7 retail industry predictions for 2024

This annual predictions process — collecting tons of information from various sources to arrive at projections for how the retail industry is likely to fare in the year ahead — could be upended if artificial intelligence keeps improving.

Prognosticators could use OpenAI to determine how shoppers intend to shift their spending, which categories are a sure winner and whether adding square footage is a wise move. Some might argue that AI is already capable of that. It’s already being used for demand forecasting and customer sentiment analysis.

But when it comes to making industry-wide predictions, AI remains an outlier. When the data set comprises global policies, cultural swings, demographic shifts and various industries, a human touch is needed.

Looking ahead to 2024, the geopolitical challenges on the horizon are profound. Here at home, economic headwinds persist thanks to uneven inflation and still-elevated interest rates. And our nation is facing what is likely to be a watershed moment in politics with the presidential election next November.

‘Guarded positivity’

How will these factors and myriad others affect the retail industry in 2024? Overall sentiment could best be described as guarded positivity.

The bullish spending retailers experienced during the holidays between Thanksgiving and Cyber Monday suggests that consumers’ commitment to gift-giving, despite inflationary pressure, is undeniable.

More than 200 million people shopped online and in stores, according to NRF, spending an average of $321.41 on holiday-related purchases during the 5-day holiday weekend. And it carried over through December as shoppers kept the registers beeping.

But will that spirited spending carry over into the first half of 2024?

The word most pundits have used to describe the consumer landscape is “uncertain.” While inflation has begun to ebb, and the hope is that it will lead the Federal Reserve to walk back interest rates and loosen the strings when it comes to borrowing costs, many consumers are still feeling cash-strapped. They are quick to call out higher grocery bills and loftier rents; buying a car or a house are pieces of the American dream that remain out of reach for many.

Where does that leave retail businesses? The short answer: Hard at work looking for ways to identify new opportunities, redesigning physical stores to be more coordinated with shoppers’ desire for experiences alongside efficiency, and investing in tech projects that deliver personalization and optimization.

Here are some predictions about what could be in store for retailers over the next 12 months.

AI is blowing the lid off constraints businesses once had and making faster and more precise decision-making a reality.

Does anyone remember life before AI? Of course, the answer is “yes,” but it’s hardly an overstatement to say that artificial intelligence is everywhere. It has sparked a fundamental transformation of the retail business model and continues to drive changes to the customer experience.

Market research firm IDC reports that the retail sector ranks second among all industries globally in its spending on AI technologies. And a new study conducted by IHL Group reveals that retailers that have already embraced artificial intelligence and machine learning technologies are experiencing noteworthy success, achieving 2.3 times growth in sales and 2.5 times growth in profits for the year 2023 when compared with their competitors. Projections for 2024 indicate a similar trend for those embracing AI/ML solutions.

Companies that are not integrating artificial intelligence into their strategies and business operations risk being left behind by their competitors and by new market entrants. Using AI, retailers can swiftly analyze huge and disparate amounts of data in real time, enabling faster decision-making, a reduction in human errors, increased efficiency and the automation of routine monotonous tasks.

Indeed, the benefits of AI are far-flung — from product designs influenced by AI-enabled trendspotting and relying on AI to optimize product sourcing, to tapping into the technology for inventory forecasting and personalization along the shopper journey. Physical retailers can use AI to analyze data collected by stores cameras and make appropriate changes to store size and layout. Among supply chain executives, AI is reshaping inventory management and demand planning.

The merits of artificial intelligence are real, but misgivings remain: AI is capable of learning over time with pre-fed data and past experiences, but — as retailers have been saying for decades — if the data is not “good,” the outputs are not going to be accurate. Moreover, in the case of fashion, historical data tends to pale in comparison to the art of merchandising.

Another concern that bubbles up is that artificial intelligence will displace humans. Experts are not entirely onboard, noting that reassigning tasks that are repetitive and primed to be replaced by AI will allow humans to embrace more creative opportunities.

