How Changing Customer Behavior Affects the Retail Industry
Retailers’ overarching goal, with a constantly moving target, is simply to figure out what customers want. Picture how a retailer selects specific clothing items to buy and stock in stores and online. They analyze sales data, track trends, and research what else is out there. This informs what colors to order for a particular shirt for a particular season. But careful strategizing is also needed for factors like how customers are spending, where they are buying, and the values that influence their decision-making.
Consulting firm McKinsey & Company recently published its latest findings on how consumers are shopping in 2024, revealing trends that retailers should stay tuned into to help them stay competitive.
3 Consumer Trends Transforming the Retail Industry
The article gives an overview of nine trends. Below are three trends we believe could be the most impactful to retailers.
1. Customers are increasingly open to brand exploration.
In 2024, brand loyalty is down as more customers are willing to try new brands. Consumers were asked whether they have (1) tried a new brand in the last three months and (2) changed retailers for lower prices or discounts. The percent of “yes” responses was (1) 38% and (2) 36% in the U.S. and (1) 34% and (2) 40% in France, Germany, Italy, Spain, and the U.K. Older generations are more likely to answer “yes” than they were in the past, closing the gap between their behavior and that of younger generations (X and Y), which are often seen as less brand-loyal.
This behavior was likely influenced by the supply chain issues of 2020, when customers had more difficulty finding exactly what they needed in stock. They tried new brands and overall became more flexible.
What this means for retailers:
It is increasingly important to maintain optimal inventory levels and avoid out-of-stocks that could cause customers to seek out a different brand.
2. Customers are increasingly shopping in new urban hot spots.
The data points to more people, particularly Millennials, Gen Xers, and Boomers, moving to “secondary cities” with populations between 50,000 and 500,000 people. In the U.S., this includes cities like Buckeye (Arizona) and Suffolk (Virginia) on the lower end and Raleigh (North Carolina) and Miami (Florida) on the higher end.
Many people are leaving large metropolitan areas like New York City and Seattle for the South and West regions for a lower cost of living, supported by remote work. But this doesn’t mean they are spending less on non-essentials. McKinsey & Company reported that the same number of consumers in secondary cities plan to “splurge” as in large cities, while compared to those that live in rural areas, it’s 1.3 times more. The middle class is “squeezed but spending,” and the migration to secondary cities helps these consumers spend how they want to spend.
What this means for retailers:
As demand spreads out geographically, it is becoming increasingly important to leverage granular data for inventory decisions to meet the demands of customers in secondary cities.
3. Customers are increasingly shopping on social commerce platforms.
Social commerce is where consumers make purchases directly through social media platforms, often due to the influence of content creators. The adoption of social commerce has risen fastest in China, but it is now beginning to increase in popularity in other areas. Consumers in countries with advanced economies were asked whether they had used social media to make a purchase online in the last three months. 20% responded “yes” in the U.S., along with 16% in Australia and 14% in France, Germany, Italy, Spain, and the U.K. For Generations X and Z specifically, this number in the U.S. is over 33%.
McKinsey & Company estimates social commerce in the U.S. will grow from a $67 billion market today to $145 billion in 2027.
What this means for retailers:
Social commerce is an emerging opportunity for brands, and to meet customer demand effectively, it is becoming critical they have unified inventory visibility across all sales channels.
Dropit: Your Omnichannel Ally in a Changing Retail Environment
As new trends emerge and evolve, retailers need a tech stack that helps them meet the latest demands and adapt as demands change. Dropit provides this and more in three steps.
- Dropit integrates disparate systems and synchronizes data for an accurate, live view of inventory across all sales channels.
- Dropit applies proprietary machine learning models to the data to optimize allocation, restocking, and returns decisions. It also leverages granular-level data, such as from CRM, to improve decision-making further.
- Dropit’s machine learning models provide continuous improvement, ensuring retailers can evolve with changing demands.
And with Dropit, there’s no need to rip and replace technology; we simply sit atop your existing tech stack for smarter decision-making with data from the management systems you already use.
To learn more about how Dropit helps retailers handle evolving trends, request a demo today.
