Retail Pulse Report: Five Big Things from 2024 and What They Mean for 2025
Consumer confidence wavered, AI ambitions faltered, and stores reemerged as vital hubs.
Adobe Stock’s AI-generated version of “uncertainty as the new normal”
If there was one over-arching theme of 2024 it was “uncertainty as the new normal”. Consumers never clearly recovered their confidence, though it did improve over 2024, and maybe retailers on average did a little bit better this year, but mostly because some winners really won, and some losers really lost. And it was the middle that really lost.
In looking back at everything I wrote about in 2024, five things stood out. Let’s dive in!
GenAI, of course
GenAI, of course, got a lot of coverage. If you haven’t figured it out by now, I’m a skeptic. I think the technology is very cool, I use it all over the place (never for my writing, however – I’ve tried but it just does not sound like me and that’s not something I’m willing to give up). But when you peel away the hype, what you find are a lot of chatbots that are chewing through the energy consumption of Rhode Island.
Chatbot recommendations are a perfectly innocuous use case – if you’re wrong, you won’t get sued. And even if you’re right less than half the time, it’s still a boost to sales because it’s better than nothing. But try for anything more than that, and things get weird.
GenAI is not all AI. I’m flummoxed by people advocating for GenAI in the supply chain. I don’t want to talk to my pallet. I want to count what’s on it. Do I want AI to tell me the right amount to send to whichever store? Sure. But that’s not GenAI. That’s optimization. Before writing this article, I consumed more trend reports than I can count, and the number of breathless predictions for a GenAI future got old really fast. If you believe the hype, GenAI is a hammer and everything – every single problem in retail – is a nail.
However, product search was one interesting nail that came up towards the end of the year. It’s really just AI chatbot recommendations but built on the whole internet instead of one retailer’s product catalog – but that makes it dangerous to both search engines and retailers. “Amazon is the Google of product search” has been the saying for at least a decade. But now it may be becoming “Perplexity is the Amazon of product search”, and both Google and Amazon are taking notice.
During 2024, I went from vendors and partners pitching me on how to incorporate AI into Aptos solutions all the way over to, “well, you have to design the right use case” and lots of hand-wringing that indicated they had convinced others to do a lot of pilots that never got off the ground. And that’s before coming anywhere near reckoning the actual costs – and those costs are still going up! As I said in July, don’t love that chatbot too much!
Cognitive Load in Retail
It took me a while to get there, but I did finally center on the concept of cognitive load for shoppers. I think this will have to be something that continues into 2025, but in 2024 it was all about awareness of the problem.
Shoppers were really cranky in 2024. And they took it out on retail staff and through opportunistic theft. I will emphasize (again) that there is no excuse that makes it OK to take frustration out on front line workers, who are probably just as frustrated with the way things have been going in stores as you are, but also, it should surprise no one that shoppers are fed up.
Self-checkout that has no help if you get stuck, automated customer service that isn’t designed to answer your question or that catches you in an endless loop, locked cabinets for everything and not a store associate in sight – it’s like retailers don’t actually want to help their customers, and in 2024, customers noticed for real.
This was a global phenomenon, by the way, not just the US or the UK, though it made bigger news in those two countries. Japan had the same issues. And Canada too, theoretically the nicest country on the planet.
In 2024, the call was for empathy. Training store associates in how to identify and head off angry customers. Walking a mile in a shopper’s shoes to understand all the things you’re asking of them. Asking shoppers to remember that staff is human too. These are not things that should be revolutionary. Unfortunately, in 2024, they were.
Soft Landing
In 2024, I started covering economic indicators in earnest, trying to figure out if there were any insights to be had from the heady combination of consumer confidence, retail sales, GDP, labor markets, and inflation. We went from no end in sight in January to a fall of hopeful expectations for a real soft landing – which seemed to be on its way until the US election either shook confidence or released it. The question for next year is, was that an actual land the plane, gather your belongings and exit via the jet bridge? Or, just a touch and go?
It's great that things are starting to look up. It’s not guaranteed that they will continue to look up. But I think most important in all of this was that consumers may still not feel like the plane is on the ground at all. That vibe-cession that everyone talked about in 2024 – all the economic indicators were weakly positive, but consumers were mostly in the dumps, and no one could figure out why there was such a gap.
In the end, consumers did not appreciate the gains the economy made because they never got to feel them – everything they gained went to rising prices. At a time when they were hopeful to make progress financially, they were breaking even. That expectation gap was far more important to consumer attitudes than any economist’s numbers. And of course, no guarantees for 2025.
For retailers, the consequences will continue into 2025. Falling interest rates mean financing options for things like store investment will be more attractive. Falling prices, or the slowing growth of prices, mean that retailers will have to work a lot harder to beat year over year comparisons, and the emphasis is going to have to be on moving units. No one cared that unit sales were falling when prices were skyrocketing, but they will care now.
