Q3 2024 Emerging Retail & Consumer Trends

In Q3 2024, the retail & consumer products industries are navigating significant shifts driven by technological, economic, and consumer behavior changes. This report examines three key trends: the deprecation of third-party cookies, the rise of shrinkflation, and the growing prevalence of "store within a store" pop-ups. The deprecation of cookies challenges brands to rethink their data strategies, while shrinkflation pressures them to balance cost and customer trust. Simultaneously, the continued rise of the "store within a store" model offers innovative ways to enhance the shopping experience. Understanding these trends is essential for retailers and consumer products companies to adapt and thrive in this dynamic environment.

Our report looks at three notable trends:

1. The Deprecation of Cookies
2. Combatting Shrinkflation
3. Treasure Hunting via Stores within a Store (SWAS)

Trend 1: The Deprecation of Cookies

Google's plan¹ to deprecate third-party cookies, initially set for completion by 2022 and later delayed to 2025, has now been cancelled. This reversal elicited mixed reactions: frustration from companies that had prepared for a cookie-less future and relief from those that were not ready. In fact, by the time of the announcement, only 60%² of brands felt 'mostly' or 'very' prepared for deprecation.

Google’s latest solution now allows customers to more easily opt-out of cookies, which appeases both marketers who were concerned about the reduced fidelity of consumer data, and consumers and regulators who were concerned about individual privacy. However, companies may view Google’s announcement as a pit stop rather than the finish line – the shifting privacy landscape still points toward likely deprecation, and companies who invest in a cookie-less future can take instrumental steps towards understanding and owning their customer insights and monetizing the data.

What is the third-party cookie?

Third-party cookies track user behavior from one site to another, allowing advertisers to reach and target current and potential customers with ads along their browsing journey. As consumers became increasingly wary of the intrusive nature of third-party cookies, concerns grew over user privacy and data collection. Governments and regulators responded – by May 2018, the European Union’s Member States had implemented the General Data Protection Regulation (GDPR),³ putting into place rights and regulations around personal data in the EU. By 2019, the EU’s top court established the right of users to consent to all analytic cookies. Regulations in the US have since then followed suit, beginning with the California Consumer Privacy Act⁴ in January 2020.

What’s next?

As the privacy landscape evolves, companies aiming to maintain customer experiences and strengthen marketing outcomes can prioritize ownership of their customer insights and seek opportunities to unlock further values through these insights. These opportunities may include loyalty programs,⁸ personalized recommendations, and targeted marketing campaigns such as those initiated by Sephora or Nike. Harnessing activation of this data is key to understanding the customer and building the long-lasting relationships necessary to navigate future transitions and continue to thrive in the digital landscape.

Trend 2: Combatting Shrinkflation

The Situation

Amidst a cost-of-living challenge in the US, retailers have begun adjusting packaging and pricing strategies to preserve profit margins, leading to a phenomenon known as shrinkflation. According to newly proposed legislation, shrinkflation is defined as “the practice of downsizing, including by reducing the amount or size of, a consumer product while not decreasing the price of such product by a commensurate amount,”⁹ which usually occurs in response to rising input and production costs or market competition and is considered a “hidden Form”¹⁰ of inflation.

Shrinkflation has increased at the expense of consumer trust and loyalty, as retailers and consumer products companies, notably within food and beverage industries, risk alienating customers from their product/brand. Recent studies have revealed that Americans are increasingly aware of shrinkflation practices;¹¹ in a study published in August 2024 by the personal finance site Empower,¹² 79% of consumers said that “there are less chips/cereal/product in a bag than there used to be.”¹² In a survey from YouGov,¹³ 72% of US consumers had noticed shrinkflation in food products; and finally, in a May 2024 survey,¹⁴ nearly 81% of US consumers stated that they were ‘aware’ of the shrinkflation trend.

Consumers are feeling the impacts of shrinkflation, taking note of their smaller grocery hauls coupled with decreasing purchase power amid inflation.¹⁵ Data shows this concern is warranted – the Labor Department data shows “shrinkflation is more common now than in the peak pandemic years of 2020 and 2021.”¹⁵

Retailer Recommendations

Here are a few key strategies that retailers can employ to balance their interests with those of their customers:

In summary, economic pressures are tangible and affect both demand and supply sides. As companies and consumers navigate these challenging times, businesses can implement a range of strategies to maintain profit margins while continuing to meet customer expectations.

