quality-first retailers can have just as good a reputation for value as those who focus on price. There’s no universal constant when it comes to value.

Because of that, local understanding is critical. With so many value-related levers to pull on, retailers need to know exactly which ones matter most to their own customers. Those who understand that will see tangible returns, too; in recent studies from dunnhumby’s RPI Series, we’ve seen time and again that a compelling value proposition translates into clear commercial success.

2. Protect and grow their private brands

Over the past couple of years, we’ve seen a surge in the popularity of private label products, shoppers in multiple markets trading down to shave money from their grocery bills. For any retailer that has tapped into that trend, 2024 will offer an opportunity to take things to new heights – growing loyalty, driving efficiencies, and improving margins.

That’s no simple task, however. With inflation easing, national brands will begin to re-enter the headspace of many shoppers. To protect the gains they’ve made – and, ideally, grow them – retailers will need to find new ways to appeal. Innovation will be key, giving retailers the ability to differentiate themselves from the competition, transition from private label to genuine private brand, and deliver unique value to customers .

In our own research into this topic, we identified six key drivers of innovation for private brands. Across four “customer drivers” (value, health, sustainability, and quality), and two “retailer drivers” (category extension and brand activation), the world’s best are already in the process of redefining what own-label products can be. In 2024, the pressure will be on to keep up with their lead.

3. Revitalise loyalty through personalisation

Private label isn’t the only success story from the past two years; around the world, uptake of customer loyalty schemes is rising too. In a cross-market evaluation of dunnhumby’s clients and their competitors, we found that loyalty programmes were seeing growth in more than half (53%) of the countries analysed[11]. Only a fifth had seen a decline.

Echoing our point on private label above, however, oversaturation can be a dangerous thing. The more loyalty programmes that someone belongs to, the less special each can feel. As a result, any retailer looking to delight their customers will need to step up to the plate and deliver something truly different – and there’s no better way to do that than via the medium of personalisation.

Again, this will require retailers to dive deeper than they already have; three-quarters (75%) of the banners we studied are already delivering personalised recommendations and offers online and by email, rising to almost 9 in 10 for offers delivered via app (86%). As customers start to ask how well retailers really know them, next-generation personalisation will be needed.

4. Take health and sustainability to the next level

“Right for me, right for the planet”. In a number of our studies over the past few years, we’ve seen shoppers becoming increasingly conscious about making the “right” decisions at the shelf. Whether it’s a healthier choice or one that’s better for the environment, though, customers expect retailers to give them good reasons to make it. Price, availability, and quality are all key factors here.

When stores get that right, they thrive. Analysis of 61 retailers across France, Italy and Spain shows a clear link between the affordability of healthy produce and the emotional connection that shoppers feel for a store[12]. Environmental responsibility counts, too; while it might not be as important as other factors like price and quality, it now plays a key role when people are deciding where to shop.

As important as these issues are, however, there’s still a gap between desire and action. More than half of the shoppers interviewed in our Pulse studies said they’re conscious about the environment, for example, but only a fifth actually buy sustainable products[13]. A similar, if not quite so substantial rift exists around healthy eating. What can you do to help your customers get to the next level here?

5. Create new revenue streams via a combination of existing assets and diversification

“Retailers: you're the next media moguls”[14]. So said Forrester – all the way back in 2020 – and the analyst clearly wasn’t mistaken. The retail media market has been in a state of overdrive in recent times, consumer brands rightly seeing it as a way to engage with shoppers at critical points on the buying journey. In fact, some sources now have retail media revenues on course to outpace TV ad spend by 2028[15].

Media isn’t the only way for retailers to create new revenue streams, of course. Retail pharmacy’s continued evolution across the Americas is testament to the power of diversification, for instance. And in 2024, we expect retailers to experiment with an even broader set of opportunities – using their existing assets and brand new solutions in tandem to branch out and grow.

Some of those initiatives will be “retail adjacent”; consumer-focused propositions such as healthcare, pet care, travel, and banking. Others will cover fresher ground, with retailers exploring fields such as cloud services and technology solutions. Margins for each of these activities will vary, leaving retailers to work which will have the greatest impact – both on their overall profitability, and customer loyalty too.

Clearly, the themes above cannot be tackled overnight. Nor will they vanish at the end of the year. Retailers should have active projects on their workplan against each, and be ready to leverage customer insights in order to create locally relevant solutions against these global megatrends. Many of our own retail clients are already working proactively with us on these issues, and are paving the way for a brighter year ahead by doing so.

[1] World Uncertainty Index – 2023 Q3

[2] The Economist – 2024 will be stressful for those who care about liberal democracy

[3] OECD Economic Outlook – Volume 2023 Issue 2: Preliminary Version

[4] IMF, Bloomberg, FT on BIS, ECB

[5] Glassdoor analysis on US Census Bureau

[6] OECD Countries – Consumer Confidence Index

[7] Statista analysis on company announcement via Business Insider / LinkedIn

[8] EY CEO Outlook Pulse Survey October 2023 / NYT It’s True: False News Spreads Faster and Wider. And Humans Are to Blame / GWI USA Q2 2020-Q2 2023

[9] World Economic Outlook Update – International Monetary Fund, July 2023

[10] Bank of England may cut interest rate sooner after surprise inflation forecast – The Guardian, 11^th January 2024

[11] The Power of Personalised Loyalty – dunnhumby, 12^th December 2023

[12] dunnhumby analysis on RPI 2023 data of France, Italy, Spain on 61 Retailers. % of High satisfied customers, standardised per market

[13] dunnhumby analysis on Pulse Survey 2023 data for France, Germany, Italy, New Zeland, Spain, UK. % of Customers who apply

[14] Media Networks From Commerce Companies Are Growing And Transforming Shopping – Forrester, 21^st February 2020

[15] Retail media ad revenue forecast to surpass TV by 2028 – Reuters, 12^th June 2023