Disruption dominated the business world in 2023, with AI shaking operations and process management to its core, and with macroeconomic conditions and consumer sentiment still in constant flux, 2024 will be a continued period of confusing signals and disruptive forces.
While consumers remain resilient and optimistic about their future financial situations, new research from value creation advisory firm Creo Advisors forecasts a reduced demand and “trading down” in consumer spending in 2024, and this emerging pattern may impact the remainder of the holiday-shopping season as well.
The findings reveal these these trends and highlights:
- Modest holiday growth of 3-5 percent in sales, but a decline in units sold in most categories as consumers focus spending on family and significant others
- Consumers plan to spend 6 percent more on essentials over the next year, crowding out $130 B+ of discretionary spending
- Respondents making under $100 k/year plan to spend 2-5 percent less on discretionary items
- Based on psychographic segmentation, we see groups planning to spend 4-6 percent more on discretionary goods across categories. This premium is at risk if optimism wanes
- Over 50 percent of respondents prefer to shop online vs. in-store, as in-store dynamics shift from preference for physically seeing/feeling products to finding pricing and promotions
- Consumer service expectations have risen by 15-20 percent vs. 2022. Increased expectations will be increasingly hard to meet with rising costs
- Respondents anticipate disruptions will continue, yet they are optimistic that “things will be better” in 2025
Consumers express optimism, but leading indicators and recent dynamics will place pressure on them in 2024
The researchers are seeing these headwinds take effect as consumers pull back on units purchased and look for more deals/promotions. “Consumer behavior along with higher labor costs, increased complexity, and additional debt refinancing will place pressure on retailers as they react to a changing consumer,” said Richard Vitaro, managing director at Creo Advisors, in a news release.
To help companies prepare for this change, Creo has identified four focus areas and ten initiatives to future-proof consumer related companies.
Strategic positioning:
Deliver a compelling value proposition
- Provide experiences that exceed customer expectations—build compelling experiences and connect emotionally with your customer
- Differentiate by delighting customers with innovation and value
Focus on forecasting inventory and optimizing in-stock
- Improve forecasting accuracy and optimize inventory/in-stock via process, tools, and reduced cycle time
- Enhance channel stock and allocation via robust analytics and collaborative planning
Go-to-market strategy:
Develop effective pricing strategies and thoughtfully use promotions
- Provide consumers with experiences focused on greater value—pricing needs to be more focused and dynamic
- Recognize that consumers are increasingly rigid on price—use analytics to vary your pricing/promotions effectively
Grow microtargeting & personalization capabilities
- Leverage analytics and technology to create personalized outreach programs and compelling offers to drive sales
- Capture fragmenting preferences of your consumer via prescriptive analytics
Evaluate business model adjustments
- Analyze potential channels for expansion and monetization. Balance focusing on the core with pursuing logical and profitable adjacencies
- Assess opportunities by focusing on customer experience, profitability, and operational effectiveness. Define where the incremental dollar/hour is best spent, then prioritize actions and align the organization
Technology optimization:
Deliver unified commerce profitably
- Design and execute the appropriate level of unified commerce for the respective business and segment.
- Understand the customer journey and lean-in on the appropriate unified commerce initiatives
Make smart investments in artificial intelligence and technology
- Increase adoption of existing technology by prioritizing fit and successful integration
- Target AI investments that remove low value-added tasks, assist as a co-pilot, increase speed, and/or lower cost
Shifting preferences:
Provide affordable indulgences
- Emphasize quality, affordable indulgences over expensive luxuries
- Provide opportunities to delight customers for respective price points, recognizing customers are becoming more value-oriented
Recognize consumer demand for casualization and practicality
- Focus on producing widely applicable, comfortable/casual products that consumers desire
- Leverage prescriptive analytics to identify the products that consumers want
Anticipate and adapt to demographic shifts
- Understand demographic shifts such as baby boomers retiring, Gen-z/Millennials entering prime spending years and ethnic diversity increasing
- Update current offerings/innovate new ones to anticipate customer needs in 1-3 years
While consumers have become more resilient, optimism will likely wane in 2024, creating a difficult market. “By building a strong go-to-market strategy, investing in technology optimization, and adapting to shifting preferences, firms can not only navigate challenges, but come out stronger with the capabilities necessary for sustained success,” says Owen Clark, senior associate at Creo Advisors, in the release.
This consumer survey was completed October 27th (n = 2,043).