The most critical concern is the potential for ethical and privacy concerns. It is imperative for retailers to be proactive in their internal governance of AI and ensure they are using these technologies in ways that support their core values, mission statements and business objectives.

Retailers need to be transparent about how they’re using artificial intelligence to be certain that safeguards are established and to prevent unlawful discriminations. Additionally, it’s imperative that companies align their governance of consumer-facing AI applications with existing internal privacy, cybersecurity and other data governance policies.

Deepfakes could mean deep trouble for retailers and brands.

Thanks to advances in AI, deepfake videos and voice dupes have become alarmingly simple to produce and thus have the potential to unravel decades of brand reputational excellence overnight.

Remember the image of the pope in the puffer coat? How about the picture of former President Donald Trump that appeared to show him in police custody? Or maybe you saw former President Obama making some less than presidential comments? All are examples of deepfakes.

There has been a massive rise in the use of deepfake fraud over the last year and the next 12 months are shaping up to be even more alarming. Look for this technology to cause both societal and security issues — everything from fake TikTok content encouraging teens to experiment with dangerous fads to deepfakes used to mimic members of the C-suite to authorize a transfer of funds.

Much of what we’ve seen thus far is tied to celebrities (Tom Cruise is definitely not that ubiquitous), but when a CEO’s image and voice can be manipulated, and/or a brand logo appears in a deepfake video, the damage can be crippling.

Customer interaction in physical stores is as imperative as the transaction. For retailers planning to open new stores or make renovations to existing units, designers beware: Shopper expectations are elevated and moving toward lofty.

Retailers keep raising the bar on experiential shopping. Exhibit 1: Crate & Barrel’s new flagship in New York City’s Flatiron district. The multi-story, 23,000-square-foot space reimagines store design and layout; it’s merchandised by destination — kitchen, living room, etc. — and there is an on-site interior design studio. The real standout here is that you don’t have to be in New York to explore all it has to offer. When the store opened in November, a shoppable virtual store launched simultaneously.

Reformation’s newest store features a tech-driven experience: Shoppers use a tablet to select items they’d like to try on and the garments are sent to a personalized “magic wardrobe” fitting room. Adding to the magic is the option to request an alternative size from the fitting room and just wait for it to arrive in the two-way closet.

Other retailers are blurring physical and digital to up the ante on shopping experiences. Zara shoppers using the Store Mode feature in the app can digitally tweak their experience to display only products and sizes immediately available at the local store. Target’s app now delivers an experience that is personalized, dynamic and filled with customized inspiration, to sync with the feeling of being in the store.

Keep an eye on convenience stores for design innovation and merchandise reengineering. As electronic vehicles gain popularity and drivers need to spend around 30 minutes charging their vehicles, convenience stores have an opportunity to rethink their role from delivering a pit stop-type of experience to one that makes it appealing to linger.

Generation Alpha is taking hold of the retail reins, and they are poised to rewrite rulebooks and upend long-standing precepts.

The kids these days are not like their moms and dads; they’re not even like their older siblings. Born in and after 2010, individuals in this cohort were digital natives at birth and have grown up using smartphones and tablets as part of their childhood entertainment.

While Gen A doesn’t have disposable income yet, they do have plenty of influence on shopping decisions and loads of opinions about shopping. While it’s easy to assume their comfort with technology would make them partial to online shopping, research finds they like the experience of going to a retail store.

Members of this generation lean hard into experiences, preferring to frequent shops where they can tinker with tech or be hands-on with a new gadget. But they’re less inclined to crave physical ownership; downloading something digitally — a book, a game, a movie — meshes with both their digital proficiency and proclivity for a more sustainable culture.

For retailers, this translates into a rally cry for innovation. The future of shopping will transcend physical and move into virtual in ways that push the boundaries of anything we’re seeing today.

Companies that revolve their efforts around circularity have the best chance at evolving their business in 2024.

Use the phrase “circular economy” and shoppers may wrinkle their brow, but if you look at how they’re behaving, it’s clear they’ve begun to embrace the concept.

