As we finish out 2022, retailers and consumer brands are bracing for strong, macro-level headwinds, including inflation, labor shortages, and supply chain. Retailers are wondering where the unturned stones of profitability may lie. In 2023, we see retailers and brands taking advantage of new opportunities for incremental revenue, transforming their business models to capture additional market share, and implementing cost-saving innovations for operational survival.
Those that find success in these areas will have analyzed where the biggest risks and rewards are. They will also have executed strategies that translate to healthier results. The elite among those will leverage technology that enables their company to quickly reconfigure business structures and capabilities to meet future customer and employee needs with adaptivity, creativity, and resilience. We call this future fit, and our data show that future-fit companies outperform their peers by 2.8 times.
What trends will differentiate future-fit retailers and brands in 2023?
- Automation will be the savior for continued retail labor shortages. Ripple effects from the Great Resignation will force retailers and brands to invest more heavily — and more strategically — in automation in 2023. Investments will automate functions required to run the business in corporate areas (e.g., marketing, HR, analytics) and in the store. A critical component of these investments will be technologies that utilize AI. For example, retailers will tap computer vision and natural-language processing, which emulate sight and listening, respectively, to make mundane but critical and traditionally time-consuming operations such as receiving, customer service, and task management far more efficient.
- Retail’s “e-pocalypse” will bankrupt US online-only brands that lack a physical strategy. Midmarket to enterprise-level pure-play retailers will need to choose at least one of the following options: open physical stores, expand wholesale partnerships, create shop-in-shop locations, or close their (virtual) doors. Even online-only retailers that recently (finally) found firmer financial footing will realize they face too many challenges and are missing too many opportunities to achieve sustainable profitability. As consumers revert to pre-pandemic behaviors, the percentage of online retail sales as a part of total retail sales has settled from 2020 levels. In 2023, we forecast that three-quarters of total US retail sales will still occur offline. And US consumers will continue to ramp up using cross-channel shopping such as buying online for in-store pickup.
- Retail media strategies will yield far more conversation for most than actual revenue. The bottom-line impact of retail media dollars will be notable for only a few massive retailers — and remain negligible for most others. Many retailers will stumble simply because they do not have — and will be slow to invest in — the measurement and automation capabilities that advertisers require to give them their significant budgets in the first place. Nevertheless, winning potential revenue from onsite/in-store advertising will be too attractive for retailers and brands to ignore as Forrester predicts revenue from retail media initiatives in the US will double from 2021 to 2024.
Eager to learn more about what 2023 holds for the retail industry and how you can get a jump on the competition? Read our full set of 2023 retail predictions here.
If you aren’t yet a client, you can download our complimentary Predictions guide, which covers our top predictions for 2023. Get additional complimentary resources, including webinars, on the Predictions 2023 hub.