With a looming recession, inflation and a myriad of other challenges affecting the retail industry today, staying ahead in such a dynamic landscape is more crucial than ever. Here are the top five strategies for retailers to maximize commerce success this year, from generative AI to phygital experiences, powered by composable commerce.
Following a challenging year marked by global inflation and a looming recession, retailers witnessed firsthand how consumers tightened their wallets throughout 2023. While positive signs are pointing toward an increase in consumer spending, relying solely on an improved economic climate is not enough.
To ensure retailers remain competitive and maximize commerce success in 2024, explore our top five strategies for fostering retail growth.
1. Boost revenue by targeting growing customer segments
Many retailers prioritize particular customer segments in their digital strategy, often directing their attention toward digitally savvy shoppers, primarily found within younger demographics. Millennials, Gen Z and, most recently, Generation Alpha (Gen A), the youngest consumers born between 2010 and 2024, are commonly viewed as digital natives. They continue to constitute the primary demographic focus for retailers emphasizing digital initiatives.
However, retailers must extend their gaze beyond traditional segmentations and explore additional customer groups to propel their growth plans. Not only have the older generations of Generation X and boomers become more digitally savvy, especially as many were forced to explore digital services during the COVID-19 pandemic, but this trend goes beyond age brackets.
For instance, Forbes recently reported that the multicultural market in the United States, including Black, Hispanic, Asian and other racial groups, represents a pivotal shift by 2050. America is not alone in this multicultural trend, with Europe following suit. According to Imani Laners, Vice President of Multicultural Partnerships at Zeta Global, “As the inaugural majority-minority generation currently under age 13, they will emerge as the focal point in the next five to 10 years, reshaping the consumer landscape.”
Representing those generational and multicultural changes in retail strategies shouldn’t wait that long, however. Armed with these insights, retailers can focus on two tactics:
Expanding reach: Retailers can harness the power of data analytics to identify and understand the preferences of these untapped segments. By tailoring marketing strategies, product offerings and user experiences, brands can effectively expand their reach and capture the attention of new customer groups.
Enhancing personalization: Investing in hyper-personalization tools can assist retailers in crafting tailored experiences that resonate with diverse age groups, multicultural segments and various demographics. Customizing marketing messages, product recommendations and user interfaces can significantly boost engagement and conversion rates. However, the challenge for 2024 is delivering hyper-personalization while respecting customer privacy, protecting data and serving up what consumers have in mind — all in real time.
2. Bring in AI to the fold — and be intentional about your first use cases
According to Raconteur, AI in retail (which includes machine learning, chatbots, swarm intelligence, natural-language processing, and image and video analytics) is expected to reach USD 24.1 billion by 2028. Experts anticipate a substantial growth in the impact of AI in retail, particularly in 2024, with a focus on personalization and creating seamless customer journeys. While AI holds immense potential for retailers, it’s important to be intentional about the use of such a powerful tool.
This doesn’t mean that retailers shouldn’t experiment with the numerous possibilities of AI, but they do need to concentrate on a few use cases as a starting point. This is important not only to capture benefits faster but also to avoid spiraling costs and inefficiencies.
Focus is particularly important as AI — especially generative AI — is still a technology en route to maturity. For executives, it’s crucial to differentiate what’s hype and what’s reality with a technology that, theoretically, provides endless use cases and benefits. Proving the worth of APIs while unlocking significant value, from improving customer experiences to reducing costs or increasing revenues, will be a core focus for retailers this year.
Another aspect to consider in the AI conversation is how customers will respond to this technology. Transparency and a customer-centric approach to AI implementation are essential to building trust and ensuring a positive user experience.
3. Prioritize customer data security
As digital platforms have become indispensable for retail transactions, retailers find themselves at the intersection of innovation and consumer convenience. However, this digital prowess brings with it a crucial responsibility: Safeguarding customer data and privacy. Adopting robust measures to protect sensitive information fosters not only consumer trust but also ensures compliance with evolving data protection regulations.
For retailers to create the best line of defense, having robust security and monitoring in place is crucial — and that will become one of the most sought-after requirements for digital services, including commerce. This entails enhancing secure payment processing capabilities, implementing data encryption, enforcing stringent data governance, applying access controls and strong authentication, as well as adhering to global compliance standards.
The role commerce technology plays in supporting the security of customer data is crucial and can be done in several ways:
Enhancing payment processing: Commerce technology often includes payment gateways that securely handle financial transactions. The utilization of encryption and tokenization within these gateways is imperative, providing a shield for customer payment data and guaranteeing that sensitive information remains confidential throughout the entire transaction process.
