Outlook not so good?
In 2022, retailers and consumers alike navigated their way through a torrent of record inflation, the escalating cost-of-living crisis, supply chain disruption and an unpredictable macro-economic environment.
Against the odds, retailers rose to the challenge. After-all, what could be worse than being forced to close à la pandemic style? Although, the pandemic made retailers agile and resilient; there were a lot of experts writing off the high-street in 2020/21, but it endured.
Retailers realise the importance of agility, convenience and innovation to meet the ever-changing demands of the modern consumer. Coupled with new technologies, retailers have made adjustments to become an Omnichannel business, providing seamless experiences from digital to brick & mortar stores, prioritising personalisation through informed data insights, and exploring sustainable avenues in their operations.
This year we will see more retailers invest in technological solutions, sustainable initiatives and embrace Omnichannel in order to meet these demands. Here's our top retail predictions and trends to watch that are set to spearhead the future of retail growth in 2023.
AI, Automation & Conversational Commerce
Despite the eCommerce boom in 2020 and the subsequent growth of Omnichannel, there are still many retailers who are sitting on customer data, excess stock, and obsolete legacy architecture and internal processes.
In 2023, retailers must look at the evolution of new technology that's capable of forecasting consumer demand as a new dawn of retail gets underway.
Chatbots will become increasingly helpful to shoppers and efficient for retailers - becoming an organic extension of customer service.
Automation will revolutionise the customer experience and increase YOY revenue.
Investment in automation will surge as companies aim to achieve more with less.
Chatbots are becoming an essential part of the shopping experience for many consumers, especially within the customer service aspect.
Reports indicate a growing interest in ChatGPT & Conversational Commerce.
Year-on-year, we've seen automation and AI technology evolve amid a backdrop of recession and inflation, hence why many retailers have been reluctant to invest significant sums of money to adopt new processes.
AI has come on leaps and bounds, most notably Salesforce's Einstein AI, an intelligence with Salesforce's CRM that dissects vast amounts of data and utilises the information it collects against pre-established parameters to create a data model. Once the data has been assembled into a model, it proceeds to generate accurate recommendations and predictions and continuously updates data in real-time to determine the best course of action for retailers.
AI is driving efficiency across entire teams like Marketing, Sales and even Development. It's evolved far beyond automating simple, repetitive tasks, but is now capable of providing meticulous customer data insights and making complex decisions to give retailers an edge in the market.
Online retailers can implement AI to meet a plethora of business objectives, including making first-party and measurement data from across the ad-stack actionable in the purchasing process, and boosting eCommerce conversions. AI algorithms analyse quality user engagement data to locate patterns of 'successful' activity, that informs campaigns and influences key marketing decisions.
For example, AI can analyse ad impressions of a particular campaign against a set of key performance indicators before producing insights on when the best possible results can be achieved towards these objectives.
Media strategies can then be adapted and optimised in real time, providing retailers with the opportunity to achieve great scale and increased efficiencies.
The versatility of the technology also means that there’s no need to completely overhaul a business model to integrate it. Instead, these customisable AI algorithms can be seamlessly adopted without logistical disruption or required technological expertise, empowering existing tech stacks to deliver better outcomes for the business.
Steamline Shop-Floor Operations with RFID Technology
Over the last couple of decades, RFID (Radio-Frequency Identification) in retail has evidently received acclaim had a positive impact from retailers who implemented the tech in brick-and-mortar stores. With a proven record in optimising stock control and costs, it's also fast becoming a catalyst for digital instore innovation - one that will elevate the high-street into a hybrid-retail experience for consumers.
Physical retail staff can spend a significant amount of time performing inventory-related duties which is precious time spent away from assisting customers in-store which could potentially yield consumer dissatisfaction.
Real-time tracking RFID technology provides retailers with a comprehensive detail of their existing inventory with remarkable inventory accuracy despite scanning hundreds, even thousands, of items. Stock can be fully maintained and optimised in real-time, reducing the risk of low inventories, lost items, and ultimately the loss of sales.
An RFID solution grants retailers invaluable real-time insights regarding where exactly on the sales journey the item went AWOL, significantly mitigating the impact of shrinkage by adjusting inventory levels to effectively replace missing or out-of-stock items.
