2024 retail industry outlook

Looking for loyalty in all the right places

As retailers look to woo price-sensitive consumers in 2024, loyalty will have to be earned. To make that happen, trust will need to be the cornerstone of their profitability playbook.

The Swiss retail industry is facing a challenging environment due to increased competition from international retailers, particularly in the fashion and luxury goods sectors. Despite this, the industry has shown resilience and adaptability, with many retailers implementing new strategies such as click-and-collect and home delivery services. Overall, the Swiss retail industry is navigating through a period of uncertainty, but is working towards maintaining its position in the market. Let’s take a look at what’s happening in the US which also affects Swiss market trends.

2024 retail industry outlook

Revamping retail loyalty

The last two years have been anything but ordinary. Consumers witnessed a 40-year inflationary high in June 2022 and 11 Federal Reserve rate hikes by July 2023. Given this volatility, it's reasonable to assume that consumers' collective psyche would be bruised, and they would retreat from the marketplace.

However, consumers have endured, surprising analysts by challenging conventional wisdom. In fact, consumers continue their consumption binge, with some benefiting from wage increases while others are presumably burning through savings and accumulating debt even as economic uncertainty continues to loom.

Against this backdrop of an uncertain 2024 economic outlook, a focus on rebuilding trust could lead to profitable loyalty.

With bargain-hunting consumers skipping from source to source and customer acquisition costs increasing 222% in the past decade, loyalty programs remain a hot topic. And with the opportunity to utilize first-person data from loyalty programs to create additional revenue, it's no wonder retail executives' most cited growth opportunity for 2024 was strengthening loyalty programs.

Based on what we’re hearing and seeing, 2024 will be the year to rewrite the loyalty playbook by putting trust at the center.

Our annual retail industry outlook explores three key opportunities:

  • Lean into loyalty programs
  • Enhance omniexperience through in-store investments
  • Drive individual engagement at scale with trustworthy AI

> Download our full 2024 retail industry outlook to learn more about the biggest focus areas for retailers in the year ahead.

On average, nearly two-thirds of US consumers belong to one-to-five loyalty programs. However, most consumers use 50% or less of their memberships, so the challenge for retailers is developing engaging programs that convert members into users, and in turn, create profitable loyalty. A recent study found that customers who belonged to a retail brand’s loyalty program reported an average of 61% higher trust in that brand than non-loyalty program members. And a consumer industry case study found that increasing trust with existing loyalty program members could potentially boost annual spending by 30%. These gains were primarily attributed to deploying personalised experiences at scale.

Some retailers have honed in on this opportunity. Dillard's outperformed many other department store chains in FY2020-22 by driving customer loyalty through effective merchandising with a strong portfolio of owned private-label and exclusive brands, personalized in-store customer service, and high employee engagement. Ulta Beauty grew its active loyalty program members from 30.7 million in FY2020 to 40.2 million in FY2022, deriving more than 94% of its annual sales from these members in both years. As the company considers its loyalty program a key driver of success, it launched a revamped program in January 2024 with additional perks and a more personalised birthday benefit.

For 2024, we believe that retailers have an opportunity to attain profitable loyalty through personalisation, co-branding, and data monetisation.

The digital acceleration from the pandemic was a boon for online and omnichannel shopping. Tech upgrades helped with some of the shortfalls of the online experience, from fit to envisioning products in homes. Social media and influencers brought products to life in short video content. Digital wallets and new last mile and return options expanded, creating less friction for consumers to click and collect. Despite these advances (and how tired the topic may feel), a cohesive, consistent omniexperience is often lacking, potentially eroding trust.

When we examined trust in various channels, customers purchasing in-store indicated the lowest trust scores. Interestingly, despite lower trust scores than digital channels, physical channels are the most preferred medium of engagement, indicating a significant opportunity for brands to help boost trust amongst a considerable fraction of their customer base.

Some retailers are planning expansive store remodels that can immediately create more pleasant environments and sticky behavior from consumers. Target recently noted that sales increase 2-4% on average during the year once stores are renovated. But we also see an opportunity in innovative tech that uses data to create efficiencies and consistent experiences, potentially building profitable loyalty. These tech tools not only elevate the overall shopping experience but also equip retailers with enhanced data, a more nuanced understanding of shopper profiles, and a competitive advantage by offering a personalised and complete omniexperience.

Retail was built from a supply-focused model to meet the needs of the masses. With consumers wanting more bespoke experiences, retailers are looking for ways to personalize at scale. Deloitte's Future of Consumer work sees this as "a critical transition from mass-market approaches to strategies that prioritise relevance for specific consumer groups. We refer to this shift as an industry moving from mass to micro." Retailers making this shift have an opportunity to delight consumers with product recommendations and tailored interactions, especially if they embed trust at the center of their design.

Half of retail executives are prioritising AI-driven personalized product recommendations in 2024. However, only 5 in 10 retail executives are confident in their company's ability to use AI effectively across their businesses. As retailers gather larger volumes and potentially more sensitive types of data, using this information skillfully is vital to maintain the delicate balance between what data consumers are willing to share and the experiences retailers can offer.

US economic forecast

A note from Deloitte US Economists Danny Bachman and Akrur Barua:

The US economy seems to have avoided a recession even as inflation has dropped. This is good news, especially at a time when geopolitical tensions are rising, growth in key US economic partners is slowing, and there is uncertainty over budget funding.

Consumers have benefitted from rising wages due to a strong labor market and declining inflation. They have also drawn down their pandemic-era savings to fund more purchases. This dip in personal savings, however, will weigh on consumer spending in 2024–2025. In addition, consumers face headwinds from high rents, rising house prices, and repayment of student loan debt.

Two key trends will shape the future business environment: tighter labor markets and higher long-term interest rates.

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