UK Retail Trends 2024

The retail landscape for 2024 can be described as transformative and is being driven by a series of major trends which will fundamentally change the shape of retailer strategies, business operations and customer experience. Those that balance short term challenges whilst looking ahead to the future will be the ones that flourish. 

BearingPoint have identified 6 key trends and 5 key enablers which retailers should consider as they build out their long-term commercial, operational and customer strategies.

1. Seamless Omnichannel Experience

Creating a seamless customer journey with retailers/brands no matter what channel of engagement

Expectations for omnichannel are even higher in 2024. It continues as an important trend with increasing use of more channels, with 71% of consumers wanting to experience the same product, service and interaction at all touchpoints without losing their information or preferences, however only 29% say they get it. E-commerce has seen some slow down as customers are returning to physical stores, as well as engaging more with digital and social content.

A well-connected journey can lead to:

• Better customer loyalty – 73% are likely to switch brands if they don’t have it
• Higher fulfilment – Omnichannel customers spend 4% more in store and 10% more online than single channel customers
• Positive interactions – Customers see the benefits and speed of on and offline shopping. They can also seek customer service through whichever channel suits them

However, to see success, retailers must focus on their efforts into:

• Establishing a frictionless journey with the customer at the centre across all touchpoints, integrating systems, processes and teams
• Adopting predictive analytics to support customer demand forecasting and enable optimisation in the operation. Effectively using different fulfilment options tailored to the retailer, customer and channel
• Understanding the customer through data and insights
• Investing in technology that can deliver a seamless cross-channel experience

2. Hyper Personalisation and Loyalty

Leveraging of data and analytics to create a tailored and bespoke customer experience

Hyper personalisation allows retailers to provide a more tailored and relevant shopping experience through targeted content and advertising with data as the foundations. 91% of consumers say they are more likely to shop with brands that provide offers and recommendations that are relevant to them. Retailers will have to leverage data and analytics to serve customers growing appetite for personalisation.

In addition, with economic uncertainties, low consumer confidence and high competition, many retailers are turning to loyalty schemes to build customer retention. 4 in 5 UK adults are part of a retail loyalty scheme, which reward customers for their repeated purchases. Despite dominance in the grocery sector, more retailers are considering loyalty schemes as a point of differentiation and growth.

Strong loyalty and personalisation offerings can lead to:

• Increase in sales – With a highly personalised shopping experience, customers indicate that they are 110% more likely to add additional items to their baskets and 40% more likely to spend more than they had planned
• Higher probability of repeat custom – It is 14x more likely a retailer will sell to an existing customer than a new one
• Better customer experience – Customers feel brands engage more with them on things that matter to them
• Greater understanding of the customer through data and analytics

However, to see success, retailers must focus on their efforts into:

• Investing in advanced analytics and AI tools and resources to leverage the full potential of customer data
• Data transparency to calm customer concerns about how their data will be collected and used
• Making key strategic and operational decisions in a responsive way around supply chain, pricing, promotions, etc.
• Balancing customer expectations on value with profitability, especially in times of inflation and cost pressures

3. Sustainability and the Circular Economy

Building and embedding sustainability led practices that minimise and positively impact the environment and customer communities

The retail industry is responsible for 25% of global greenhouse gas emissions, so sustainability and the ESG agenda remains very much front of mind for retailers, with many setting ambitious targets. Consumers have equally driven a change and we have seen the rise of the circular economy in businesses, with consumers opting to make the most of resources. There have been increases in 2nd hand marketplaces, especially for fashion. 

