In TheMathCompany’s 2022 Retail Trends Report, we took into account the changing playing field of retail, the repercussions of the COVID-19 pandemic, and identified three major industry trends. The past couple of years had seen a notable shift in consumer shopping habits, and retailers had been rushing to adapt to these changes. Contactless Shopping, Experience Retail, and Fulfillment Execution Systems, which we projected to greatly impact the industry, played a huge role in how businesses operated in 2022. These trends will continue to have lasting impact in the coming few years, but 2023 brings with it a host of new innovations to implement, problems to overcome, and situations to adapt to. We asked the Retail experts at MathCo what they saw as the upcoming and continuing retail trends in 2023, and how businesses can prepare for the year. Read on below to find out what they had to say.
There are three big drivers that could shape the trends in retail in 2023: residual effects of the pandemic, volatile economic environment (war, global inflation, and recession), and incredible technology advancement in the last few years. Below are some trends that the retail industry should look out for.
The pandemic saw increased levels of consumption than before—higher demands that could not be met. It was not uncommon to see empty aisles in stores for a long time. Retailers, rightly so, reacted by preparing inventory, and stocking up. It took time for retailers to react, and today, demand has already slowed from pandemic levels, resulting in stacked up inventories. Naturally, there is a need to get rid of this inventory and so we will see more markdowns.
The global economic situation, and war/conflict has dramatically shifted manufacturing and raw material geography, and changing gas prices have affected shipping. Shopping aisles are looking different from what they used to be as the availability of many products remains uncertain. For some time, retail shopping will be availability-driven (which may be difficult for markets like the US—which is used to multiple options). Essentials will take priority. Online shopping is gaining a new filter: "Ready to ship".
Consumers were always e-commerce-friendly, but the pandemic made us e-commerce-dependant for a prolonged time, leading to changing shopping behaviors. Catering to this significantly higher e-commerce mix has become a whole other business model. Retailers need to continue to reinvent themselves and invest across the e-commerce value chain—from online shopping experience to optimizing last mile delivery.
Most companies had to rush towards a digital transformation and saw some success, but it was far from a thorough transformation. Some examples: the process of buying is built into the app, but returns are not; the app does not offer a great shopping experience yet; the retailer has started shipping online but has not optimized for shipping costs and shipping times are over seven days; and the IT systems of the physical store and online store look like different companies. All these incomplete pieces need to be picked up and revamped.
The levels of inflation today are the likes of which we have never seen since the 1980s. Pricing models are getting disrupted and past data is no longer an effective indicator of future behavior. Retailers must cautiously price products differently (and higher). Gross margins will go through a bit of turmoil before settling down and stabilizing.