The biggest retail trends according to the experts

As we consider what lies ahead in 2024, the retail landscape is being reshaped by a range of dynamic trends. These trends are not just fleeting changes but are setting the course for how retail will operate in the future. To find out more about the most important things retailers should be considering, we spoke to Lisa Byfield-Green, Research Director at Retail Week, and Wilco Slabbekoorn, VP of Sales at Checkout.com. 

Byfield-Green has made a career out of researching and analyzing data on the online and digital retail industry. Slabbekoorn has a long career in payments and has worked closely with numerous retailers, understanding their pain points and strategic interests. They give us their takes on technological advancements, particularly in AI, and the ways that consumer expectations are shifting - especially when it comes to how they pay. Finally, they also take a look at the economic outlook and how businesses can weather the macroeconomic climate. 

AI and the digitalized customer journey

The rapid shift to digitization that happened over the past few years has led to heightened expectations from customers throughout their shopping journey. From product discovery to post-purchase services, the expectation on each stage is that it is as seamless as possible. 

Retailers are focusing on providing engaging online experiences to meet these expectations, using technologies like AI and machine learning for personalized interactions.

Byfield-Green confirms this, “AI was the Collins’ Dictionary word of the year in 2023 and the explosion of ChatGPT, reaching one million users in just five days, has certainly inspired businesses to explore new AI opportunities.

Some areas we see retailers focus on include brand evolution via consumer-focused AI usage. This includes the introduction of natural language search and bots, improved product listings, personalized interactions and the ability to summarise key information for customers (eg Amazon, which is now providing a review summary for items on its site).”

In 2023, AI redefined payment processes, and 2024 is set to see this continue. AI is now crucial in retail for developing sophisticated fraud strategies, providing predictive analytics for personalized consumer payment experiences, and improving operational efficiency. Essentially, AI is reshaping every aspect of the customer journey in retail.

When it comes to customer service in retail, AI is having a huge impact, Slabbekoorn reflects. "Increasingly, AI is revolutionizing retail ecommerce by automating customer service, particularly in managing returns and handling inquiries, leading to a reduction in traditional customer service workforce. Beyond streamlining post-purchase interactions, AI plays a crucial role in profiling consumers, understanding their buying patterns, and enabling targeted marketing strategies. Its application extends from the backend of customer service environments to the forefront of product and service selection, indicating that AI's integration into retail is not just prevalent but indispensable for enhancing operational efficiency and customer experience."

A significant advantage of AI in retail is its ability to tackle the issue of false declines, which cost online retailers billions. AI-powered solutions like Intelligent Acceptance help understand customer behaviors, leading to higher approval rates, better payment performance, and enhanced customer loyalty.

AI and machine learning are also being used in other areas—like fraud detection.

With e-commerce fraud losses increasing, retailers must adopt advanced detection and prevention methods. This involves utilizing AI, machine learning, pattern recognition, and data analysis to differentiate legitimate transactions from fraudulent ones. A comprehensive, adaptable fraud prevention strategy is necessary for the ever-changing landscape of payment fraud.

And, in other areas of retail AI is also having an impact, “AI is being used for intelligent supply chains, making operations more efficient through automation, better tracking and accurate forecasting. AI is allowing businesses to analyze vast data sets to learn more about customers and to inform their strategy,” says Byfield-Green.

“As businesses seek to lower costs to improve profitability, operational efficiency is a key investment area. This includes the introduction of cloud-based IT systems, new employee tools, outsourcing and automation.”

New (and better) ways to pay

The adoption of new payment methods like mobile wallets reflects the changing landscape of financial transactions in retail. 

“Removing friction from the retail experience is important for customers. We have seen some great payment innovations lately. Radio Frequency Identification (RFID) - a technology that uses radio waves to identify people or objects - self-checkout is being rolled out by retailers including Decathlon, Uniqlo and Zara and it is transforming the ease with which customers can pay for items and exit the store. Inditex (who owns the clothing chain Zara) now plans to remove plastic tags from its garments to make the whole experience even easier,” says Byfield-Green. 

“Apple Pay and PayPal are among the frictionless payment methods that we are seeing being introduced increasingly online and in-store to make the checkout and payment process quicker and easier. Many shoppers, including me, go out with a mobile device in their pocket rather than cards or a physical wallet, and expect to be able to pay that way.”

When it comes to creating a more seamless experience, Real-time payments (RTP) are rapidly becoming the norm, with staggering growth reported in recent years. For U.S. retailers, this means adopting 'Pay by Bank' methods and tokenization. This not only boosts transactional efficiency but also reduces costs compared to traditional payment methods, benefiting both the business and its customers.