Shifting to more sustainable business models and practices can lead to:

• Customer satisfaction from transparency – 26% of global consumers say that lack of clarity stops them from adopting more sustainable lifestyles
• Expanding into new markets – The worldwide revenue of circular economy transactions, comprised of second-hand, rental, and refurbished goods, was estimated to total 339 billion U.S. dollars in 2022. This was forecast to more than double by 2026.
• Brand recognition – 55% of UK consumers say living sustainably is important for society and they try to make sustainable choices when they can

However, to see success, retailers must focus on their efforts into:

• Renewable energy and efficiency – Reduction in operational costs and emissions, optimising load shifting through carrying out energy intensive tasks at off peak hours, and investing in green technologies
• Increased regulation and reporting due to laws and regulation on emissions reporting as well as customer demand for transparency
• Ethical and sustainable sourcing strategies to ensure appropriate standards, policies and checks in place
• Sustainable supply chains – Leveraging tools to greater visibility of their end-to-end sustainability footprint

4. Artificial Intelligence

Leveraging technology and the use of AI to transform retailing end to end

Enterprise level AI and other data science solutions are fundamentally changing the retail landscape, but much of this is currently untapped. 22% of retailers are already using AI, 17% plan to invest in 2024 and 24% interested and waiting to see what happens. What will be interesting now is how retailers seize the opportunity and build it into their transformation and optimisation plans. According to a recent survey from the BRC, 71% of retailers will prioritise speech analytics above text analytics, Natural Language Processing and Machine Learning.

Leveraging AI in retail enables:

• Personalisation and hyper targeted marketing – Another of our retail trends, AI can analyse customer data and suggest customised products and offers
• Chatbots for improved 24/7 customer service using Natural Language Processing to understand customer requests and respond appropriately
• Dynamic pricing – AI can help retailers adjust their pricing strategies according to market conditions and customer demand
• Advanced data collection and analytics e.g. AI can help retailers optimise their inventory levels and avoid overstocking or understocking

5. Resilient Operating Models

Focusing on the optimisation of the operating model now and into the future

Retailers continue to face economic pressures due to inflation, higher shipping rates, labour shortages, and rising energy and product prices. Employee expectations are high with annual employee turnover among UK retail workers at 57.3%. Coupled with consumer behaviour changing in uncertain times, retailers will need to look for efficiency within their operations to protect their financial position.

To protect themselves against current and future challenges, retailers need to consider:

• Streamlining of business operating models, but with strong governance structures, change management and communication
• Building new propositions – Adapting to the changing market e.g. introduction of new value tiers to support with cost of living
• Automation – Robotics, automation technology and AI can be used to complete more manual and repetitive tasks leaving retailer to build their business on value added activities
• Cost Optimisation – Retailers will need to consider the end-to-end value chain across their businesses rather than smaller short-term wins
• Employee retention and investment – With retailers being the largest private sector employer, training a new employee can on average cost £1500. High turnover retailers could expend significant amounts of money on training and recruitment

6. Acquisitions and Partnerships

Strengthening and creating new opportunities through acquisitions, mergers and partnerships

As the economic climate remains uncertain and consumer trends continuing to evolve, we have seen a new wave of retailers looking to strengthen and create new opportunities through acquisitions, mergers and partnerships across the industry. UK retail M&A activity has shown an increase by 21% since 2022. Acquisitions and partnerships in retail can take many forms – purchase of direct competitors, expansion into new channels and propositions, or partnerships with brands that can enhance the retail or customer offer.

In 2023 we saw Tesco acquire Paperchase (and now The Entertainer in 2024), Matalan acquired by Investors Invesco and VF Corp acquire streetwear brand Supreme for $2.1bn. Brand blocking (brands taking over a dedicated block of shelves) in grocery is also becoming more prevalent.

Successful acquisitions and partnerships can lead to:

• Positive brand perception – Retailers can rescue failing brands from fully disappearing from the sector
• Enhanced retail proposition – Retailers continue to strengthen customer offering and breadth of range that they are unable to develop alone e.g. Paperchase and Tesco in store branded partnerships
• More efficient cost models as volumes can grow and supplier relationships can be leveraged much harder

But in order to see success, retailers must focus on:

• Acquisition and partnership strategy – Using data to make informed decisions and creating strong long-term plans
• Employee engagement across M&A – This is critical to successful integration of cultures, processes and operations. It can often lead to operational challenges and inefficiencies as businesses integrate
• Access to new capabilities through which operational and technology improvements can be realised e.g. distribution coverage