Competing Amidst Challenges: 5 Trends Transforming the Retail Industry 

By Stefan Kalb, Co-Founder and CEO, Shelf Engine 

Persistent inflation. Skittish consumer confidence. Staffing shortfalls. Supply chain issues. Changing shopper habits. Growing competition.


Retailers are fighting a battle on many fronts as 2023 arrives. The ones that quickly and flexibly adopt innovative strategies to boost customer loyalty and profits will emerge successfully from this difficult era. These five trends will impact retail moving forward:

It's challenging times. Retailers have to adopt innovative strategies, create differentiators to attract shoppers and boost customer loyalty.

  1. Retailers will get creative to shield shoppers from inflation’s impact: Knowing the impact of rising prices on consumers, retailers will look to cushion the shock by absorbing margin hits and reducing their own costs. They will cut the number of SKUs to weed out poor sellers and stick with tried-and-true products rather than gambling on new items. They will also offer shoppers smaller quantities of goods that are less costly. If they have no other options, they’ll pass higher costs on little by little to consumers so shoppers aren’t hit overnight with dramatic price hikes.

  2. Fragmented shopping means more competition for fickle consumers: When inflation initially hit, customers stayed loyal to the familiar. But in the current phase of recession retailing, they’ll try new ways to make the most of their budgets. One of these shifts is fragmented shopping, where consumers widen their repertoire of stores to chase value and bargains. This fragmented shopping means some are dabbling in club stores and dollar stores for the first time. In this climate, stores that offer more reasonably priced items and promos will win over customers.

  3. Brands will build value-based connections to consumers: Brands will step up campaigns to connect consumers to their mission and values. People decide on purchases based on an emotional response, and they want to believe that the brand’s values align with their own. If companies can demonstrate that they satisfy crucial needs, shoppers will pay more, even when watching their spending. To forge this bond, more brands will promote social responsibility to show how they’re helping people and the planet.

  4. Retailers will automate orders for a competitive advantage: Retailers that maximize efficiency by adopting the latest technology advances will fare the best. Technology that minimizes labor needs, boosts sales, and lowers shrink will expand market share. Computer assisted ordering will begin declining, as it’s time-intensive to manage, introduces error, and doesn’t handle forecasting and inventory well. Instead, automated replenishment systems will flourish. Their forecasting and ordering capabilities sharpen a retailer’s competitive edge by delivering more profit and a better shopper experience. Technology partners offeringeasier implementation with faster impact will capture share from traditional enterprise system providers.

  5. Centralized ordering will gain mindshare: Another way to heighten efficiency through technology is centralizing ordering for all stores in a chain. Headquarters sets company-wide goals to maximize sales or margins, handles purchasing from a single source, and controls financial performance with a lower range of error. If individual stores oversee ordering, even a small change could result in lost sales or waste. Their manual SKU adjustments may not appear large but do add up. This centralization also frees up store staff for higher-value duties, such as serving customers.


The path forward: innovate with new strategies that shape differentiators

The bad news: 2023 will bring many challenges to the retail industry.

Now the good news: retailers that analyze their shortcomings, think creatively about solutions to mitigate those, and adopt new strategies rapidly will gain the upper hand over those issues. Creating differentiators that attract shoppers and maintain their loyalty will result in advances despite any headwinds they will face.

The State of the Retail Industry 2023

JAN 2023