2023 was another tumultuous year as inflation, high interest rates, and general economic headwinds continued constraining consumer behavior. The past year also revealed bright spots across a variety of consumer-facing sectors, including retail, dining, advertisement and entertainment. Which of these developments are likely to shape the consumer landscape in 2024?
Find out in this January 2024 conversation between Inside.com’s Stephanie Zielinski and Placer.ai’s SVP, Ethan Chernofsky.
Q: Placer.ai is a platform bursting with data and insights. Can you give us a brief overview?
A: Absolutely. Placer is all about decoding location analytics. We observe millions of mobile devices, ensuring GDPR and CCPA compliance, to unveil how people engage with retail locations daily. Through machine learning and AI, we generate comprehensive reports on trade areas, visit counts, customer journeys, and more.
Q: It’s January 2024, and the buzz around retail holidays is still echoing. What did we uncover from the 2023 holiday season, especially concerning Black Friday?
A: When it comes to retail holidays, the spotlight often falls on Black Friday. True, its relative importance has shifted due to the surge in other retail holidays, creating a more extended and competitive holiday season. Nevertheless, these holidays remain crucial for retailers, impacting each differently. For instance, Best Buy sees Black Friday as its pinnacle, but for Target and Walmart, the day before Christmas saw a surprising surge in visits, emphasizing the importance of understanding the nuances and adapting strategies.
Q: Let's talk about how we perceive the holiday season. You've mentioned viewing it not as a uniform period but as distinct stages. Could you elaborate on that?
A: We can break down the holiday season into stages—early, peak, pre-Christmas, and post-Christmas. Each stage caters to different consumer motivations. Early shoppers may seek a sense of accomplishment, having their lists ticked off. Black Friday enthusiasts crave deals and the thrill of the retail rush. Last-minute shoppers are looking for overlooked gifts, and post-holiday, we see a surge in gift card usage and returns. Retailers need to understand these motivations to tailor strategies effectively.
Q: Let's delve into the concept of value. How do you foresee the role of value in consumer behavior throughout 2024?
A: Understanding that value doesn't solely equate to lower prices is vital, and this emphasis on seeking value will likely shape retail thinking for the next six months. Value is complex and varies across consumer segments. For some, like discount stores, value presents an opportunity. For others, particularly in non-essential categories, it poses a challenge as consumers may delay purchases.
Q: Considering the evolving landscape, how do migration patterns and hybrid work arrangements influence where consumers are?
A: Migration patterns and hybrid work arrangements have left lasting imprints. The shifts in migration during the pandemic were not unidirectional—people moved both to and from urban and suburban areas. This dynamic creates new opportunities for retailers in various locations. As for hybrid work, it's still in flux, demanding a nuanced approach from retailers. Knowing where their audience is and adapting strategies accordingly is more critical than ever. Consumer shopping patterns underwent significant changes during and after the pandemic. Retailers need to identify changing consumer behaviors and adapt, rather than waiting for a return to pre-pandemic norms. Retailers must decide which behaviors to incentivize. The ability to influence consumer behavior is crucial for creating a win-win situation for both consumers and retailers.
Q: In this environment of uncertainty, what types of products, services and retail are still well positioned?
A: In an uncertain economic environment, beyond the obvious value-centric approach, products like affordable luxuries are gaining traction. Specialty retailers with unique offerings can thrive by providing something different from competitors focused on value.
Q: How is the role of the store changing and what does this mean for story strategy moving forward?
A: The role of physical stores has evolved beyond mere transactions. Stores serve as media channels, operational assets, and places for engagement. Understanding these diverse values enhances the retailer's ability to achieve their goals.
Optionality in retail space, such as pop-ups and flexible leases, benefits consumers, retailers, and landlords. It adds variety, creates urgency, and allows retailers to experiment with different locations and formats, reducing risks.
Q: From pop-ups to greater flexibility in leasing agreements, there’s a large degree of variability in retail space. What does this mean for the sector?
A: The concept of the retail store has shifted from the "retail apocalypse" narrative. Stores now offer various values, including media channels, operational benefits, and spaces for engagement. Recognizing these values contributes to a snowball effect of positive impacts for retailers.
Q:The changing conception of the role of the store has brought new revenue opportunities. How big of a deal is this really?
The emergence of retail media presents significant revenue opportunities. It goes beyond online retail media to include in-store digital screens and signage. Retailers can engage customers during the discovery phase and capitalize on high-intent, close-to-purchase moments.
Q: Why is a heavier focus on placemaking important, and what does it mean for retail strategy?
A: Placemaking, creating spaces where people want to spend time, increases the likelihood of extended visits and transactions. Examples include EV charging stations and unique attractions. Placemaking introduces more factors for retailers to consider when selecting locations.
Q: One of the more impactful trends in retail real estate has been a shift to more mixed use real estate properties. How could this impact retail site selection and performance?
A: Mixed-use real estate properties, incorporating non-traditional retail tenants, provide creative opportunities for retailers. The shift between urban and suburban retail demands a reassessment of audience demographics and a strategic relocation to align with changing consumer habits.
The evolving retail landscape demands adaptability, a focus on consumer behavior, and creative strategies. Retailers that grasp the multifaceted values of physical stores, embrace optionality, and leverage new revenue streams stand to thrive in this dynamic environment.
Q: How has the balance between urban and suburban retail shifted and what impact could it make on retail performance?
A: A changed living situation, from a small apartment to a spacious house, can lead to shifts in purchasing behavior. A couple, once constrained by space, now opts for larger value packs, impacting not only drugstores but also retailers like Costco. This change is evident in the home furnishings wave post-pandemic, where consumers with more space seek different experiences.
Similarly, in urban environments, a Gen Z audience replacing a couple in an apartment creates opportunities for retailers. The city becomes a suitable location for retailers targeting Gen Z, emphasizing brand, experience, and building relationships beyond transactions.
Q: What are your expectations for retail in 2024?
A: Expectations for retail in 2024 include a value-driven H1 due to ongoing economic uncertainty. The focus on retail sophistication, audience-centric strategies, and flexibility will be crucial. The dynamic nature of the retail environment requires continual adjustments to align with changing consumer habits.
Addressing the effectiveness of retail media measurement, Placer.ai can contribute to understanding audience impressions and offer segmentation for more targeted media planning.
Free tools on Placer.ai, available in "The Square" section of their website, allow users to access and explore data. The belief in making data accessible aligns with the goal of fostering a collaborative exchange of ideas within the community.
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