2024 Predictions: Why High-Performing Retailers Will Double Down on Data

2024 Predictions: Why High-Performing Retailers Will Double Down on Data

By Tom Gleeson, CEO, Kepler Analytics

Since the beginning of the pandemic, retailers have been faced with immense pressure. The situation today has become even more complex in light of economic volatility, inflation and high interest rates.

If that wasn’t enough, competitive intensity continues to accelerate. According to IBIS World, there were nearly three million U.S. retail businesses in 2022. That number is predicted to grow at a rate of 1.7% over the next five years.

In response to these factors, we’re seeing retailers take one of two approaches. The first involves “hunkering down” in a very defensive manner by cutting stock levels, ranges, and even staffing. At first glance, these cost-cutting measures may seem like a wise choice, but the diminishing customer experience can be detrimental in the long run.

This hunker-down approach contrasts with what we see high-performing retailers doing — doubling down on data in order to better understand their business and its customers, and fine-tuning rather than cutting.

There’s a widening gap between these high-performing retailers and the rest of the competition that are falling by the wayside. In fact, McKinsey finds that the top 10% of publicly traded retailers now account for 70% of the overall profits in the retail sector. The companies that are investing in data are clearly reaping the rewards of their strategies and beating the competition.

If the last few years are any indication, 2024 will be yet another volatile year filled with uncertainty. However, as we brace for whatever may lie ahead, here are my top four predictions for how retailers can use data to drive value and improve outcomes for their customers in 2024 and beyond:

#1) Physical store data will fuel omnichannel strategies

Omnichannel is becoming increasingly important for retailers around the world. However, there’s still a glaring asymmetry between the data available to online channels compared to brick-and-mortar stores.

In 2024, there will be strong demand for technologies that enable retailers to better understand the in-person customer journey — from outside the shopfront to inside stores as they interact with sales associates and ultimately make purchasing decisions. These data sources will be critical to enabling true omnichannel experiences.

#2) Zone-based traffic data will replace heat maps

Heat maps showing foot traffic intensity within a store can be used to gain an initial understanding of store layout, but they are too static to have any impact on the bottom line. They don’t provide the level of day-to-day insight that retailers need to make decisions.

Instead, retailers should look for more dynamic tools that allow them to understand the customer journey. For example, having the ability to monitor foot traffic movement between particular zones of the store and understand the customer’s journey through those zones. Then, retailers can analyze how the movement through these zones impacts the average basket size and the items that customers actually buy.

#3) Matching staffing to foot traffic will be critically important

Labor churn is an ongoing problem that’s created incredible headaches for retailers in the U.S. and beyond. As such, it’s now increasingly important for retailers to understand how to match their scarce labor resources with the foot traffic they have in-store.

There’s a lot of money left on the table when foot traffic arrives but there is not enough staff available. In fact, inside foot traffic is beginning to recover but sales conversion rates are plummeting. This is indicative of retailers not staffing up to meet the return of that traffic.

Technology that allows retailers to more accurately allocate their scarce labor resources based on real-time traffic data will be vital. In particular, having granular data about active shoppers – such as in-store dwell time, bounce rates, and fitting room conversions — allows retailers to understand exactly when and where staff are required in specific zones of the store.

#4) The retailers that win will be able to quickly measure and test their theories

Retail trends are becoming much more short-lived, which means that retailers need the ability to quickly test what’s working and what’s not — and subsequently make fast, informed decisions on how to proceed.

Retailers that will succeed in 2024 will be those with the ability to measure the impact of what they are doing — such as a new promotion, window display or fitting room — and to quickly make changes if it’s not working as desired. This will ensure that retailers are no longer stuck in a trend or promotion that’s not driving results.

Change may be the only constant in the retail industry. However, it all comes down to how retailers adapt to that change that determines whether they succeed or fail. By using data to inform their strategies, retailers can gain a leg up to not only survive, but thrive in 2024 and beyond.

By Tom Gleeson, CEO, Kepler Analytics

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