Advanced data encryption: These technologies employ state-of-the-art encryption mechanisms to safeguard data both at rest and in transit. Customer data undergoes encryption when stored on servers and during transmission, making it extremely difficult for unauthorized parties to access or intercept.
Rigorous access controls: Commerce technology enforces strict access controls. Restricted to authorized personnel, access to sensitive customer data is carefully regulated, significantly mitigating the risks associated with data breaches caused by insider threats or unauthorized entry.
Real-time monitoring and alerts: The integration of monitoring and alerting services is essential, enabling the swift detection and response to security incidents. Incorporating anomaly detection and threat intelligence, eCommerce tech identifies and addresses potential threats promptly, enhancing the overall resilience of the system.
Compliance with regulations: Best-in-class commerce technology should be designed as a data processor to adhere to relevant data protection regulations, such as the General Data Protection Regulation (GDPR) or the Payment Card Industry Data Security Standard (PCI DSS), ensuring that customer data is handled in compliance with the law.
By incorporating these features and adhering to best practices, commerce technology becomes a pivotal ally in creating a secure environment for customer data, minimizing risks and preventing fraudulent activities.
4. Obsess over the post-purchase experience
Beyond the transaction itself, it’s the post-purchase journey that fosters lasting connections and maximizes customer lifetime value (CLV). From personalized engagement initiatives to seamless customer support, retailers can explore a range of tactics to create a symbiotic relationship that extends far beyond a single transaction.
Seamless post-purchase services: Retailers must prioritize a seamless post-purchase experience characterized by efficient order fulfillment, simplified return processes and proactive customer support. Incorporating advanced technologies, such as chatbots and automated tracking systems, can significantly elevate the overall post-purchase journey. Additionally, retailers should invest in personalized communication strategies, tailoring post-purchase messages to individual customers based on their preferences and purchase history.
Engagement and loyalty programs: Implementing loyalty programs and personalized post-purchase engagement initiatives can foster a strong connection between the brand and the customer. Consider designing and promoting loyalty programs that offer rewards, discounts, exclusive access and even unexpected bonuses to delight customers and incentivize repeat purchases.
5. Bridging online and offline experiences
Bridging the gap between physical and online experiences, also called phygital, refers to integrating digital technology into physical retail spaces to create fluid customer journeys. As shoppers continue to flock to brick-and-mortar stores, blending online and offline experiences is a natural evolution for retailers that explore seamless omnichannel commerce.
To bring a phygital strategy to life, retailers must create a holistic approach that aligns operations, product delivery, pre-sale and post-sale experiences to create a seamless customer journey. Embracing an omnichannel strategy is crucial across in-store, online or through mobile apps is a vital strategy to make shoppable experiences seamless, no matter the touchpoint at which the consumer starts or finishes the buying journey.
Retailers should also take into consideration that data and analytics are at the heart of a successful omnichannel strategy. By enabling unified customer profiles, retailers can ensure that customer information is consistent across all touchpoints. Not only does this facilitate personalized experiences but also streamlines operations big time.
How composable commerce empowers retailers to leverage these strategies
Retailers struggling to bring these pragmatic strategies to market are very likely relying on legacy, inflexible technologies that make any potential changes, updates or innovations hard to realize. A composable commerce platform, on the other hand, is designed to help retailers navigate the waves of constant change as attested by hundreds of brands and retailers globally.
When we decided to implement a one-size-fits-all solution years ago, we compromised by creating a standardized approach. However, we soon learned that SPORT 24 needed to offer unique customer experiences to be successful in the long run. The legacy tech wasn’t right to achieve our goals, so we switched to composable commerce. With the flexibility of composable, we have the foundation to tap into our customer needs, no matter if they’re omnichannel, AI or anything else that may pop up in the future.
HEAD OF ECOMMERCE DEVELOPMENT, SPORT 24
Composable proved that companies with unique requirements like Vision Healthcare can get the best mix of best-of-breed components and in-house capabilities that create the omnichannel experiences our customers look for.
DIRECTOR OF INFORMATION TECHNOLOGY, VISION HEALTHCARE
For retailers that require a more streamlined implementation of composable commerce this year, commercetools Foundry helps businesses unlock the benefits of composable faster with a pre-composed solution and expert best practices. This blueprint is a great place to start a commerce project while leveraging top-notch strategies that empower retailers to differentiate and grow.
If composable commerce is on your radar to turbocharge your growth plans, explore commercetools Foundry.