It’s the most wonderful time of the year – especially for retailers. And this year more so than usual. With a condensed holiday shopping period between Black Friday and Christmas, more than half (55%) of US consumers already planned to start their holiday shopping in November. Over three-quarters – 76% – planned to make at least half of their purchases online.
This played out on Black Friday 2024. Insights from the shopping holiday show that consumers did indeed turn to online shopping to make their purchases. While in-store shopping dropped by 8%, data from Adobe Analytics showed that U.S. online sales hit record highs – topping $10.8 billion on Black Friday, an increase of 10.2% over last year. Mastercard noted even greater online sales growth at 14.6%.
What stood out was that much of this online shopping took place on people’s phones. Mobile shopping enjoyed a 79.3% share compared to desktop during this year’s shopping holiday weekend.
The data also further bore out that shoppers were driven by value and snagging a good deal or discount. Nearly 70% of customers rated price and value as the most important factors when deciding which retailer to buy from ahead of the holidays. And this was proven to be particularly true for toys, electronics, apparel, computers, and sporting goods on Black Friday.
Adapting to the Future of Retail
The evolving nature of holiday shopping acts as a strong indicator that retailers should look towards a Future of Retail framework. This involves taking a customer-oriented approach enabled by technology – moving beyond a transaction-based approach to a structured transformation with integrated layers.
Consumers today are tech-savvy and more knowledgeable than ever before, leaving them frustrated by the transactional nature of most retail experiences. Generic recommendations, inconsistent omnichannel journeys, and poor customer service are currently some of their biggest bugbears.
Retailers have to do more than simply keep up with changing behavior and rapid technological advancements. They need to find a strategic enabler that gives them a competitive edge.
The inter-connected layers of the Future of Retail framework can help. The inner layer focuses on critical operational and technological components, for example, while the outer layer focuses on stakeholder experience and sustainability.
Building Technological and Operational Excellence
Retailers’ technology stacks need to support the shift to hyper-personalized engagement-based relationships that anticipate and meet customer needs in a unified way across the channels of their choice.
AI, analytics, and machine learning can help retailers provide customized recommendations and offers, as well as make predictions based on past purchases, interactions, and behavior. And the numbers show that it works. Another key insight to come out of this year’s Black Friday shopping was the rise of chatbots and AI as sales drivers. AI drove more than $14 billion in global online sales on Black Friday – and retailers using Gen AI specifically had a 9% higher conversion rate.
Integrating online and in-store capabilities is also critical to meet customers where they’re shopping and drive sales and revenue. Those who do it right have the potential to increase revenue by 5 to 10%.
Most retailers, however, still need to invest in omnichannel capabilities such as buy online/pick up in-store, buy online/return to store, and ship-to-store for pickup in order to unlock this potential.
Investing in the Stakeholder Experience
Retailers need to build on and shape these technological capabilities by focusing on the overall stakeholder experience, which will look different across the board:
- Customers: Customers expect a relevant, consistent, and cohesive experience at every stage of the purchase process, with personalized, responsive engagement and support. Faster and better adoption of customer insights at the point of decision-making is the key to getting this right. And at the heart of it lies the synergy between the creators and consumers of data-driven insights. While streamlined systems, processes, and solutions power more contextual and real-time information and make it easily and instantly available at their finger-tips, the consumers of these insights across the workforce need to translate the insights into exceptional and unforgettable experiences for customers.
- Employees: Job roles determine what tools and solutions employees should be equipped with to perform most effectively. Contact center agents, for instance, need real-time information and customer insights at their fingertips to provide intelligent support and resolve issues. In-store sales staff, on the other hand, are in need of mobile apps or wearables to track stock and handle operational and customer matters rapidly and effectively.
- Partners: Harmonized, up-to-date systems ensure streamlined operations across the partner ecosystem, enabling better efficiencies and results.
- Suppliers: An integrated supply chain unlocks retail value. Capabilities such as predictive inventory management can help mitigate stock level challenges and ensure suppliers are always a step ahead of supply chain needs.
Looking Ahead: The Retail Outlook in 2025 and Beyond
Against this backdrop and going into what is forecast to be a challenging 2025 defined by geopolitical uncertainty, inflation and macro-economic concerns, and the explosive growth of online shopping and marketplaces like Shein and Temu, how then can retailers deliver value and stand out from the crowd with customer experience (CX)-driven digital transformation?
Forrester’s retail trends prediction for 2025 show that more retailers will be challenged to drive revenue and profit in the months ahead. This will require deeper innovation and investment in tech solutions to elevate support and service offerings to retain shoppers and grow loyalty.
For example, the company forecast that one in five US and EMEA retailers will launch customer-facing Gen AI applications. Areas that will see targeted investment in Gen AI capabilities include improving search results and site navigation, as well as explaining recommendations. This will help simplify and elevate customer outcomes, and will be increasingly vital in a retail environment where online and mobile commerce become more prevalent.
Modernizing processes, systems, and technology solutions will also be essential to drive efficiencies in front- and back-office retail operations, elevate the omnichannel customer journey, and hyper-personalize customer engagements across channels. This will require digital building blocks that serve as a strategic foundation to enable business transformation.
Investing in Digital Building Blocks
The first step is strengthening the digital foundation: cloud, data, and analytics. Quality data is the driving force of AI-driven initiatives, and this requires a robust data strategy and governance framework underpinned by strong data management and advanced analytics. Critical data, applications, and processes should also all be moved to the cloud for agility, flexibility, and scalability.
Next comes the modernization of enterprise apps and platforms to unlock digital performance and greater efficiencies across the retail footprint.
Then retailers can focus on augmenting AI and automation capabilities at scale to further drive operational and cost efficiencies, innovate at scale, and respond to customer needs and changing market dynamics at speed.
Putting these building blocks in place can help retailers address business and customer pain points and uncover opportunities to add value in critical areas including order lifecycle management and fulfilment, returns mitigation, and more for seamless retail operations that deliver measurable results.
And it will be the retailers who invest in these capabilities with an eye on building a solid framework for the future who will gain the strategic edge into 2025 and beyond.
