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February 09, 2024

5 retail trends to embrace the experience economy

To unleash the full power of new tech, retailers should embrace five drivers of retail growth for shopper experience.

To navigate a changing world, you need to focus as much on the past as the future. That’s the message of ‘Same as Ever: A Guide to What Never Changes’ the latest book from international bestselling author, Morgan Housel.

Same as Ever has a particularly relevant lesson for retailers in 2024, many of whom have been swept up in the hype, and justified excitement, around generative AI. In the stampede to embrace this and other new technologies, it’s easy to forget that the cornerstones of the customer experience, the constants that determine success, remain what they always have been: Loyalty, satisfaction and intimacy.

As business has learned time and again: new technology doesn’t necessarily add value unless it solves an existing problem or furthers an existing goal. For retailers, the most important of those goals is an ever-improving customer experience. It’s the use of new technology in service of this foundational principle—not the new technology itself—that stands poised to reshape the retail industry.

5 retail trends to embrace in 2024

1.    Repositioning stores as an ‘experience hub’

The line between the physical and virtual worlds will continue to merge—and that means stores are about to start looking very different. Instead of focusing on revenue per square foot, retailers will begin to prioritize curated experiences, value-added services and other opportunities to help consumers better know the brand.

The LEGO Store is a great example of how a retail location can embody a brand’s identity, in this case LEGO’s reputation for creativity. The flagship store in New York offers a host of experiential services, like the LEGO Minifigure Factory, which lets visitors build their own unique minifigure and 3D print it, and the Lego Brick Lab, where shoppers can learn about the science and engineering behind the iconic bricks.

Across the board, services and experiences like this are what forge connections between shoppers and products, and foster loyalty to a brand. As the retail landscape becomes more competitive, organizations must take every opportunity to build and deepen their customer relationships, using stores as a venue to highlight what makes the brand unique, create a sense of community, and use technology to enhance and personalize the customer experience.

2.    Frictionless everything

Many retailers are working on frictionless checkout—but what about frictionless sizing? Or virtual try on? How valuable is the contactless check-out if it doesn’t supply curated product recommendations on demand? For shoppers who value convenience and simplicity, there are many steps between the door and the register. Retailers need to design an experience in which every interaction is a powerful and seamless part of that customer journey.

One retailer maximizing the power of digital throughout the store is luxury retailer FARFETCH. In their London-based Store of the Future, the company leverages a host of technologies to bring the digital and physical worlds together, from the second the shopper walks in (digital check-in tools that recognize customers), to the moment they leave (frictionless payments solutions), and everywhere in between (augmented reality try-on tools via Snapchat, smart mirrors that display personalized product recommendations, and RFID-enabled clothing racks that ping a customer's smartphone).

The bottom line is that while contactless checkouts are an excellent first step in modernizing the store and making the customer journey more convenient, retailers should stay alert for other ways they can use technology to eliminate friction in a shopper’s experience.

3.    Loyalty is a two-way street

The reality, in 2024, is that most existing loyalty programs—with their “points” and perks— fall short of modern customers’ expectations of personalization, as outlined in our related article, The changing face of retail loyalty.

Shoppers have become wise to the value of their data. If they decide to share information with you, they expect value in return. While value means different things to different people, the common denominator is personalization: personalized experiences, products, recommendations, content, and offers. Retailers need to slice and analyze all that data and use it in a way that proves they know who their customers are, as individuals, and earn their loyalty every step of the way, interaction-by-interaction.

4.    Strengthening the supply chain through the lens of the customer.

The supply chain has always been a critical function for retailers, but never has it been so central to the customer experience. Both in-store and online, shoppers have a new expectation that the products they want will be available, whenever and wherever they need them. That means the supply chain needs to be more responsive and transparent than ever before.

Data and AI play a critical role here. During the 2023 holiday season, for example, Walmart implemented an AI-powered inventory system that combined historical data and predictive analytics to help optimize the availability of holiday items across locations, from distribution and fulfillment centers to Walmart stores themselves. The success of this system, backed up by other investments across the supply chain and within stores, has enabled the retail giant to better serve local needs and quickly adapt when demands change.

5.    Dynamic pricing

One often overlooked part of the retail experience is pricing strategy.

Knowing when to raise and lower prices has always been a way to right-size inventory. But now, as trend cycles shorten, it’s becoming an even more important capability for retailers who need to quickly capitalize on movements in the market.

Amazon, of course, is perhaps the most prominent example of a company that embraces dynamic pricing. According to reports, the online retail giant changes prices more than 2.5 million times per day. While that may sound excessive to the average retailer, the ability to automatically adjust prices based on consumer demand, or other external factors, is a useful tool to enhance margins in a tough economy.

Dynamic pricing has also become an integral element of some companies’ sustainability strategy, as it can help reduce waste. A study from U.C. San Diego’s Rady School of Management found that such pricing models can reduce food waste among grocers by more than one-fifth (21 percent). With inflation sending prices ever higher, these savings can also be a valuable differentiator for grocery retailers to attract and keep customers.

Embracing technology to deliver incredible experiences

As the world braces for the age of generative AI, it’s become a cliché to say that “everything’s about to change.” But the retailers who’ll fare the best in the coming years will those who best understand that the traditional pillars of retail success—customer loyalty, satisfaction, and intimacy—will still be standing when the gen-AI dust settles. The key to meaningful innovation is to remember what stays, and will always stay, “the same as ever.”

Sushant Warikoo

SVP & Business Unit Head, Retail

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Sushant leads Cognizant’s Retail practice where he helps clients reimagine the future of retail with transformational experiences, innovative products and services. He’s also skilled in harmonizing technological innovation with strategic business value across retail & consumer products, hi-tech, communications, media & entertainment.

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