Twice a year, Upside checks in with retailers to gauge the health of their business and track the biggest challenges they face. In the beginning of 2024, retailers reported that costs were top-of-mind, even as inflation had begun to cool. Though most retailers felt positively about their businesses, there was a clear sense of unease surrounding economic uncertainties. Today, we see those concerns beginning to subside as cautious optimism takes hold.

In 2023 and early 2024, retailers were simply focused on surviving. The key question now is less about how to stay afloat and more about how to make smart investments that lead to sustainable (profitable) growth.

Read on for the full results from our Q3 2024 retailer pulse survey.

For most, business is improving

Our survey of 1,806 retailers across 10 retail categories asked: How would you rate the current health of your business? The answers show that the majority of respondents are feeling good about the way things are heading.

61% of respondents say their current outlook was excellent, marking a 14-point increase over Q1 2024. In all, 96% of respondents feel positively about the current state of their business. This figure is up by 8 percentage points over Q1 2024, when 92% felt positively about current business health. 

Looking by industry, the retailers most likely to report excellent current business health are:

• Discount stores (82%)
• Health and beauty stores (76%)
• Pharmacy and drug stores (65%)

Meanwhile, only 4% of respondents say their current business outlook is fair, and 0% say their outlook is poor. That’s worth emphasizing once more — no respondents said their outlook was poor, and overall, the majority of retailers in our survey felt that their current outlook was excellent.

Of all retail categories, restaurants are least optimistic about the current state of business, with only 39% of respondents claiming excellent current health. With diners pushing back against menu price increases, restaurants have been focused on providing value with blanket deals or combo meals, but by focusing solely on low prices, they risk losing profit. This relatively negative sentiment tracks with the headlines we’re seeing — a few months after Red Lobster declared bankruptcy, T.G.I. Friday’s did the same. But even so, only 5% of restaurant respondents feel business was fair or poor, which is in line with overall averages. 

Looking forward, most retailers feel similarly that the next few months will bode well for their businesses. 

When asked how they expect their business to change through Q1 2025, 54% of respondents say they think their financial health will get much better, and 35% expect it to get a little better. That’s just shy of 90% of retailers who think the outlook for this business is improving, and improvement over previous surveys.

Pivoting from maintenance to growth 

What are the biggest challenges facing your business right now? For the third survey in a row, inflation is the most popular response… but among fewer and fewer retailers.

That the number of retailers citing inflation as a challenge is decreasing dramatically. Whereas 48% of all respondents said inflation was a challenge last year, only 32% of respondents feel challenged by it today. That’s a 16-point decrease year-over-year. 

Digital strategy is trending up as a concern, moving up the list of challenges from fifth-most popular to second since Q1 2024. Its steady year-over-year gains in our survey show us that more and more retailers are prioritizing this area. 

Our research into the uncommitted customer shows us this is a smart investment area. The majority of today’s customers, especially members of Gen Z, are digitally-savvy and on-the-go, with all the information they need to make buying decisions right at their fingertips. Reaching them online, in those moments that they choose where to buy, is critical for growing foot traffic. 

Digital strategy is followed by multiple items related to cost — supply chain costs, labor costs, and hiring. Though retailers are still thinking about their costs, each of these concerns are challenging retailers as they were earlier in the year. Each response has fallen between 3 and 12 percentage points since our Q1 2024 survey.

It’s worth noting a few responses that are lower in popularity but seeing marked increases in this survey — expanding footprint and the cost of borrowing. In particular, the number of retailers focused on opening new stores has risen by 7 points, from 19% a year ago to 26% today. These challenges becoming more common indicate to us that retailers are ready to make moves that grow their businesses after years in survival mode.

What comes next for retailers?

It’s becoming clear that retailers are ready for the next step in unlocking business growth — but how can they know what that next step is? Given rapid changes in consumer behavior, it can be difficult to choose the areas where further investment would be most effective.

Upside’s inaugural Consumer Spend Report 2024 dives deeper into these behavior changes and highlights the most important trends in spending today. With this information, retailers can better plan their investments for 2025 and beyond, securing sustainable growth for their business. Click above to get your copy of the full report.