The Future of the Store, Again
2024 was the year that retailers realized that stores are actually more valuable than online. With cost pressures hitting labor, freight, and warehouse space, and consumers doubling down on returns, retailers found they could no longer sustain investing in eCommerce for some kind of future profitability – they need profitability now.
At the same time, retailers learned (again?) that the store needs to offer more than just an assortment of products. Stores have people, and those people are the missing ingredient in an online experience, whether you’re talking about associates, or even other customers. The store can be a social experience. It also offers a lot of opportunity for leverage, for everything from advertising space for retail media networks (especially if you’re a grocer) to a cheaper path for returns, a pickup point for online orders, or even a place to go hang out with other like-minded shoppers.
I asked in February 2024 if pureplay retail was dead. That question applies equally to the online store as the physical one. I think retailers have paid a lot of lip service to omnichannel over the years, but the time has come to really figure out how to make it work. This effort has to be more than just tacking on returns to the store customer service desk, or throwing a kiosk next to the cash wrap to order things online. The future of omnichannel – and thus, the ultimate future of the store – is still not here yet.
4 Key Consumer Questions in 2024
At the beginning of 2024, I posed four key questions about consumer behavior that would play key roles in shaping how the year would play out. How did I do? Not perfect, but not too bad…
Will consumers embrace AI or reject it in favor of genuine human expression?
“At the end of the day, will consumers embrace conversational bots driven by GenAI, and all the creative output that can come with that, or will they deal with it in their lives because they have to, but elevate genuinely human creativity as a counter-balance?”
The answer turned out to be both. Consumers are nearly as equally wary of GenAI as they are interested in embracing it. It’s easy to trust when the consequences are low – like with product recommendations. I think it’s going to be a lot harder to get consumers to sign up for, say, deciding what I want, selecting the product that meets the need, and then acquiring it for me.
At the same time, consumers also say they value the human connection more than ever. They’re going back to malls and stores to get it, and they keep putting expectations on businesses, including and especially retailers, to help them make connections.
So, yeah, both.
Will consumers let companies step back from cause-based marketing or demand even more?
My prediction last year: “Another brand is going to step in it (it’s too complicated of a landscape to avoid that) and be punished by a lot of consumers and probably Wall Street, all at the same time.”
I don’t recall anyone running afoul of botched marketing at the level that we saw in 2023. The biggest retail oops of 2024 seemed to me to be when Wendy’s tried to roll out dynamic pricing menus and faced immediate backlash. Other than that, it was pretty quiet.
There does seem to be a growing weariness among consumers around brands and cause-related marketing. It could go the way of “I don’t need you to take a stand, thanks” but I could also see the weariness turning into irritation around companies paying lip service instead of taking a real stand. I’ve heard more grumbling this holiday season from what I used to think was the relatively innocuous practice of asking people to round up to donate to a cause. “How nice for the retailer to ask me to donate. What are they doing?” seems to sum up the grumbling. That doesn’t bode well for letting retailers off the hook.
Will consumers renew their trust in companies and brands or will anti-corporatism and anti-consumerism take hold?
The idea was that shrinkflation and GenAI combined would erode trust in brands. This is still not a full-on thing, though this trend looks to deepen in 2025. Consumers want fewer choices, they want trust, and they want value.
The problem for brands is that consumers may seek that from places other than brands. Say, influencers on TikTok (or wherever forlorn Americans flock to if it gets banned) rather than from the brands themselves.
Anti-corporatism is out there. Right now it’s laser-focused on health care. It doesn’t have to stop there, though.
Will consumers continue to spend or pull back?
I said at the beginning of 2024 that this was really THE question of 2024, and no way to know other than to see how it worked out in the end. Well, we’re at the end, and it worked out… OK. No great pullback, but no great release of pent-up demand either. In the great dichotomy of 2024, consumers continued to spend but also showed increasing signs of distress – like higher debt and higher delinquencies on that debt. Consumers continued to spend and also traded down hard. Consumers continued to spend and continued to say that the economy was in the dumps.
So this is definitely a question we’ll all still be asking in 2025.
What did we learn?
Not much was really decided in 2024. Uncertainty is the new normal. The economy and consumer spending have been driven by massive consumer contradictions between what they say and feel and what they do. And that is all likely to continue into 2025 – as much as I hate to lean on past trends as predictors of the future.
And I can’t say that without also pointing out that, at least in the US, we are headed for a year of chaos. Who knows what the new government will do? Many voters bet that Republicans would not actually do many things that they explicitly stated they would do – like deport something like 10-20 million people. Or slap tariffs on everything. Both of those would have immediate and outsize consequences for consumers and for retail, way more than any of the trends that we didn’t wrap up in 2024.
So strap in people, 2025 may be a wild ride.