Chatbots will strike up Conversational Commerce
AI-driven positive experiences will become the preferred choice for customers this year and beyond as consumer demand for agile response and experiences from retailers only grows. Consumers abhor inept chatbots that are unable to process their issues correctly or being placed on hold before they even speak to a customer service agent.
As interactive AI becomes more widespread in the retail sector, consumers will be subjected to what’s being coined as 'Conversational Commerce'. Chatbots and smart speakers like Amazon's Alexa are the most common examples of Conversational Commerce in retail.
Retailers are using to help shoppers determine specific needs and preferences, and they’re also funnelling shoppers to specific products online. There are numerous market reports that prove there’s lots of interest in chatbots and the potential benefits of conversational commerce.
Within customer service, chatbots with conversational AI technology are being increasingly deployed to answer product FAQs and queries regarding orders, which can potentially yield a huge increase in automation rates.
Sustainability Regulations May Prove Difficult for Retailers & Consumers alike
Implementing sustainability measures can prove easier said than done for lots of businesses across multiple industries, but it's an inevitable force that they will have to embrace. Of course, with the cost-of-living crisis not relinquishing its grip on the nation anytime soon, there will be sustainability setbacks when it comes to integrating eco-friendly operations.
However, that doesn't mean sustainability regulators won't be changing their approach towards retailers. Regulators in the UK and overseas will press ahead with introducing increased legislation on the sustainability claims of businesses, and particularly across the retail sector.
Namrata Sandhu, CEO and Co-Founder of automated carbon software business Vaayu, explained that: “...investment in sustainability goals will not waver in 2023, even as retailers face operational pressures, such as soaring costs, global supply chain issues, inflation and a developing recession."
Retailers who prioritise and invest in their sustainability efforts now, will benefit in the long-run, operationally, financially and especially with consumers, who are increasingly seeking out brands who are sustainably and ethically sound.
Although, this is definitely something to keep an eye on; again, with the cost-of-living crisis, rising energy prices, and inflation wreaking havoc on society, shopping habits are changing dramatically with an overwhelming sense of unpredictability. The challenges of this macro-economic environment is putting sustainability at stake.
As a result of this, consumers are being pulled in different directions, literally torn between values - the value of products so they can make ends meet, and their values that strive for a more sustainable lifestyle that combats environmental issues.
Each crisis provides another challenge for retailers and consumers alike to prioritise - something that is definitely unsustainable for both parties.
Can Hybrid Retail incorporate Thrift Retail?
Retailers want to deliver a seamless experience across every channel, including online, in-store, mobile devices, social media, and the increasingly popular live-stream. The inception of this experience comes from the evolution of consumer demands following the pandemic.
The High-Street remained steadfast despite the events of 2020, and once it was reopened, consumers (surprisingly) flocked back to bathe in the social experience that can only be obtained between bricks & mortar. However, the consumer desire for convenience also remained, and stores that introduced methods to cope with the aforementioned challenges of the pandemic stuck with shopping methods like BOPIS (buy online, pay in store).
Hybrid-Retail was accelerated out of necessity; and now retailers are constantly innovating to discover new methods of providing digital experiences instore and trying their best to replicate physical experiences online, whilst remaining dedicated to consumer convenience within the retail experience - Omnichannel solves all that by delivering a consistent, singular experience across all channels and their touchpoints.
However, there is a niche in the market that mainstream retail hasn't exactly mastered, mainly due to the acceleration of sustainable retail and the effects of the cost-of-living crisis. It's another aspect of consumerism that Grocers started addressing in late 2022, but there's yet to be a market leader in mainstream retail that has integrated Thrift-Shopping into their omnichannel arsenal.
With the economy still recovering, this year will see repair, recycling, reuse, and thrifting grow. As we've discussed earlier, consumers will be forced to buy less items and invest more in understanding their product's life cycle. There are retailers that have started to address this area by adding pre-owned items to their product inventories, but not on the scale it perhaps should be.
In 2022, one of the UK's leading grocers and retailers M&S launched a trial of refillable own-brand cleaning and laundry products, as part of its pledge to reduce and remove plastic packaging, as well as offering customers more sustainable options - marketing the pledge with #FillYourOwn.
REI features pre-loved outdoor gear available for members, and lululemon has its very own Like New circular ecosystem. Denim-aficionados Levi has a long-standing collaboration with Thread-Up, and U.S retail/grocer Walmart has its own line of pre-owned items for sale. Yet, it still feels like an untapped market.
