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What’s in Store for Retail in 2024: Five Predictions for the Coming Year

The retail industry has navigated powerful headwinds over the past few years, including extreme market volatility, inflation, labor pressures and global supply chain snarls—not to mention a global pandemic that forced businesses to completely rethink how they operated. This year will surely continue to present challenges, but it will also offer opportunities for retailers with their fingers on the pulse. Gordon Brothers predicts five trends will shape the retail industry this year.

1. Consumer Spending Will Remain Unsteady

The retail environment was a mixed bag in 2023. On one hand, U.S. consumer spending rose for much of the year,[1] including a 3.1% year-over-year jump in the holiday season.[2] On the other, household debt reached its highest level ever[3] with average credit card balances topping $6,000.[4]

Many retailers are starting to feel the squeeze. Those focusing on big-ticket items like furniture or home improvement goods are enduring a cyclical decline following the pandemic boom. Other retailers, like drug stores, find themselves in structural decline due to staffing issues and the rise of e-commerce, among other challenges.

The 2024 consumer outlook remains murky. Many retailers are preparing for uncertain consumer behavior by tightening inventories, putting the onus on national brands to do the same.

While this environment may be difficult for many retailers, pockets of the industry stand to benefit especially value players like off-price retailers, dollar stores and mass merchants.

2. Brick & Mortar Will Grow in Importance

Consumers will still do plenty of online shopping in 2024, but growth in e-commerce will continue to decelerate as it has since 2021.[5] Gone are the days of unlimited funding for anything with the word “digital” in it.

Growing consumer demand for a meaningful shopping experience has influenced retailers to reassess the size of their physical presence. The reduced construction of retail real estate during the COVID-19 pandemic, combined with retailers’ eagerness for high-quality locations, could drive up rents until the supply aligns with the demand—a process that may extend over several years. This is further compounded by continuing high interest rates, which are impeding developers’ ability to meet market demands.

Consumer distaste for megastores will grow, prompting many retailers to open small-format, off-mall stores. And all retailers with physical locations will need to strike a balance between freely displaying their goods and countering rising shrink from theft and organized crime.[6]

3. Retailers Will Direct AI Inward

For years, retailers have leveraged advanced analytics and AI to facilitate the customer journey through personalization, product recommendations, virtual try ons, automated chatbots and more. In the year ahead, we expect retailers will lean in to AI to improve their own operations.

Retail designers increasingly will collaborate with generative AI tools to create new products, injecting greater efficiency into the design process.[7] AI-assisted trend forecasting will also become more prominent, helping companies make better, more timely decisions about buying, pricing and promotions. This will have positive implications on inventory turns and working capital.

4. Lending Will Be Hard to Come By

Pressure from high interest rates will keep building in 2024 despite talk of coming rate cuts from the Federal Reserve. Many major retailers experienced rising credit card delinquencies in 2023 as the consumers who tend to be drawn to these higher-rate cards struggled to pay off debt, particularly after student loan repayments resumed in October.[8]

This development adds to concerns about some retailers’ balance sheets and prospects, contributing to credit downgrades and a slowdown in deals. Expect retailers in need of financing to turn even more to the private credit market.

5. Retailers Will Prioritize Working Capital

With rates high and financing tight, retailers will develop creative ways to free up liquidity. Many will seek to monetize real estate through sale leasebacks and/or to restructure leases, inventory and other assets.

Additionally, retailers will tighten their operational spend and renew their focus on optimizing inventory management, reducing shrink and streamlining logistics to minimize operational costs. This dual approach to increase working capital will be crucial during a potentially turbulent year while simultaneously positioning for future growth.

To succeed in this climate, retailers need savvy strategies and effective tactics informed by deep industry insights. Leveraging relationships with trusted partners can help retail companies manage mounting crosswinds and seize new opportunities as they arise.

With changing consumer habits and evolving technology, the retail industry is one of the most dynamic and demanding aspects of our economy. For more than a century, our firm has honed our understanding of values across multiple sectors and industries to offer our clients the insight and hands-on support they need at all points of the business lifecycle. Our seasoned team of retail professionals provide customized solutions that allow you to focus on your core business while we focus on monetizing the value of your assets and protecting your brand.

To learn more, reach out to one of our experts or contact us.


[1] https://apnews.com/article/retail-sales-inflation-economy-spending-ad844bf1aae175204dd1e68d45ebd382

[2] https://www.nytimes.com/2023/12/26/business/economy/christmas-holiday-spending-retail.html

[3] https://www.newyorkfed.org/microeconomics/hhdc

[4] https://www.cnbc.com/2023/11/09/average-credit-card-balances-top-6000-a-10-year-high.html

[5] https://www.forrester.com/blogs/us-retail-and-e-commerce-sales-trends-2023/

[6] https://www.morningstar.com/news/marketwatch/20231113254/retail-shrink-is-about-much-more-than-theft-analysts-say

[7] https://venturebeat.com/ai/ai-in-retail-smarter-stores-smarter-product-design/

[8] https://www.reuters.com/business/retail-consumer/us-department-stores-see-higher-credit-delinquencies-amid-strained-spending-2023-08-24/

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