Phrases like “gently used” and “previously loved” have been adopted by shoppers, and more and more consumers are choosing to buy used or refurbished electronics, previously worn apparel and used furniture. Alongside the stalwarts like Patagonia, we’re seeing retailers such as Amazon and Best Buy selling used tablets and cellphones, Anthropology selling gently worn fashion items and IKEA promoting previously used furniture.

In a more do-it-yourself vein, people are taking items that are no longer useful in their current state and transforming them into something else. Examples include repurposing an old ladder as a bookshelf or sewing together old ties to create a pillow cover.

The point is that shoppers are buying in. That means 2024 is a pivotal period for retailers to ramp up their efforts. Improve the in-store experience through better signage to both identify items and tell the circularity story. Don’t assume you know your shopper’s appetite for gently used or refurbished products unless you ask them. Maybe seeing new and used products side-by-side on store shelves will move the needle?

And consider investing some sustainable capital in marketing. The more companies invest in educating shoppers about circularity, the likelihood of them embracing it will increase exponentially.

The future is hyper-personalized; it has been for some time now. The challenge for 2024 is delivering hyper-personalization while respecting customer privacy, protecting data and serving up just what they had in mind — in real time.

While hyper-personalization is not a novel idea for ecommerce business, the advent of large language models could potentially increase its significance even further. LLM are pre-trained on vast amounts of data and have proven to be valuable at delivering feedback based on a relatively small number of inputs. The ability to use AI-driven personalization across all platforms, including social media, to deliver more relevant content is the gold standard.

What does that look like? It’s about a brand that I love and have purchased from for many years recognizing me the minute I click on their site and the second I cross the threshold of a physical store.

Shoppers often start their journey online and then visit a bricks-and-mortar store to check it out in person. A hyper-personalized experience is one in which the preferences and products explored in one channel influence their experience in another. Imagine spending an hour researching products on Apple and then receiving a personalized recommendation in the store based on that browsing history.

Health and wellness apps can deliver hyper-personalized experiences to users who share some personal information. For example, by answering a few questions about exercise habits, goals, age and fitness levels, it’s possible for some apps to offer customized workouts that take into account the health and fitness data provided. These types of experiences can go a long way toward increasing loyalty.

The conversation around augmented reality is poised to reach a fever pitch, particularly as Apple debuts Vision Pro. With CEO Tim Cook promising “blow-away” experiences, look for retailers to be in the mix.

With a price tag of $3,500, Apple’s Vision Pro will not be widely accessible, but given the “game-changer” hype preceding the launch, AR experiences will gain new relevance, renewed traction and — as more companies follow suit — more shoppers looking to try and adopt the technology.

Vision Pro is essentially an augmented and virtual reality headset, but Apple prefers to bill it as a special computer because it has the power to blend digital content with the physical world. Apple says the Vision Pro has “more pixels than a 4K TV” and navigation is done through eye movements, hand gestures and voice-based commands; there are no physical controls for the Vision Pro.

Samsung appears to be making a big bet on augmented and virtual reality technologies. The company recently secured a trademark in the UK for “Samsung Glasses” and is reported to be working on an AR headset. And, at a more easily accessible price, Meta recently debuted first-generation Ray-Ban smart glasses. Using Ray-Ban Meta smart glasses, a user can snap a photo or video clip in the moment — allowing them to not only relive the moment, but to truly live in the moment. The Meta smart glasses can also look at images and interpret them with generative AI.

IDC forecasts the AR/VR market to rebound in 2024, growing 46.8% year over year thanks to all the new hardware. By 2027, the market is expected to reach 30.3 million units globally.

Metaverse is not dead; metaverse hype is. There could be a resurgence of interest in the year ahead.

Headlines can control the narrative, but that does not mean they’re irrefutably accurate. The metaverse remains a vast, interconnected virtual universe. It transcends physical boundaries and provides a space where users can interact, socialize, work and play.

