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Retail Trends 2023

Facing headwinds, finding tailwinds

Trends
Priorities
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Although we are facing economic headwinds, multiple tailwinds including Artificial Intelligence (AI), retail media, the transition to renewable energy and the return of demand for physical stores are laying new foundations from which retailers can grow their businesses in the year ahead.

Heading into the fourth year of a decade that started with excitement and optimism about the power of technology to change the way we shop, it feels like retailers are finally ready to get out of first gear. The Pandemic, the war in Ukraine, political instability and a declining consumer economy have all taken their toll, but significant lessons have been learned about how to survive and ultimately thrive under rising cost pressures, supply chain constraints and changing consumer behaviour. For some retailers, 2023 will be an opportunity to reset their ambitions and start on a path to recovery, involving some difficult choices along the way. For others, the lessons learned over the past three years, combined with major advances in technology and legislation that favours the retailer, mean there is an opportunity to finally unleash the full potential of their business, achieving profitable, sustainable growth.

Regardless of the scale of their ambition this year, the decisions that will need to be made by retailers will require strong and effective, but also thoughtful and empathetic leadership. Leadership is a theme that runs throughout all our trends for 2023, whether it is making strategic investments or decisions on cutting costs to unlock value, ensuring your business stays focussed on the customer experience in the face of extreme challenges, pushing your net zero agenda or transitioning to a skills-based organisation. But leadership is not just demonstrated in the boardroom. To be successful, retailers will need employees across their organisations to step up and demonstrate leadership traits in the year ahead.

Here are four major trends for retailers to look out for throughout the rest of the year:

Unlocking Value

The reality of ongoing cost pressures means that retailers are having to make difficult decisions about prioritising capital allocation. Therefore, we expect to see a renewed focus on performance improvement in the year ahead. Specifically, we predict that retailers will focus on identifying, improving, and creating efficiencies across all areas of their business, whilst also looking to maximise the value of their available assets. This approach will allow retailers to unlock the true value of their business, creating an environment that allows for profitable sustainable growth.

Experience Innovation

In the year ahead, we will continue to see innovative technology and business models serve changing consumer behaviour across every aspect of the customer journey. Retailers will differentiate themselves in a crowded, competitive market by engaging directly with consumers, encouraging the growth of communities, and actively encouraging interaction with their brands. Elsewhere, the ability to communicate and serve consumers where they spend most of their time means that we will see more retailers focus on social commerce and gaming as a growth opportunity. Likewise, the demand from consumers for physical experiences will force retailers to offer immersive, technology filled stores as standard.

Planet & Society

The success of the retail industry in the year ahead may come to be defined by how retailers manage to navigate some of the most serious and complex issues we face. Whilst rules and regulations around everything from emissions to the ingredients in our food mean that retailers have a legal responsibility to act on these issues, there is actually a strategic advantage to be had, with major growth opportunities available in these spaces. We predict that 2023 will be the year when retailers adopt business practices that shift the dial on their net zero commitments, finally making their (sometimes) lofty targets seem achievable.

People & Leadership

In a time of significant change and economic uncertainty, the best organisations maintain a laser focus on their people and their wellbeing. At its core, retail is a people business, employing millions of people across the globe. At the sharp end of retail, if workers don’t feel fulfilled or looked after, customer service suffers. But the demands from employees are changing and retailers will have to innovate their approach to recruitment and retention, considering what really matters to a new generation of retail employees. At the same time, strong, empathetic and purposeful leadership will be needed to navigate new ways of working, challenging decisions on cost and delivering on net zero ambitions.

Artificial Intelligence – the most disruptive trend for 2023?

Throughout our 2023 trends, it is clear that artificial intelligence has the potential to cause major disruption in the retail industry this year. Whether it is increasing productivity, reducing the time to launch new products, providing age verification at self-checkouts and click and collect sites, disrupting the creative process, or defining the skills required for future retail workers, AI will be something that retailers have to get to grips with sooner rather than later.

So who better to ask about the potential for AI than AI itself? We asked ChatGPT “how will AI impact retail?” and were astonished by the immediacy, and accuracy of its answer:

AI is likely to have a significant impact on the retail industry in several ways.

1. Personalisation: AI can be used to personalise the shopping experience for individual customers. For example, it can be used to recommend products to customers based on their browsing and purchase history, as well as their social media activity.

2. Predictive Analytics: AI can be used to analyse data from various sources (such as customer data, sales data, and social media data) to make predictions about customer behaviour and trends in the market. This can help retailers to make more informed decisions about what products to stock, how to price them, and how to market them.

3. Inventory Management: AI can be used to optimise the management of inventory. For example, it can be used to predict demand for products, track inventory levels in real-time, and automate reordering processes.

4. Automation of repetitive tasks: AI can help in automating repetitive, mundane tasks like price checking, stock checking and much more.

5. Chatbots: AI can be used to create chatbots that can answer customer questions, provide recommendations, and even complete transactions without the need for human assistance.

6. Image recognition: AI can be used for automated image recognition for products in online retail, which allows for easier product search and category browsing.