Effective retail strategy is one that is responsive to changing consumer behaviors. Retailers may be tested on their strategies later this year. That’s according to Colliers’ Spring 2024 Retail Report, Retail Outperforms, But for How Long? 2024 Forecast, which predicts a “slight slowdown” in consumer spending. 

Specifically, consumers will place an increased emphasis on essential items such as food and healthcare, challenging non-essential retailers and restaurant owners to draw in more budget-conscious patrons, according to Anjee Solanki, National Director Retail & Practice Groups. Economic variability and increased costs – such as wage increases – will add more pressure on retail brands to be responsive and flexible. 

The Economics of Consumption 

Real household consumption expenditure growth is expected to decrease from 2.0% to 1.7%, led by subdued employment expansion, restrictive credit conditions and fiscal consolidation. Further, over half of consumers (51.5%) are poised to curtail spending on retail goods and services over the next two quarters, enough to take the edge off retail growth in early 2024. Consumer debt has increased by 48% over the past decade with the personal savings rate dropping from 4.5% to 3.7% in that span. 

Consumers are increasingly price-sensitive, adopting strategies like comparing prices online and opting for less expensive or private label products, necessitating that retailers broaden their pricing strategies to cater to budget-conscious shoppers. Retailers should expect splurge or impulse-buy behavior to wane and brand loyalty to be tested.

“Retailers must adjust their strategies to focus on products offerings that provide value-added services, such as loyalty programs, to enhance consumer retention and ensure affordability,” Solanki says. Other strategies Solanki notes include offering pre-owned products and enhancing guarantees and warranties to affirm quality, durability and value.

Transformations in Foodservice Retail

Consumers have tired of higher dining out costs, with negative perceptions not limited to high-end restaurant experiences. With the majority (64.2%) of foodservice retailers expecting costs to rise in 2024 given the continued pressures from rising wages and a shifting labor market, there’s a “generally pessimistic view” that trading will worsen this year.

There is good news though for restaurant companies adopting operational efficiencies and digital innovations. Those that have already implemented new technology reported increased efficiency (77%), less pressure on staff (61%), reduced costs (35%) and more revenue (33%). The key to achieving this equilibrium is through adopting operational efficiencies and embracing digital innovations and AI, which not only help manage rising wages but also increase revenue, adapting positively to shifts in consumer dining habits away from perceived overpriced options.

To a Flexible Future

U.S. cities such as Orlando, San Jose, Austin, and Boulder are expected to see significant consumer spending growth driven by favorable demographics and an aging population that remains economically active. Furthermore, they note that “vigorous” spend growth will likely come from the Baby Boomers, who, undaunted by higher interest rates, increased spending to 40% of all consumer expenditures. 

And while certain regions may see less headwinds, all retailers should be ready to deal with these fundamental realities: consumer preferences will evolve, technology will advance and external disruptions will occur. Adaptability is imperative.

“Brands that can effectively navigate the complexities of an increasingly digital marketplace while maintaining flexibility in their strategies will succeed in the dynamic retail landscape,” says Nicole Larson, Manager, National Retail Research. “By embracing innovation, harnessing data-driven insights and prioritizing customer experience, retail brands can cultivate resilience and forge a path forward, ensuring their relevance and sustainability in the uncertain marketplace of tomorrow.”