Consumer spending accounts for nearly 70% of U.S. economic activity. In the first half of the year, shoppers buoyed the economy — or at least kept it from falling deeply into recession. But they’re starting to feel the pinch from inflation and rising interest rates.
The supply chain was more stable in 2022, but retailers still had trouble keeping shelves stocked. This time, the ongoing labor shortage was to blame. Like every other industry, retailers had trouble keeping their rosters full.
Digital shopping channels were strong in 2022, even though physical stores were fully reopened. From here on out, the consumer journey is irrevocably omnichannel for everything from fast food and groceries to appliances and automobiles. That means retailers have to find ways to profit from their brick-and-mortar storefronts and the last miles of online delivery. Real estate strategies will continue to be right-sized to match the channel shift.
Consumers also have different priorities and shopping behaviors than they did before the COVID-19 pandemic. For one, they’re pickier about where they spend their dollars. Retail customers are looking for higher quality foods and goods, more ESG-friendly options and bigger values. Unfortunately, high-quality, sustainable and inexpensive don’t usually go hand-in-hand, so retailers are navigating a number of competing purchasing priorities.
Retail trends 2023
Heading into 2023, consumer spending will be softer, but retailers’ prospects are still good. Here are six strategic priorities that can help retailers drive revenue next year:
1. Create exceptional customer experiences
Consumers aren’t out of cash yet — they’re just very particular about who they give it to. Retailers can win business by creating hassle-free and fulfilling shopping experiences and delivering excellent customer service.
That’s true online, in store and in-app. Customers want the flexibility to switch between channels, and they expect the transition to be seamless.
Take the time to understand customers (and specific segments) really well. Be transparent so consumers can identify the attributes that matter to them, from local products to sustainable materials to deep discounts.
Loyalty or rewards programs can be an effective way to learn about consumers and deliver the value they’re seeking. Retailers that deeply understand their customers and deliver exceptional experiences can steer consumer spending their way.
2. Invest in your employees
You need great employees to create great shopping experiences.
Of course, that’s easier said than done. Unemployment is really low, which makes it difficult for retailers (and every other industry) to find enough workers. And retailers don’t want employees who are just “good enough.” They need people who care and want to go the extra mile for customers.
Ask employees for feedback on how to staff shifts without burning out your hardest workers. Look for ways to use technology to make the employee experience better, more productive and more efficient. And invest in your workforce by giving them the development opportunities, retention benefits and recognition that they value.
3. Expand your technical capabilities
Even a top-notch team can’t do it all. Retailers need to invest in tools and systems to make work more efficient and eliminate waste.
Businesses that invest in technology have more certain futures. They can pivot to new models faster (like direct to consumer) and minimize risk. They also have a better understanding of how changes in the macro environment will trickle down to their sales floors.
Big retailers have benefited from industry 4.0 technologies for a few years now. It’s time for small and medium enterprises to benefit from their lessons learned.
4. Tighten up data security
Apple, Samsung, North Face, Door Dash (and dozens of other companies) reported data breaches or cyberattacks this year. The Federal Trade Commission amended its Safeguards Rule to try to keep pace with current risks. Businesses are expected to comply with the new standards starting December 6.
Regulatory risk is hardly the impetus for tightening up security, though. Cybercriminals can hold operations hostage, steal customer data and ruin reputations. Plus, they cause significant financial damage.
Companies of every size — up and down the supply chain — are vulnerable to cyberattack. The risk cannot be understated or ignored. Retailers need a defensive data strategy, or even a virtual chief information security officer, to maintain business continuity and consumer confidence.
Read more: 30 cybersecurity tips for businesses
5. Protect the supply chain
Supply chain woes are much improved, but some issues have not been fully resolved. Parts of the sector, like agriculture, are especially vulnerable to geopolitical uncertainties and higher energy costs.
Retailers can use technology to protect their supply chains. Use digital twins or analytics to forecast different supply chain models. Investigate and plan for multiple scenarios so you know how to respond if prices, rates or availability changes. Develop a deeper bench of potential suppliers and scrutinize their financial health so you’re buffered from regional or company-specific delays.
6. Create your own momentum
Uncertainty is still the standard — but it’s not a reason to stand still.
There’s never been a better time to abandon “the way it’s always been done.” The electric vehicle market is challenging the traditional dealership model now, selling directly to consumers. There are many opportunities for retailers to disrupt the market and create new value streams.
In this environment, “playing it safe” and being complacent is too risky.
Wipfli can help
Looking to jump on some of 2023’s top trends for retail? Wipfli can help. From digital transformation to supply chain planning to talent optimization, we help retailers, manufacturers and distributors navigate an ever-changing business landscape. Learn more about how we can help.
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