In 2024, retailers are navigating a landscape marked by economic turbulence, intensified price transparency, and global supply chain disruptions. Recent studies indicate that 70% of consumers now compare prices online before making a purchase, intensifying the pressure on retailers to stay competitive.
Understanding and adapting to these shifting dynamics is essential for any business aiming for success in today's market. This article delves into the economic forces reshaping the retail industry, explores how AI and machine learning are revolutionizing pricing strategies, and identifies the key pricing trends of 2024.
Join us as we dissect these trends and provide actionable insights to keep you one step ahead of the competition.Without any further ado, let’s dive in.
The current economic climate is challenging.
The present global economic environment is hardly an easy setting for retailers. Just take a look at a few latest retail trends.
Even though Forrester expects total inflation rate to decrease from an average of 4.1% in 2023 to 2.6% in 2024, the buying behavior of consumers still remains rather price-savvy as shoppers want to get the best products for the most attractive prices. If you add increasing price transparency on top of that, you'll realize how challenging it might get to keep customers loyal in 2024.
Now, examine the supply chain challenges with disruptions in transportation, logistics, and sourcing impacting retailers' ability to maintain adequate inventory levels and meet consumer demand. Delays in production and shipping have already led to inventory shortages, forcing retailers to either raise prices or face stockouts, both of which can have damaging effects on bottom line and customer satisfaction.
The latest trends in retail industry are exacerbated by new geopolitical tensions in the Middle East, the war in Ukraine, as well as trade disputes, leading to uncertainty and volatility in the market.
How will current trends in the retail industry affect companies?
Increasing price transparency, driven by digitalization and consumer empowerment remains a challenge for many retailers. Consumers can easily compare prices across different stores, making it harder for companies to maintain margins high and manage old pricing strategies effectively. Modern retail trends force businesses to focus on providing unique value propositions beyond just price.
Global supply chain disruptions also profoundly impact recent retail trends, leading to inventory shortages, delayed deliveries, and increased costs. Retailers are forced to adapt by diversifying suppliers, optimizing inventory management, and investing in resilient supply chain strategies.
Finally, geopolitical tensions in the Middle East and the war in Ukraine further complicate retail market trends, potentially disrupting global trade and causing economic instability. Retail companies must closely monitor these situations and prepare contingency plans to mitigate risks such as increased costs, new logistical disruptions, and fluctuations in consumer demand.
All the recent trends in retail industry have intensified competition, requiring businesses to invest in technology and omnichannel capabilities to stay relevant and give customers what they want.
Why are machine learning and AI the future of product pricing?
As economic and recent retail trends change, consumer preferences vary, and demand curves rise or fall, some things remain steady. One of such things is the vital importance of pricing. Pricing was, remains, and will be the major communication interface between a shopper and a retailer. So, why not leverage the power of pricing to deal with the economic turbulence and master the recent trends in retail industry?
The good news is that advanced pricing technologies powered by machine learning and artificial intelligence can help you do it. ML and AI enable retail professionals to analyze vast amounts of data quickly and accurately. Eventually, retailers can set optimal prices based on real-time market conditions, competitor pricing, and consumer behavior.
Michelle Gass, Levi Strauss CEO, believes technology, data, machine learning, and AI to be the most disruptive forces shaping the future of retail. And this is not without reason.
Last-gen pricing solutions, like the Competera pricing platform, can identify pricing trends, forecast demand, and even customize prices across channels to maximize revenue and keep customers loyal. Additionally, ML and AI can automate pricing decisions, freeing up your time to focus on more important strategic aspects of the business. Among the latest retail trends, this one is a genuine game-changer.
If you want to find out in detail how AI-driven pricing helps retailers, take a look at a recent case of Competera helping a grocery retailer to overcome the challenge of unaccounted cross-elasticities by creating a universal pricing approach that boosted profits by 7% within 8 weeks.
Pricing retail trends of 2024
We've already discussed the major economic trends defining the retail landscape in 2024 and highlighted the crucial importance of pricing as a key factor enabling retailers to stay competitive. Now, it's time to dive deeper into the 2024 major pricing retail trends. Here they are:
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Profitability Focus. Retailers will continue leveraging sales and other data to determine optimal pricing strategies that maximize profitability. This includes understanding real demand to identify which prices yield the best results and which may cannibalize sales of other products. By approaching the cross-elasticity of demand using advanced tools, retailers will be able to make more informed decisions driving profitability.
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Increased Transparency. With the landscape of eCommerce pricing becoming more dynamic, consumers now expect frequent price changes. To build trust and loyalty, retailers will embrace increasing price transparency by openly communicating about price changes. This approach both aligns with ethical standards and helps meet consumers' expectations.
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Product Focus. Retailers will likely streamline their product assortment, focusing on Key Value Items (KVI) that are crucial in driving business performance. This strategic shift in the retail sector involves identifying products that contribute significantly to profitability and campaign success. The data-driven smart product segmentation is the key to successful portfolio management.
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Dynamic Pricing. Dynamic pricing will continue to gain momentum as retailers strive to remain competitive. This strategy involves adjusting prices in nearly real-time based on market conditions, changes in demand, competitor pricing, and dozens of other factors.
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Pricing Automation. The complexity of pricing strategies and the increasing frequency of price changes will force even more retailers to embrace pricing automation. By adopting AI-powered pricing automation tools, retailers can keep up with the pace of change in pricing trends, ultimately driving efficiency and profitability.
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Electronic Shelf Labels. As trends price changes become more frequent, retailers will increasingly adopt digital shelf labels. New tags offer a cost-effective and efficient solution compared to traditional physical tags, allowing retailers to update prices instantly both in offline and eCommerce stores.
To sum up, these retail industry trends reflect the need for the market players to respond to global economic challenges effectively. A retailer's competitiveness needs to be built upon data-driven strategies, transparency, and agility in pricing decisions. Embracing pricing technologies powered by ML and AI will make your business well-positioned to drive profitability and growth in 2024 and beyond.
