While no industry is recession-proof, some industries like consumer and retail, deliver high performance even in challenging economic conditions. As we enter an uncertain 2023 in the face of economic volatility, inflation, and changing consumer habits, the consumer and retail industry faces tremendous pressure to drive growth. We take a closer look at the key trends that will dominate this industry in the upcoming year and factors that will play a major role in achieving business success.
Key trends dominating the consumer and retail industry in 2023
Weakened profits due to rising inflation
As a result of inflation, global retail sales will rise by 5% in US dollars in 2023, although retailers’ profits will be weakened due to lower sales volumes and surging costs. Retailers’ profits will be squeezed in 2023 due to global inflation of 6.4% and flattened demand. In addition to increasing raw material and logistics costs, they will also have to deal with rising labor and energy costs. Many countries, particularly in Europe, have seen retail wages rise faster than overall private-sector wages, in addition to rising wholesale electricity rates.
Omnichannel shopping to dominate FMCG sales
According to Neilsen IQ, 86% of shoppers purchase goods both in physical stores and online, while 14% shop exclusively in physical stores. Less than 1% of consumers shop exclusively online. Far from being a passing trend, omnichannel is a permanent – and substantial – fixture of consumer behavior. Globally, 30% of consumers indicated that they now have a completely different set of priorities that impact their purchase behavior, and 59% are re-evaluating their priorities. In the U.S., 81% of consumers are re-evaluating their priorities or already have different priorities.
Social commerce is here to stay
Social commerce is forecasted to reach $30.73 billion in sales in 2023, accounting for 20% of global retail e-commerce sales. 75% of retailers already sell on social media, with social storefronts and shoppable posts. Furthermore, influencer marketing has become a strategic targeting of the right online audiences, and positive advertising through rapid returns. The effectiveness of UGC videos is 22% higher than that of brand videos. Starbucks, Adidas, and Dunkin’ Donuts use it extensively to market to online audiences.
Personalized experiences will go a long way in improving conversion rates
60% of shoppers say they are more likely to be repeat customers when offered personalized shopping experiences. Retailers understand the need for such experiences to maintain a competitive edge in the highly saturated retail space. In 2022, 74% of e-commerce companies had a website personalization program, investing in curating highly personalized experiences across critical touch points. Retail trends show that 89% of companies that rate their experience management strategy as better than average report better revenue growth than competitors. The recommendation engine market size is projected to hit $12 billion by 2025.
Reviews and ratings will influence more purchases than discounts
In a LinkedIn poll carried out by Intelligence Node, 41% of respondents said that they found consumer reviews and ratings the most important factor while making a purchase online. In comparison, low prices were deemed most important by only 20% of respondents. The modern shopper needs features such as zoom, 360 views, AR try-on capabilities, detailed descriptions, and robust review sections. According to research, 3D views of products generate 50% more engagement than static images. another study found that 80% of Gen Z customers changed their minds after reading negative reviews.
The circular economy will gain momentum
A pandemic-induced change in buying habits has led to 52% of consumers valuing brands that demonstrate sustainability. A linear economy in retail, which transforms raw materials into products and discards them once they have been used, leads to a lot of wastage and carbon emissions. In fashion retail, 65% of shoppers use resale or ‘recommerce’ services. In a given year, 16-18% of Americans shop at thrift stores, according to the National Association of Resale and Thrift Shops. The hashtag “#furnitureflip” has generated 4.6 billion views in the furnishing segment, a 23% increase from 2021. About 30% of major retailers offer resale services, and DIY brands grew 14% year-over-year.
The metaverse to shape the future of retail marketing
Since the launch of the metaverse in 2022, retailers have invested in virtual real estate, experimented with new marketing strategies, and created new areas for engaging with young, tech-savvy Gen Z consumers. Already, 74% of adults in the USA are willing to spend up to $1000 on VR gear to join the metaverse. Similarly, global spending on AR/VR is set to rise to $72.8 billion in 2024.
Today, however, 51% of all metaverse users are 13 years old if not younger, indicating a unique window of opportunity to begin identifying and shaping future audiences for brands. The metaverse market is predicted to hit over $800 billion in 2024, growing at a compound annual growth rate (CAGR) of more than 13%. And with 400 million monthly active users in 2022, it has already been predicted that by 2026, 25% of people will spend an hour or more on the metaverse every day.
More consumers embrace Direct-to-Consumer (DTC) brands
DTC channels offer better quality products, according to 23% of consumers. In a DTC model, the brand owns the entire relationship with the consumer, including sales, distribution, and marketing. This gives brands immense control over the customer experience and the ability to increase brand value. 61% of shoppers claim DTC companies offer the best personalized and engaging digital experiences compared to marketplaces and third-party channels.