And this has all taken shape in the shift to digital. Slabbekoorn explains, "In the evolving landscape of retail, particularly within cosmetics and luxury brands, the shift towards subscription models and digital marketing strategies has become prominent. Companies like Sephora are exploring subscriptions to enhance monetization, while also leveraging marketplace platforms for increased brand visibility. The integration of live streams, social media channels, and direct purchase options on platforms like Instagram reflects a broader trend towards digital engagement. Additionally, major retailers, including Amazon and fashion giants like Nike and Zara, are investing in in-house media agencies and content creation teams to maintain direct communication with their audience. This transformation signifies a move from traditional retail towards a more digital and interactive consumer experience."

Flight to value amidst economic pressures

But what do these trends mean in the current economic climate? 

In an economy where consumers are increasingly budget-conscious, the trend of 'flight to value' is becoming prominent. Shoppers are reassessing their relationships with brands, seeking a balance between quality, experience, and affordability. Retailers are responding by reevaluating their value propositions, ensuring that they offer products that meet the evolving needs of cost-sensitive consumers.

In 2024, payments are recognized as a key element in retail business growth. More CFOs are acknowledging the strategic impact of payments on revenue growth. Enhancing payment performance is crucial not just for mitigating losses, but for unlocking greater profitability.

Efficiency is the new growth strategy. This puts payments in the spotlight as a strategic partner for business in 2024. 

According to Byfield-Green, “We have seen a tough economic environment over the past year and this is impacting the sector as a whole. The cost-of-living crisis has led to customers reining in discretionary spend for big-ticket items and fashion, as essentials such as food, rent or mortgage payments, fuel and everyday essentials account for a higher percentage of their income.”

It is not all doom and gloom, though, as she continues, “The good news is that inflation is coming down and this will improve the situation in the second half of 2024, as the impact of lower inflation and lower prices filters through. Retailers must cut through with brand strategies that resonate with cautious customers.”

Slabbekoorn points out that the shift to digital can help businesses through these economic challenges. ​​"In the dynamic retail landscape, European strategies emphasize downsizing physical stores in favor of creating integrated in-store experiences, bolstering online presence through diverse channels including social media and digital marketing, to engage continuously with consumers. The rise of social commerce, leveraging influencers, and introducing flexible payment options like 'Buy Now, Pay Later' for a range of products from electronics to fashion, highlight a shift towards personalized consumer engagement. Retailers aim to increase customer lifetime value and cycle by ensuring repeated engagements and growing basket sizes through subscriptions, visibility across multiple platforms including marketplaces, targeted digital marketing, and payment options tailored to consumer demographics. This comprehensive approach is designed to keep retailers closely connected to their consumers, enabling them to rapidly adapt to changing preferences and trends," Slabbekoorn.

And, as the outlook of the economy improves this year, payments leaders will be well-positioned to prove their worth. Checkout.com's own research indicates that an increasing number of CFOs and their teams recognize the strategic potential of payments and their influence on revenue growth, with 67% of Heads of Payments saying they have secured board-level buy-in. CFOs are eager to enhance their payments performance, not merely to recover losses but also to grasp the potential for heightened profitability.

Businesses are going to have their eyes on their acceptance rates. As Slabbekoorn points out, "Acceptance rates matter. High-performing retailers are prioritizing keeping customers within their ecosystem by ensuring seamless transaction processes, and understanding that performance rates and smooth checkouts are crucial to prevent customers from turning to competitors. The emphasis on creating a frictionless purchasing experience, coupled with a diverse payment mix tailored to target demographics, significantly impacts customer loyalty and increases basket sizes. Acceptance rates are not only about card transactions but also about offering preferred payment options, including 'Buy Now, Pay Later' for younger demographics, to convert potential declines into sales. This strategy is pivotal for retaining customers and enhancing both immediate revenue and long-term customer value, making every aspect of the transaction process—from performance to payment options—vitally important for retail success."

Navigating the shifting trends

The retail industry in 2024 is marked by a blend of technological innovation, shifting consumer preferences, and evolving operational models. Retailers who can effectively navigate these trends will find themselves well-equipped to thrive in an increasingly competitive and digital marketplace. The key to success lies in adapting to these changes swiftly and strategically, ensuring that the customer remains at the heart of every innovation and decision.

According to Byfield-Green and the research conducted by Retail Week, retailers will need to keep leveraging data to identify new revenue streams as well as be ready for continuous brand and CX evolution. 

As we continue to witness these transformations, one thing is certain: the retail landscape of 2024 and beyond will be more dynamic, personalized, and technology-driven than ever before. Retailers who stay ahead of these trends will not only survive the changing times but will also set new standards in the world of online retail.

In 2024, retailers must look for ways to offer the latest payment methods and create a seamless shopping experience at the checkout for their customers.