2024 Retail Predictions: 5 Trends to Watch

1. The rise of the phygital store

Research shows that improving customer experience remains the number one priority for businesses. The rise of the “phygital” store is the result of a fusion of physical and digital retail strategies to create a cohesive customer journey.

The phygital approach recognizes that customers move seamlessly between physical and digital touch points when shopping. While customers know how to use retailers’ online stores to make their purchases, when they go into physical stores, they are not just looking for a specific product, but also the purchasing experience.

To stay competitive, retailers must be constantly renewing and rethinking their customer experience, and in the next 12 months, we will see the digital increasingly merge with the physical, to create new content and ways of shopping to keep buyers engaged.

The technology in physical stores will range from using AI and virtual and augmented reality (VR/AR) to offer events, classes and demonstrations, to continuing to equip employees with tablets and devices to provide more accurate assistance – i.e., on where an item is located or stock availability – and tailored recommendations based on customers’ previous purchases.

2. Using tech to tackle small in-person fraud

Retailers around the world are raising the alarm about the financial impact small theft is having and the dangers of this type of fraud continuing. In the U.S. last year, inventory shrink contributed to $112.1 billion in losses, up from $93.9 billion in 2021, and in the UK, ONS figures reported 365,164 shoplifting offenses recorded by police in the year to June, up 25% in the previous 12 months.

Retailers have already made significant headway in preventing fraud on their ecommerce platforms, using AI to identify patterns and try to block attacks before they happen. In 2024, the retail industry will be looking to implement this technology in physical spaces too.

Technology, including generative AI, alongside image recognition and a variety of sensors, will be increasingly used to support retail workers on the ground in companies’ efforts to tackle small in-person fraud. For instance, AI technology can determine whether the weight of a fruit or vegetable in the shopping bag corresponds to the information in the scales-ticket. 

3. Tuning into diverse shopping styles for ultimate convenience – one generation at a time

“Hyper-personalization” is not a new trend, but it is one we will see more of in the next twelve months, especially around targeting different generational consumer groups.

Different generations have varying shopping habits, and retailers will use technology to offer tailored options to provide an ideal shopping experience for each of them and positively influence their buying decisions. Companies have more data than ever before on their customers, which can provide a detailed understanding of how different types of people shop and like to engage with brands. 

For example, boomers overall prefer to go to a physical store first but are open to that being supplemented by digital in some way. Millennials straddle all trends and are open to leveraging both physical and online shopping, based on whichever is more convenient and easier for them. Better pricing or convenience are both key factors, and they are willing to undergo a little bit of work to optimize the outcome.

Gen Z starts its shopping experience online or through links from social media and posts they are engaging with before they continue their research online. This social commerce boom, i.e., browsing social media for the latest trends, will accelerate and therefore, the opportunity to engage, leverage and orchestrate influencers will remain key to brand relevance and growth for this generation. 

4. Becoming a sustainable, future-proof retailer

Retailers and brands have grappled with a cost-of-living crisis of their customers in many places and are having to balance that with their own environmental, social and governance (ESG) and sustainability goals. Still, companies in the retail sector have been making big efforts to improve their sustainability practices, as they know that customers care greatly about making purchases that are environmentally and socially responsible. This also includes retailers working towards improved end-to-end supply chain visibility in order to ensure processes are efficient and sustainable as goods move from manufacturer to the consumer. 

In the near future, we will see retailers leverage new technologies such as generative AI to improve their sustainability practices. In addition, retailers are increasingly looking to reduce waste throughout their value chains by reviewing circular goods, such as clothes and homewares, as well as minimizing fuel or food waste, the use of building management systems, or reusable packaging for packaged goods. Retailers are also looking to increase the sales of their own-label products with the continued economic pressure on household budgets. 

AI is already widely used in retail for inventory and supply chain management, customer support or research and development. The next step in this direction is introducing innovations brought by generative AI to fuel parts of the business and empower customers by providing hyper-personalized advice.

5. Seamless and frictionless checkout and generative AI enabled hyper-personalization

The new year and beyond will see the spread of the seamless, checkout-free shopping experience, where customers simply go in and out of a store and purchases are made automatically.

To enable such a fast and frictionless experience, product information systems, payment gateways, and pricing and promotion engines that integrate sensors and cameras will need to be installed, allowing shoppers to scan items as they go throughout the store. The authentication of a customer will be established automatically.

This model is already in use in Amazon Fresh grocery stores around the world. Customers’ bank
accounts are automatically charged through details stored on customers’ Amazon accounts upon their exit from the store. In the next twelve months, we expect to see the system spread across other retail companies, moving beyond supermarkets to airports, sports stadiums and education campuses. 

In addition to frictionless checkout enabled by sensors, generative AI is the technology that will
fundamentally change the shopping experience. For example, rather than sifting through SKUs, customers will be offered a conversational, one-to-one personalized experience. Amid the virtually limitless possibilities for generative AI in retail, there are three areas that will feel the largest and most immediate impact—commerce, marketing and customer service. 

As an example, online retailer The Man Company implemented an AI-enabled chatbot via WhatsApp to provide personalized product recommendations based on shoppers’ prompts. With this approach, the company tripled conversion rates within six months without making any other changes to its marketing campaigns or shopper experience.