Retail Proposition Index 2024

Entry price points will remain highly competitive over the next 12 months, with value-seeking behaviours entrenched in consumer memories and likely to persist. However, the importance of non-price factors is rebounding, with quality an important and growing consideration in how consumers assess value for money.

Price leadership alone is no longer enough to win in the long-term, and retailers must act to ensure they deliver value beyond headline price. Discounters remain highly popular, but few consumers (c.25%) report preference for them over other retailers and there is evidence of renewed focus on quality ranges by value players across categories (e.g. Aldi, Mango)

Fun has been lost from the retail experience, leaving retailers more exposed than ever to competition from leisure for consumer discretionary spending. Consumers continue to prioritise leisure spend over retail, and retailers lag digital leisure leaders (e.g. Airbnb, Just Eat) on Fun to Shop/Use ratings.

The new retail disruptors (Temu, Shein) should provide both inspiration and urgency in re-invigorating retail experiences, with their success anchored on both fun experience and low prices. This competitive threat is fundamentally different from the Amazon model (low price, breadth of range, easy to use) and will require a new response.

Example tactics for retailers include eclectic product ranges, gamification of the purchase journey and hyper-personalisation.

The youngest generations (Gen Z and Gen Alpha) now contribute a meaningful share of consumer spending (c. 25%), but this needs to be weighed carefully against an ageing overall population where Boomers and Gen X are the largest spenders (c50%).

Younger generations have increasingly polarised needs and priorities, which incumbent retailers are struggling to address. Gen Z ratings are materially lower, and few retailers are managing to resonate consistently across generations.

Retailers face an impending decision-point on whether they can credibly deliver ageless appeal, or whether they will need to pick a side of the generational divide. This will be crucial in developing future-fit propositions.

AI will be a fundamental enabler in driving the next phase of transformation in retail operating models, accelerating both efficiency/quality improvements and strengthening the customer value proposition. Adoption is already growing with both retailers and consumers, but retailers need to be choiceful on both where and when to act to ensure the right investments are prioritised.

Given the dual focus on both operational efficiency and consumer propositions, AI is a strategic topic which should be on the agenda for CEOs and boards, rather than siloed with CTOs or operational teams. Critically, propositional investments in AI should have a clear customer lens and be targeted on strengthening areas of underlying strength/differentiation. For example, AI-enabled pricing will have most relevance for retailers with a strong price proposition.

This year’s Retail Proposition Index has surveyed attitudes of >48,000 consumers to establish adoption levels of AI propositions, and identify key pain points in the retail journey where AI could bring tangible value to customers.