As the likes of Gen-Z's spending power grows, retailers who introduce sustainable measures such as thrift clothing options might unlock the next big sales channel. Pre-owned items, recycling, and reusing are becoming more mainstream and increasingly expected by consumers, so it's definitely something that Hybrid-Retail could widely incorporate into their omnichannel strategies.
Where AR(t) thou?
A casualty of soaring inflation and crashing economies, the jury is still out on whether augmented reality, along with its virtual relative, will become a mainstream technology in 2023.
However, with sustainable demands and new technologies (slowly) becoming cheaper and more readily available, it might just be the year where it takes off.
There are, let's say, 'more affluent' companies that are experimenting with AR tech to connect, educate, and engage with their consumers.
The following benefits of using AR processes for manufacturers and businesses can significantly help reduce their carbon footprint and compete against less eco-friendly competitors.
Meet consumer demand for sustainable processes
Practice responsible consumption and production (+ lower costs)
Reducing waste in early product design and redesign stages with a visualised workflow for easier troubleshooting
Promote and educate recycling practices
Support and augment brand transparency
Augmented Reality is an incredibly engaging technology that can support, promote and educate sustainable practices. It can evolve product packaging to connected packaging that can be reconfigured without redesigning or reprinting.
It can also educate consumers, improve brand transparency, increase customer loyalty, and promote the principal values that are paramount to a businesses' sustainable endeavours.
Companies that want to embrace sustainability should invest in augmented reality technology that ticks all their boxes. It has huge potential to be more engaging, informative and sustainable than your typically standard approaches.
Personalisation is the key to Customer Retention
It's ironically evident that customer behaviour is unpredictable in 2023. The impact of the cost-of-living crisis means retailers have to pull out all the stops this year to retain struggling customers and acquire new ones.
With a struggling customer base, cutting prices to attract more of them is easier said than done. There are many retailers are working with incredibly tight margins, and slashing prices may not be entirely viable because of the potential detrimental affect on long-term profitability and strategy.
However, despite rising costs, consumers still want meaningful experiences when they shop. They need to be inspired and engaged by retailers that understand and empathise.
We've seen Aldi, Lidl and ASDA leapfrog their biggest competitors to become the UK consumers' choice of grocer. The formers providing unrivalled value in a time of crisis, whereas ASDA provided £1 kids meals in its cafes in a commendable act of empathy for families looking to make-ends-meet towards the end of 2022.
Give your customers further incentives to visit your stores, be it physical or online experiences, even when they’re not necessarily thinking about spending money on your normal store items.
According to research conducted by tech company Dojo, 56% of consumers prioritise spending on experiences as opposed to material goods, while a further 71% said the current financial climate has changed the way they feel about customer experience.
Jon Knott, Head of Customer Insight at Dojo explains:
"This all shows us that the next battleground for businesses is to provide memorable experiences for their customers through a deeper knowledge of them - it’s what we call the Experience Economy."
“In fact, our data shows that one in three Brits are seeking out a memorable experience regularly, and they’re willing to pay 28 per cent more to get it."
“As we move into the new year, we expect more consumers likely to be looking for more deeply personalised experiences and service to ensure they’re getting value from the money they spend on the High Street.”
New technologies will become the driving force that fuels increased personalisation. We previously discussed tech that sifts through incredible amounts of consumer data and finds key customer insights are invaluable tools for consumers to integrate into their personalisation endeavours.
Consumers want tailored offers and promotions that are personalised around their shopping habits, and the technology to oblige them is available now.
This unpredictable scenario for retailers is likely to remain challenging across 2023, but the current predicament also presents an opportunity for retailers that move decisively to swiftly develop solutions that successfully engage with consumers and react to the economic conditions around them.
Amid the uncertainties and economic challenges the world faces in 2023, eCommerce retail will continue to grow exponentially. Consumers have more methods and options to shop than ever before. Retailers must adapt and devise new strategies in order engage with the modern consumer whilst retaining the loyalty of their existing ones.
Some retailers are already leveraging social media and technological solutions in order to increase new customer engagement. We've discussed potential trends that we expect to filter through the mainstream retail sector in the coming year, but ultimately, it will be agile brands that gain consumer trust by aligning with their values and provide authentic retail experiences that will be well positioned for rapid growth.