Smart retail marketers and communicators are already thinking ahead to the 2024 holiday-shopping season and preparation—and already realizing that a bevy of challenges await. New research from predictive analytics firm First Insight reveals that retailers are grappling with concerns about promotional effectiveness, inventory levels, and customer acquisition and retention, as well as data-quality problems stemming from the fact that most of their insights come from third-party data, along with a troublesome disconnect between retail brands’ marketing and merchandising functions.
The firm’s latest report, Retailers’ Blind Spot for Holiday 2024, based on a May 2024 survey of U.S. retail decision-makers, highlights the critical uncertainties retailers face as they prepare for the upcoming holiday season, emphasizing the need for integrating predictive analytics with consumer insights to optimize pricing, promotions, and marketing strategies.
Top concerns identified include:
- Promotional strategies: Retailers are uncertain whether their promotional strategies will be too reactive rather than strategic.
- Inventory management: There is a significant worry about having stocked enough of the right merchandise.
- Customer alignment: Retailers are not confident that their planned assortments will resonate with target consumers.
“With rising inflation costs, retailers have much to worry about, especially whether the products they bought will be what consumers are willing to spend their money on,” said Greg Petro, chief executive officer at First Insight, in a news release. “This makes it imperative for retailers to ensure their offerings align with consumer expectations.”
Retailers cited their top data and insight sources, the top three of which were either backward-looking or derived from third-party data. More than half (53 percent) use previous seasons’ sales histories, 49 percent use trend services and reports, and 42 percent rely on customer comments and reviews from their websites.
The report also highlights the external pressures facing retailers, such as the impact of inflation on consumer spending and the competitive threat from online marketplaces, like TikTok Shop. With inflation cited as the number one external concern, retailers are wary of its potential to reduce consumer discretionary spending on gifts and other holiday-related purchases.
Key findings from the report:
- Inflation concerns: 81 percent of respondents stated that rising prices for essentials like groceries and gas would negatively impact consumer spending on discretionary items.
- Promotional timing and depth: Retailers are struggling with the timing and depth of markdowns, which are crucial for attracting consumers while maintaining margins.
- Customer acquisition and retention: Attracting new customers and maintaining loyalty among existing ones remain significant challenges.
Marketing and merchandising disconnect
One of the report’s significant insights is the misalignment between marketing and merchandising teams. Often operating in silos, these teams struggle to synchronize their strategies, leading to ineffective promotions and mismatched inventory levels. By sharing consumer insights on pre-season items, customer-valued products, and initial pricing expectations, both teams can better align their efforts for success. The report suggests that by coupling VoC data with AI and predictive analytics, retailers can move from a reactive to a proactive stance.
Top Holiday Concerns: Marketing vs Merchandising:
“Preparing for this upcoming holiday season presents a pivotal opportunity for retailers to rethink their strategies for future seasons,” added Petro. “By focusing on customer insights and integrating AI-driven predictive analytics, they can focus their sights on where they’re going, and not where they have been.”
Download the full report here.
First Insight’s findings are based upon a May 2024 survey executed through InsightSUITE, with responses from 104 U.S. retail decision-makers. Responses were sorted and filtered based on role, title, company size, and retail sector. The analysis focused on feedback from merchandising, marketing, and consumer insights management at retailers and vertically integrated brands offering apparel, footwear, and home décor items.
