The lingering effects of the post-pandemic era have created a crunch in consumer budgets, intensifying competition among brands vying for a share of the constrained spending. Geopolitical uncertainties, particularly in Ukraine and the Middle East, further contribute to the complexities impacting consumer-facing industries such as retail, consumer products, restaurants and more. The year 2024 is expected to continue this trend, with varying impacts on each sector, according to new research from AlixPartners.
“Our latest consumer research shows widespread belt-tightening across the board, with only grocery maintaining spend levels but even here, volumes still drop sharply because of inflation. Only those retailers at the very top of their game will retain or grow share of wallet and I fear we are in for another round of restructuring and consolidation in early 2024,” says Matt Clark, partner, managing director and EMEA retail lead at AlixPartners.
“The message is clear for the consumer goods sector; consumers’ behaviour is continuing to shift into 2024 and ability to pass inflationary increase prices without significant volume loss is over. As retailers' position to be the champion of consumer value - the CPG-retailer dynamic is shifting. 2024 will be a challenging year for consumer goods companies, only the most proactive management will thrive in this environment,” adds Andrew Searle, partner, managing director and EMEA consumer products lead at AlixPartners.
Key takeaways:
- The holiday shopping season faces a heavy price pinch, with consumers adjusting spend due to elevated inflation. Notable trends include a rise in trading down to more affordable brands, particularly in the retail sector. Consumers are expected to focus on value-right products that provide strong value-for-money.
- Financial difficulties will lead EMEA consumers to shop less frequently and spend more cautiously across various non-essential retail and leisure categories in 2024. An efficient product range and offering is imperative to capture spend in retail, while quality remains critical for leisure operators. The data also highlights age as a strong indicator of retail spend reduction, with younger consumers less willing to let economic conditions impact their lifestyle.
- Omnichannel solutions are critical as consumers shift spend across channels and categories to manage budgetary pressures.
- Consumers now expect a personalized and frictionless experience at every touchpoint in the omnichannel shopping journey. Personal interaction remains crucial, with nearly two-thirds of EMEA consumers preferring personal contact with in-store assistants. Efforts to augment consumer loyalty must extend beyond pricing to a thoughtful, tailored user experience.
- Generative AI has become crucial in improving the online buying experience, particularly in sectors where consumers prefer to test products in person. The adoption of AI tools for research is catching on fastest in the Middle East. Consumers across regions show enthusiasm for modern digital offerings such as virtual fitting rooms via AR and unmanned stores.