The biggest tech providers, including Microsoft, AWS and Meta, continue to innovate in this enterprise setting, offering new methods of mixed reality digital experiences. Roblox and Minecraft remain powerhouses in this arena, and while they are considered gaming platforms, practically speaking they’re also incredible conduits for retailers to connect with future generations of consumers.

Who’s actively pursuing that opportunity? Walmart. The company is experimenting with technology that allows shoppers to connect physical and virtual shopping experiences in the metaverse. According to VentureBeat, customers can now buy some of the same items for their actual homes that they can buy for their virtual homes in House Flip, a mobile game that lets players renovate and sell virtual homes.

The same technology is applied to virtual clothing; users can buy virtual clothing items from Walmart’s own Scoop fashion brand in Zepeto, a mobile virtual world that lets players create and customize their avatars.

Ultimately, it’s about meeting customers where they are spending more of their time. And, as the lines between physical and virtual continue to blur, that includes virtual worlds.

Here are some other prediction musings in the ether for 2024 …

1. Twitter is dying a slow but certain death, courtesy of the enigmatic Elon Musk. The app may survive 2024, but business leaders’ allegiance lies with LinkedIn.
2. The average U.S. store size will continue to shrink. Data firm CoStar Group recently reported that during the first three quarters of 2023, retailers signed leases averaging 3,200 square feet. Given shoppers’ waning attraction to mega-sized stores, expect the smaller footprint to continue trending.
3. Look for the Combating Organized Retail Crime Act — a bill introduced in Congress in 2023 — to finally pass. The bill’s provisions include expansion of the federal enforcement of criminal offenses related to ORC and of the scope of conduct that qualifies as an offense; latitude for prosecutors under federal money laundering statutes; and the establishment of an ORC Coordination Center within the Department of Homeland Security to coordinate the federal law enforcement activities related to these types of crimes. Meanwhile, expect retail companies to continue investing in technology like RFID to help stem ongoing ORC and retail theft losses.
4. There were more than 4 million retail job openings in the last 12 months. That shortage of workers is not likely to ease dramatically in 2024 but retailers may be able to overcome some challenges by earmarking capital for technology that aids scheduling, hiring and training.
5. The popularity of Ozempic has had a ripple effect on the industry, with food retailers reporting shifts in buying behaviors (fewer carbs; more protein) and apparel merchants noting a boost from shoppers needing to update their wardrobes. Expect more of the same in 2024 — assuming the providers of Ozempic and other GLP-1 drugs do a better job of managing supply and demand. Unfortunately, the popularity of Ozempic is having a negative impact on fashion’s inclusivity movement.
6. Mushrooms have been an “it” food for the last few years, with the trendy fungi showing up in coffee, chocolate, snacks and elixirs. Instacart recently reported a mushroom surge, with carts containing fresh Lion’s Mane Mushroom growing by 589%, alongside fresh Hedgehog Mushrooms (+315%), Pink Oyster Mushrooms (+391%) and Reishi Mushrooms (+293%). Its popularity has spread to nearly all spheres of life — including wellness supplements, pop culture, fashion and face creams. There’s no stopping the mushroom movement in 2024.
7. The same could be said for the “sober curious” movement, which took hold as the nation emerged from the pandemic. The trend, backed by social media influencers, has spawned a plethora of mocktails and alcohol alternatives. Expect more options in 2024 as this sector is expected to grow to $30 billion in 2025, according to Global Market Insights.
8. Brands that demonstrate a commitment to caring for consumers’ health are winning. Some good examples: UK supermarket Morrisons and the National Health Service are working together to put advice on underwear labels urging people to contact their doctor if they spot potential symptoms of breast or testicular cancer. Blue Zones Kitchen has launched a new line of ready-to-heat meals inspired by the longevity pillars and food principles discovered in the blue zones. And the Comfrt apparel brand makes a slightly weighted hoodie that may relieve stress and anxiety.
9. Finally — the important prediction for 2024: Taylor Swift and Travis Kelce will be engaged before the summer. Their wedding will be the equivalent of UK royalty.