The Consumer Behaviors That Keep Retail Executives Up at Night
Executives have a list of worries going into the new year with economic and inflationary pressures and keeping up with rapidly changing consumer preferences ranked as top sources of anxiety.
In its first consumer products and retail executive pulse report, EY surveyed more than 200 executives with the title of vice president or higher throughout the U.S. from Fortune 1000+ CPG and retail companies, with the goal of further understanding these current worries and how executives are planning to mitigate them.
More from WWD
American Millennials Are Putting Love on a Budget This Valentine's Day
Announcing Sourcing Journal's Third Annual Sustainability Summit: 'A Need for Radical Cooperation'
MZ Wallace Announces Collaboration With Megan Roup's The Sculpt Society
EY said 53 percent of CPG and retail executives surveyed for its research reported concern with “keeping pace with constant shifts in consumer preferences and behaviors” with 48 percent also reporting that the current economic environment has changed their business strategies. Another 51 percent also cited profitability and margin pressures as causes for anxiety.
With these worries in mind, executives told the company that they are “seeking to create more value across the business. To tap into new areas of growth and better meet consumer needs they are planning to invest in artificial intelligence, supply chain and industry convergence. Almost all (99.6 percent) executives said they are experimenting with GenAI in some capacity while 91 percent said they are planning investments in alternative revenue streams.
Acknowledging that the past year has been challenging for consumer leaders, Kathy Gramling, consumer industry markets leader at EY Americas, said that in 2024 she expects “we’re going to see a swing from cost to value. Brands and retailers will look to make smart, strategic investments in areas where value is created — with many expecting it to come from [the] transformation in finance (27 percent), technology (26 percent), supply chain (26 percent) and customer experience (25 percent).”
In its 2024 outlook for retailers and brands, the authors of EY’s report discussed value drivers including emerging technology, the deal market and the supply chain. The company specifically called out GenAI and ML playing a key role in executives’ 2024 agendas citing its survey results where 41 percent said their company is implementing AI into the consumer experience through employee virtual assistants and 32 percent implementing the technology for product purchase reminders.
Brands are coming to a fast realization that the consumers aren’t just in it for the product…”
Kathy Gramling, EY Americas
“New channels and technologies — such as AI, Web3 and the yet-to-be-coined — will continue to emerge, diverge and redefine the retail landscape,” said Isaac Krakovsky, retail leader at EY Americas. “Retailers need to fortify their foundations in the face of these ever-changing dynamics, and a significant part of that is prioritizing the AI and emerging tech use cases most valuable to the business.”
Discussing the potential for growth in a holistic way across the consumer journey, EY’s researchers point to the current deal market and a focus on cost optimization. The company’s survey found that 91 percent of leaders plan to make industry convergence-related and alternative revenue stream investments over the next two to three years, with 65 percent of those leaders saying they plan to make significant investments.
“Brands are coming to a fast realization that the consumers aren’t just in it for the product, and that to really differentiate, they have to consider their role across the holistic journey,” Gramling said. “That means we’re going to see increasing activity from CPG companies around where they want to play beyond traditional manufacturing — whether that’s direct-to-consumer, technology, logistics or something else. What will be important is making sure that these adjacencies align with who you are as a brand.”
Moreover, EY’s findings show that companies continue to see the supply chain as a key source of value.
“Inventory continues to be one of the greatest challenges retailers are facing,” Krakovsky said. “Whether it’s getting a handle on inventory loss — or shrink, as it’s referred to in the industry — managing excess stock coming out of the holiday season, or optimizing last-mile delivery, 29 percent of retail leaders believe that transforming the supply chain is going to create the most value in the next 12 to 18 months.”
With the significant shift to online shopping in mind, 40 percent of retail and CPG leaders said a core element of their business strategies is “creating a more efficient supply chain,” closely following direct-to-consumer and omnichannel (42 percent). Notably, 35 percent ranked supply chain resilience as a top area to invest in over the next year with 21 percent saying that they plan to increase investments in digital supply chain.
For More WWD Business News:
IBM and Salesforce Lead Transformation in Retail With AI-driven Innovations at NRF’24
Gen Z Women Seeking Work-life Balance Lean Into the Quiet Shopping Trend
Rising Cost of Living Is Having a Cross-generational Impact
Best of WWD