Supply chain disruptions will force companies to rethink their strategies
COVID lockdowns, port congestion, natural disasters, and more have disrupted supply chains for the better part of two years now, with brands suffering the consequences. This has prompted many companies to reconsider their supply chain strategy, looking for opportunities to increase resilience, such as bringing manufacturing operations closer to home and diversifying their sourcing networks, as well as leveraging the IoT to monitor container shipments and chartering their own cargo vessels.
‘Subscription-economy’ to gain ground
Direct-to-consumer subscription services are expected to grow to $1.5 trillion by 2025 as work-from-home becomes more common.
DTC subscription-based models are gaining popularity for a reason. With direct delivery services, consumers can enjoy convenience, while brands can:
- Generate predictable, recurring revenue
- Collect first-party data
- Increase engagement
- Offer curated product selections
- Strengthen consumer relationships
- Engage in continuous product innovation and service improvement
Demand for private-label brands will continue to grow
Due to the increasing demand from customers, the number of private-label brands has increased substantially in recent years. Private-label products used to be seen as lower-quality or cheaper alternatives, but that is no longer the case. Today, private-label brands can be on-trend, affordable, and competitive without the marketing costs that are normally associated with branded counterparts.
A global survey finds that while 45% of respondents believed that price was the main reason for switching to private labels, 58% now believe they offer similar or even better quality than national brands.
Retail will become increasingly data- and AI-driven
Today’s customers are spoiled for choice. This has heightened their expectations from retailers and offering a good product alone is no longer enough to convert or retain today’s evolved shoppers. From seamless checkouts, price matching, and highly engaging content to timely delivery and returns, and personalized experiences, customers expect seamless, hassle-free, and customized experiences across every channel.
Providing these elevated experiences requires a deep understanding of consumer behavior. A continued commitment to leveraging data and AI technology will be crucial in meeting the demands and expectations of evolving customers. Retailers need to monitor customer data, analyze market and shopper trends, optimize prices based on competitor price movements, rank high on digital shelves, streamline delivery and fulfillment, and manage a host of other factors to reel in customers and retain them – and this is where AI and automation will be paramount for success.
How consumer and retail companies can better prepare themselves for 2023
Implement a competitive pricing strategy
Price is one of the primary factors a shopper considers before making the purchase decision. You don’t want to lose out on your hyper-aware shoppers. Instead, you can make intelligent pricing decisions using AI-driven pricing that give you real-time feedback on market movements and competitor prices so you can price your product competitively without compromising on your margins.
Invest in robust supply chain management
Studies show that companies that offer free shipping have a 20% higher conversion rate than those that do not. In fact, 78% of Amazon Prime members say they chose to sign up specifically to avail of free shipping. Not surprisingly, free shipping is a top priority for shoppers. Plugging the gaps in the supply chain will be crucial in meeting these demands, as well as staying better prepared for future disruptions.
Revisit your MAP monitoring policy
MAP monitoring is becoming more and more necessary as counterfeiting products are spreading everywhere and gray-market goods are being sold unchecked. There is no way to know who is selling your products and how. Implementing a MAP monitoring solution can help brands keep a check on unauthorized sales. With this solution, they can protect their revenues and brand value by identifying and penalizing MAP violators. An AI-driven MAP monitoring solution that can monitor your products is crucial.
Offer a seamless omnichannel experience
With an omnichannel approach, retailers can utilize their in-store real estate to fulfill online orders and provide a unified, seamless customer experience across all touchpoints. From BOPIS and curb-side pick-up to ordering online and offering free delivery, an omnichannel approach can help broaden your customer base and cater to them wherever they are.
Create winning in-store and online assortments
Today’s customers have access to multiple channels, websites, search engines, and a host of data to choose from. To convert this informed shopper takes more than just low prices or discounts. Companies need diverse product assortments for consumers to choose from and need to keep evaluating their merchandise based on consumer preferences, competitor offerings, and shopping trends. Instead of keeping the same assortments online as well as in-store, studying consumer demographics and spending patterns will enable you to curate product assortments that meet consumer demand.
While 2023 will bring its own share of highs and lows, some aspects will remain unhindered. Shopper behaviors will continue to evolve. Boundaries between physical and digital will keep blurring. Smartphones will stay the shopper’s best friend and go-to assistant for a lot of purchases. Among it all, brands and retailers that are equipped to capture and harness more pronounced trends across segments prudently will win.
To know how Netscribes can help you keep pace with the latest consumer trends to seize relevant e-commerce opportunities to grow your revenue and boost sales, contact us.