Trend 3: Treasure Hunting via Stores within a Store (SWAS)

As a result of increasing grocery prices,¹⁷ more inflation-strapped consumers are bargain hunting.¹⁸ To capture and retain the loyalty of these “treasure-hunting” consumers, more retailers are differentiating in-store experiences through Store within a Store (SWAS) pop-ups.

What is Store within a Store (SWAS)?

SWAS entails a larger retailer allocating floor space for another brand to establish a dedicated storefront. An early example is the integration of pharmacies into grocery stores, designed for customer convenience in filling prescriptions. Retailers have also incorporated food and beverage restaurants within their stores, even evolving offerings to meet changing customer demands.¹⁹ Many department stores also house multiple brands under one roof.²⁰ More recently, both big-box and smaller retailers are getting in on the action.

Today’s Evolution of SWAS

In an era where customers are willing to bargain hunt across multiple stores, it is imperative for retailers to demonstrate enhanced value by aligning with customer desires for the “treasure hunt” and novel experiences. Adopting SWAS can be a strategic approach for retailers to diversify their offerings and elevate the retail experience, thereby encouraging transient consumers to develop long-term loyalty.

References

¹Jennifer Elias, “Google cancels plans to kill off cookies for advertisers,” CNBC, July 22, 2024.
²Ryan Fleisch, “Brands make progress weaning off third-party cookies, yet feel less prepared than ever for a world without them,” Adobe, July 15, 2024.
³Ben Wolford, “What is GDPR, the EU’s new data protection law?,” GDPR.EU, accessed 2024.
⁴“California Consumer Privacy Laws,” Bloomberg Law, accessed 2024.
⁵Priscilla Tan, “Zero-Party Data: How 3 Brilliant B2B Brands Approached it,” Breadcrumbs, November 2, 2023.
⁶Michaela Goss, “4 real-world examples of zero-party data,” Tech Target, July 20, 2022.
⁷Amit Sharma, “How These 3 Brands Are Taking Loyalty Beyond Points,” Adweek, April 25, 2018.
⁸“The new consumer loyalty landscape: Transcending consumer expectations,” Deloitte, accessed 2024.
⁹118^th US Congress, “Shrinkflation Prevention Act of 2024,” February 28, 2024.
¹⁰Corporate Finance Institute, “Shrinkflation,” accessed October 28, 2024.
¹¹Daniel de Vise, “Is that cereal box getting smaller? Welcome to the bewildering world of shrinkflation,” USA Today, September 5, 2024.
¹²“The Big Shrink study,” Empower, August 19, 2024.
¹³Janice Fernandes, “Consumer Choices in the Era of Shrinkflation,” YouGov, February 23, 2024.
¹⁴Dan Berthiaume, “Consumers are noticing ‘shrinkflation’ -- and don’t like it,” Chain Store Age: The Business of Retail, May 6, 2024.
¹⁵Alex Benveniste, “Shrinkflation isn’t a trend – it’s a permanent hit to your wallet,” BBC, September 24, 2023.
¹⁶“Retail Strategies: Adapting Strategies in the Face of Shrinkflation,” Faster Capital, June 4, 2024.
^{17, 18}Rachel Wolfe, “The Era of One-Stop Grocery Shopping Is Over”, WSJ, April 27, 2024.
¹⁹Jena Warburton, “Forget McDonald's: Walmart gets trendy new fast-food partner,” MSN, August 10, 2024.
²⁰Beth Owens, “Store Within A Store (SWAS): The next stage of physical retail”, Ryder, May 9, 2023.
²¹Bruce Japsen, “Retail Pharmacies Add New Services As Specialty Drugs Take Greater Role”, Forbes, May 4, 2023.
²²Target Press, “About Target Drive Up with Starbucks, Our New Fulfillment Feature”, October 3, 2023.
²³Rachel Wolfe, “The Era of One-Stop Grocery Shopping Is Over”, WSJ, April 27, 2024.
²⁴Kelly Kovack, “Sephora at Kohl's Continues to Gain Momentum”, Beauty Matter, April 2, 2023.

Acknowledgments

The authors would like to thank Carol Cui, Jamie Curran, Anirudh Panuganty, Sylvie Wallin, and Karen Xie for their contributions.