The retail industry is gearing up for a new year amidst shifting economic landscapes and evolving consumer behaviours.
With the Mastercard Economics Institute predicting a return to a more 'normal' economic climate in 2024, retailers worldwide are preparing for changes in consumer spending habits and preferences.
Global economic outlook
Inflation is expected to ease across most economies globally, potentially boosting consumer purchasing power as wage inflation outpaces it.
As economies continue to rebalance, both consumers and businesses are expected to prioritise their spending and investments, reflecting a cautious approach in the face of economic uncertainty.
Regional expectations
North America: In the US, easing inflation may bolster consumer spending, particularly in 'real' terms, although nominal spending growth is anticipated to slow. Meanwhile, in Canada, continued labour market growth is expected to support spending, although higher debt burdens could limit discretionary spending.
Central and South America: Despite a slower pace of spending compared to 2023, solid labour markets in Central and South America are expected to drive consumer spending in 2024. Factors such as declining interest rates and debt consolidation efforts may free up disposable income for consumers, potentially benefiting the retail industry in the region.
Europe: Wage growth outpacing inflation is anticipated to strengthen purchasing power in Europe, although differences in spending habits between affluent and less affluent consumers may persist. European retailers are focusing on adapting strategies to cater to diverse consumer segments amidst changing economic conditions.
Middle East and North Africa: Consumer spending varied across oil-producing and oil-importing countries in 2023, with retail sectors in Gulf countries experiencing growth supported by fiscal policies. Retail spending in oil-importing countries is expected to pick up in the latter half of 2024 following policy adjustments and job generation efforts.
Asia-Pacific: Resilient consumer spending is expected to continue in Asia-Pacific in 2024, driven by tight labour markets and inflation-adjusted wage increases. As consumers recalibrate their budgets, retailers are poised to adapt to shifting spending priorities across the region.
Understanding and reaching consumers
Retailers are focusing on connecting with the 'empowered consumer' in 2024, with personalisation tactics evolving to incorporate deeper empathy.
After three years of fulfilling pent-up demand for experiences, consumers are expected to continue evolving their shopping habits, from seeking good deals to making more conscious purchasing decisions.
As retailers navigate economic shifts and changing consumer preferences, understanding and connecting with shoppers remain paramount.
Personalisation strategies are expanding, with empathy playing a significant role in marketing approaches as companies seek to resonate with consumers in an ever-evolving retail landscape.
