2023:Numerous Challenges, Innovative Opportunities
Between inflation, recruitment challenges, and continued supply chain delays, there's no doubt that the retail industry is in a state of flux. Although retailers will enter 2023 facing numerous challenges, they also will encounter new and innovative opportunities to optimize their operations and get to know and grow with their customers. In order to thrive in this ever-changing environment, retailers will need to be strategic and adaptable, using technology and data to better understand and respond to consumer, economic and societal pressures and needs.
- Economic factors and variations in consumer spending will lead retailers to reconsider inventory and efficiency:
With inflation rates beating records across the country – and the world – tight budget constraints are swaying consumers' purchasing decisions and shrinking retailers' profit margins. Recent research highlights dire straits – 71% of shoppers are considering finance plans when they shop, and 30% of shoppers say compelling promotional offers, more than anything else, lead them to try a new brand.
With consumers increasingly expecting personalization and value,
one key trend is the need for more intelligent, targeted promotions that target profitable customers and drive sales and loyalty by offering the right products at the right time. To increase margins, businesses must narrow in on their assortment plan and inventory selection through accurate forecasting powered by machine learning and artificial intelligence to forecast consumer demand. Furthermore, more thoughtful inventory planning and focusing on operational efficiency can help retailers have the right products at the right location, reducing costly markdowns and clearance sales and concentrating on fast-moving, high-demand products.
- The variable supply chain will require additional insights and adaptable action to improve the customer experience and minimize the loss
Supply chain constraints are another major challenge – and trend – facing retailers. And these issues wreak even more havoc when customers are faced with out-of-stock items, which research shows would cause 29% of shoppers to turn to another brand. The reality is that supply chain issues are an expectation for the foreseeable future and won’t be resolved overnight.
Retailers should revisit their inventory needs, supplier network, and distribution strategy from a different angle to minimize the financial impact and preserve customer loyalty. Supply chains will need to be reconfigured through enhanced visibility and comprehensive assessment. By using data and analytics to optimize the supply chain, retailers can effectively reduce the need for manual intervention and ensure that products are delivered directly from the manufacturer to the store or consumer. This proactive approach can minimize store-to-store transfer and help ensure that inventory is in the right location, in addition to reducing touches when delivering products to the end consumer.
Furthermore, businesses can streamline the entire product journey by utilizing stores as distribution nodes to reduce the need for costly last-mile delivery and address the "less-than-truckload" shipping that bogs down operations. By leveraging their store network and technology, such as RFID tracking and smart shelves, retailers can go into 2023 with a more efficient and cost-effective supply chain.
In order to thrive in this ever-changing environment, retailers will need to be strategic and adaptable, using technology and data to better understand and respond to consumer, economic and societal pressures and needs.
- A shift in shopping will redefine retailer's priorities and focus for the New Year
Rising consumer expectations are also driving change across the industry. First, consumers are increasingly prioritizing experiences and memories over possessions – 67% of shoppers will spend more or an equal amount on experiences as they will on material goods. Although that outlook could look grim, trips, events, and vacations often mean increased spending to prepare and look your best. Next, the economic challenges cited above mean the 2023 consumer is willing to wait for promotions and deals to get the best value for their money. Customers are committed to more price comparisons and waiting for the price to drop during sales or other retail holidays.
To combat these changes, retailers must lean into consumers' desire for personalization and meet them where they are. While 68% of shoppers still prefer an in-store shopping experience, retailers can benefit from exploring additional engagement opportunities, like subscriptions, rental models, or even direct-to-consumer (DTC). Furthermore, creating a positive and memorable customer experience through unique and engaging in-store experiences, such as pop-up shops, experiential marketing events, and immersive brand experiences, will become the next evolution of the store. Personalized offers, suggested products, and marketing to various audiences can drive deeper loyalty and repeat visits, critical revenue in uncertain economic times.
- Talent constraints will drive technological advancement and flexible work
Finding and keeping the right talent continues to evade retailers as we enter the New Year. It's been challenging for retailers to attract and retain the right talent as the "gig" economy stresses talent availability and longevity in customer service roles. The job market has remained competitive in the last several years, and employees are increasingly seeking flexible work options and value from their work.
To find and keep the right talent for their business, organizations must prioritize engaging workplaces while investing in technology to help scale talent and increase speed and efficiency. Innovation around persona-based workflows and artificial intelligence can deliver and prioritize critical tasks to employees for more informed decision-making. Retailers can tap into automation and built-in best practices to complete menial tasks, freeing employees to take on more strategic and meaningful work. Technology also allows retailers to expand the talent pool to offer remote work for operational roles and improve training to help employees adapt to new technologies and changing consumer expectations.
Diversity and inclusion bring unique and essential points of view that create trust within a community. By focusing on career development and advancement opportunities in the workplace, retailers can experience a connection and commitment from their teams, resulting in better business outcomes. By investing in the development and well-being of their employees, retailers can create a more engaged and productive workforce that can provide even better customer experiences.
- ESG will remain top of mind for consumers and define brand values
Consumers are increasingly looking for brands that align with their values. Many are either continuing or beginning to consider sustainability, waste reduction, emissions and fair employment practices when choosing where to shop. Even more, ESG is not just a publicized commitment or intermittent decision, but a long-standing commitment dispersed through entire product lifecycles and woven into every business process from ideation to creation, supplier evaluation, distribution, delivery, and more.
Retailers need more transparency with their customers and a better overall process for understanding their end-to-end business. From internal teams to suppliers, companies must have the visibility to better implement procedures across their entire supply chain that best align with their brand goals and values. Aligning these processes with widely advocated ESG standards can also boost profit margins as some customers are willing to pay more for ethically-sourced and sustainable products and services.
Looking ahead, retailers should look towards the right technological advancements to hit the ground running in 2023 following the busy holiday season. By remaining nimble and anticipating and evolving their operations to combat these challenges and opportunities, retailers can position themselves for success in the coming year. Leveraging data and technology will become the key to unlocking more intelligent inventory management, intuitive pricing strategies, and fulfilling guest experiences, enabling retailers to distance themselves from competitors through data-driven decisions and building better customer relationships.