Let’s face it, 2023 was another disruptive and unpredictable year for Australian retailers. Sales surged during retail events like Black Friday, Cyber Monday, and Click Frenzy, but much of the year was clouded by inflation, interest rate hikes, and cost-of-living pressures that impacted spending and sentiment. But what does 2024 have in store? Here are some trends that we anticipate will define the year ahead.

AI adoption will increase

In 2023, artificial intelligence (AI) exploded into mainstream consciousness thanks to the prominence of ChatGPT. In 2024, that momentum will continue. In fact, by 2026, the global AI market in the retail industry is projected to grow by 70%. AI is still in the early stage of its evolution, and many retailers have yet to harness its potential. But as AI becomes more accessible in 2024, we expect it to be utilised in inventory management, merchandising, customer service, fraud prevention, and more. According to research, 73% of global retail executives said the most significant benefit of AI will be fast-tracking profitability, increasing productivity and revenue streams, and reducing operational costs.

In-store is going nowhere

Despite the pandemic-driven boom in eCommerce, Lightspeed’s Retail Insights & Shopper Sentiment report reveals there is still huge demand for physical retailers, with 76% of Australians continuing to shop in-store at least once a month. Aussie shoppers evidently still crave the personal, tactile, face-to-face experiences that physical retail provides. In fact, 56% of shoppers visit brick-and-mortar stores to check out products in real life, fulfilling a need to touch, see, and experience products before purchasing. Retail stores will no longer be seen as mere transactional hubs, either. Instead, they’ll transform into spaces that offer unique, immersive experiences like DIY workshops, demonstrations, classes, and talks. That’s not to say online is any less influential, though.

Seamless omnichannel experiences

That’s because online is a crucial component of delivering that all-important, seamless omnichannel experience. According to our report, 45% of shoppers research products online before going in-store to make a purchase – pointing towards a need for an omnichannel strategy. Meanwhile, 17% research in-store, then purchase online. In 2024, we expect more retailers to bring in-store and online shopping together, rather than treating them as two separate channels. Retailers should consider a key pain point, though. Our data shows that 42% of shoppers check online for stock availability before their in-store visits, so retailers should ensure their online inventory accurately matches what it is in store in real-time, so no customers are left disappointed.

Driving loyalty through brand communities

The concept of community engagement will be important in the coming year, with a strong brand community set to become a key differentiator for retailers looking to enhance their customer engagement strategy. Our data alludes to the value of incorporating various community-centric elements into a brand’s strategy. For example, 24% of shoppers value businesses that align with their beliefs and actively contribute to the local community, while 34% said access to special deals for locals would encourage their custom. So in 2024, we expect to see more retailers focusing on community and connection, and using that to incentivise loyalty.

Sustainability is a defining issue

Recent research found that 69% of Aussies either always or often consider sustainability in their purchasing decisions – only 5% don’t at all. Therefore, it’s unsurprising that sustainability will be a hot topic for retailers, who will be focusing on increasing sustainable packaging, reducing wastage, boosting sustainable sourcing practices, and localising supply chains. While sustainability should be a top priority for all retailers, it’s particularly essential for those targeting younger demographics. In a recent survey, 55% of Gen Z Aussies and 51% of Millennial respondents said they had purchased sustainable fashion products in the past. In contrast, only 39% of Gen X and 28% of Baby Boomers said the same.

Pricing and promotions

Pricing and promotions will continue to be an influential factor in purchasing decisions. Price sensitivity is top of mind according to our report. It found that 33% of shoppers are concerned that in-store pricing may be higher than online, while 38% are discouraged by the inability to search for cheaper deals in physical stores as easily as online. To retain and attract in-store shoppers, it’s essential that retailers implement transparent pricing strategies, offer price guarantees – where feasible – and focus on how they can provide value.

Personalisation will drive loyalty

Personalisation has been a huge focus in recent years. Thanks to advanced marketing platforms, AI, and data automation, retailers can personalise their customer experience easier than ever. Our report found a quarter of shoppers prefer tailored experiences, so we anticipate more retailers will include personalised product recommendations and take a more curated approach to loyalty programs. Adding a personal touch and tailoring content so it resonates on an individual level will enhance the holistic shopping experience and foster a sense of connection between brands and consumers.

Customers want more

Customers expect more from their favourite stores than simply the product they’re purchasing. Loyalty programs (39%), gift cards (21%), and a desire for buy-now-pay-later options (15%), are evidence of the impact of economic considerations. Another interesting discovery was that 14% value services such as repairs and alterations, which provides benefits for both consumers and retailers alike. So retailers should think about how they can provide value and incentive, and also what they can offer in addition to merely their products.

The new year brings with it new opportunities and new challenges for Australian retailers. With peak season now behind us, it’s an opportune time for retailers to take stock of the influential trends that will shape 2024, using them to maximise opportunities and minimise challenges in the year ahead.

Andrew Fraser is managing director for Asia Pacific at Lightspeed.