Deloitte: Consumers value price over loyalty in 2024
Inflation has left its mark.
Three-in-four consumers still feel concerned about rising prices, even as inflation moderates, according to Deloitte’s 2024 U.S. Retail Industry Outlook. Consumers consider trade-offs, try out the competition and hunt for the best deals to maximize their budgets.
The report found that one-half of retail executives expect consumers to value price over loyalty in 2024, and 64% of the executives also expect inflation-weary consumers to purchase fewer goods.
As to who wins the incremental dollar in a slower growth, inflation-bit consumer environment, the report cites data (source: Affinity Solutions) that suggests discount retailers are in the lead, with mass merchants and club stores also edging out specialty formats. Consumer spending at discount stores was up 26% over-year-over in 2023.
Deloitte’s economic forecast anticipates continued growth in consumer spending at a rate slightly below GDP growth due to falling inflation, low unemployment and increasing productivity growth. While the aftermath of the pandemic led to a shift in consumer spending patterns, the forecast suggests a slower growth trajectory for durables spending relative to consumption and income over the next five years.
Other key insights from the Deloitte report are below:
•Leaning into loyalty programs Nearly two-thirds of consumers belong to between one and five loyalty programs. But most of these consumers use half or less of their membership, creating a challenge for retailers to develop engaging programs that convert these members into regular, profitable users. Retailers should look towards rekindling profitable loyalty through personalization, co-branding and data monetization.
•Creating experiences in-store Most customers (three-in-four) say they are more loyal to stores that show consistent customer service and experiences.
As retailers are challenged to do more with less, they cite four opportunities for growth: strengthening loyalty programs (54%), reinforcing digital commerce offerings (44%), enhancing in-store customer experience (36%), and boosting omnichannel experience (32%). Enhancing the in-store experience was a top-cited growth opportunity for driving growth in 2024.
“Some retailers are planning expansive store remodels that can immediately create more pleasant environments and sticky behavior from consumers,” the report stated, adding that Target recently noted that sales increase 2% to 4% on average during the year once stores are renovated. “But we also see an opportunity in innovative tech that uses data to create efficiencies and consistent experiences, potentially building profitable loyalty.”
•AI gets personal. As consumers hunt for deals and seek out bespoke experiences, half of retail executives are prioritizing AI-driven personalized product recommendations in 2024. But only five in 10 retail executives are confident in their company’s ability to use AI effectively. While trust in a brand drops 144% for customers who know a brand is using AI, building AI with trust in mind can help quadruple market value.