Consumers opting for deals over store loyalty amid inflation

Inflation has left its mark.

Three-in-four consumers still feel concerned about rising prices, even as inflation moderates, according to Deloitte’s 2024 U.S. Retail Industry Outlook. Consumers consider trade-offs, try out the competition and hunt for the best deals to maximize their budgets. 

The report found that one-half of retail executives expect consumers to value price over loyalty in 2024, and 64% of the executives also expect inflation-weary consumers to purchase fewer goods.

As to who wins the incremental dollar in a slower growth, inflation-bit consumer environment, the report cites data (source: Affinity Solutions) that suggests discount retailers are in the lead, with mass merchants and club stores also edging out specialty formats. Consumer spending at discount stores was up 26% over-year-over in 2023.  

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Deloitte’s economic forecast anticipates continued growth in consumer spending at a rate slightly below GDP growth due to falling inflation, low unemployment and increasing productivity growth. While the aftermath of the pandemic led to a shift in consumer spending patterns, the forecast suggests a slower growth trajectory for durables spending relative to consumption and income over the next five years.

Other key insights from the Deloitte report are below:

• •Leaning into loyalty programs Nearly two-thirds of consumers belong to between one and five loyalty programs. But most of these consumers use half or less of their membership, creating a challenge for retailers to develop engaging programs that convert these members into regular, profitable users. Retailers should look towards rekindling profitable loyalty through personalization, co-branding and data monetization.
• •Creating experiences in-store Most customers (three-in-four) say they are more loyal to stores that show consistent customer service and experiences. 

As retailers are challenged to do more with less, they cite four opportunities for growth: strengthening loyalty programs (54%), reinforcing digital commerce offerings (44%), enhancing in-store customer experience (36%), and boosting omnichannel experience (32%). Enhancing the in-store experience was a top-cited growth opportunity for driving growth in 2024.

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“Some retailers are planning expansive store remodels that can immediately create more pleasant environments and sticky behavior from consumers,” the report stated, adding that Target recently noted that sales increase 2% to 4% on average during the year once stores are renovated. “But we also see an opportunity in innovative tech that uses data to create efficiencies and consistent experiences, potentially building profitable loyalty.”

• •AI gets personal. As consumers hunt for deals and seek out bespoke experiences, half of retail executives are prioritizing AI-driven personalized product recommendations in 2024. But only five in 10 retail executives are confident in their company’s ability to use AI effectively. While trust in a brand drops 144% for customers who know a brand is using AI, building AI with trust in mind can help quadruple market value.

This story originally appeared on Chain Store Age.