Why it matters:
- Economists are predicting that 2023 will be a year of weak growth, at best, or at worst, the beginning of a recession.
- Retailers are looking for ways to cut costs and retain customers, with strategies like Target’s expanded private label offerings, or Walmart’s new rewards program.
- Livestreaming, voice-assisted commerce, and supply chain automation are some of the technology solutions retailers are leaning into this year.
The country’s top retailers are looking at 2023 with mixed emotions.
Two years of record sales growth during a pandemic, and above average growth this year despite inflationary pressure, have them feeling optimistic about their ability to handle any challenge.
But they also are worried about the clear signals that consumers are putting the brakes on spending.
Some 35,000 retail executives and retail vendors gathered in New York in January for the annual trade show hosted by the National Retail Federation, amid reports of growing economic headwinds.
“It is undeniable that growth is going to slow down this year,” Sarah Wolfe, an economist at Morgan Stanley, said in a session at the show attended by CO—.
While Morgan Stanley is not yet forecasting a recession, it expects growth to slow dramatically, Wolfe said.
Another economist at the show, Kenneth Kim, Senior Economist at KPMG, said the global advisory firm believes the country will enter a recession in the first half of this year, but recover in the second half.
The silver lining for retailers, and the economy, Wolfe and Kim agree, is the continued strength of the U.S. consumer, thanks to a strong labor market, high levels of home equity, and savings built up during the pandemic. However, they noted, inflation has eaten away much of the income gains of recent years.
The country’s top retailers realize that in a time of slow growth, they must be both creative and efficient to win over consumers and stay profitable.
Jeff Gennette, Chairman and CEO of Macy’s, said in a keynote address to retailers that his plan for 2023 is to “be cautious but be ready to pounce when opportunities and signals present themselves.”
Here are four strategies retailers will be relying on in order to pounce on opportunities this year:
Emphasize value, with store brands to resale products
Retailers are hoping to appeal to 2023’s budget-conscious consumers by spotlighting ways customers can save money in their stores, and how they can earn discounts and rewards through loyalty programs.
Target executives at the show talked about how they plan to promote their private label brands, particularly in grocery, as a way for consumers to find “affordable joy,” such as actress and social media phenom Tabitha Brown’s new kitchenware and vegan food collection. The collection ranges from $2.99 to $90, with most items selling for under $10.
Retailers like Saks Off 5th are leaning into resale as a way to connect with budget-conscious customers.
Saks Off 5th last year partnered with Rent the Runway to increase its luxury resale offerings.
Paige Thomas, President and CEO of Saks Off 5th, said the off-price industry is well-positioned when consumers are scaling back spending.
The off-price industry has shown over the years that it out-performs in a volatile economic climate, she said.
Walmart last year launched a cash-back-on-purchases rewards program for its Walmart+ members as another way to win over value-conscious shoppers.
Embrace tech that nixes the wait in line and tracks what shoppers buy to serve up highly targeted ads
Despite being cautious about the economic forecast, retailers came to their annual trade show in the mood to spend on tech.
More than two-thirds of U.S.-based retailers plan to increase their technology spending over the next three years, according to a report by Coresight Research.
Retailers learned during the pandemic that the companies with the right tech were able to pivot faster and offer crucial services such as curbside pickup, home delivery, and in-store appointments.
Retailers lined up to talk with tech vendors selling everything from drone delivery systems to metaverse platforms to in-store holograms that can be used to greet customers or show off products.
Fast-fashion retailer H&M is using a hologram display created by tech firm Proto in the windows of its Williamsburg store in Brooklyn to show images of fitness instructors dancing and exercising in H&M athletic clothing.
Tanya Moryoussef, a manager at the Kearney Consumer Institute, an internal think tank at global management consulting firm Kearney, said some of the most exciting technology she saw at the show included mobile checkout technology that lets employees better engage with consumers.
Moryoussef said she also was impressed by “queuing tech that empowers consumers to spend their time more freely versus waiting in line,” and ad-targeting tech that uses first-party data to track what consumers look at, touch, or put in their cart to provide better recommendations to shoppers.
Investing in tech is essential, Walmart U.S. President and CEO John Furner said at the show, because “loyalty in retail is the absence of something better.”
“If you’re not offering the best customer experience,” Furner said, the consumer will “move on to someone else who is.”
More than two-thirds of U.S.-based retailers plan to increase their technology spending over the next three years, according to a report by Coresight Research.
Engage with the customer in new ways, via livestream video to voice-assisted commerce
Retailers increasingly are turning to livestreaming, voice-assisted commerce, virtual experiences in the metaverse, and tech-enabled personalization of offers and recommendations to engage with shoppers.
The three biggest retailers, Walmart, Target, and Amazon have invested in livestream shopping as a way to drive sales, and to make online shopping feel more like an in-person experience.
“Imagine me as your new best friend,” Instagram influencer Joy Green said as she began a livestreaming shopping session in January for Target, featuring home and wellness items that shoppers could add to their digital shopping cart while watching the video.
Buywith, one of the startups featured in the Innovation Lab at the show, offers retailers a way to add livestream video to their existing e-commerce sites, and even will supply and train influencer hosts to be effective sellers.
“Our platform makes it very easy for retailers to go live quickly,” Adi Ronen Almagor, CEO and Co-founder of Buywith, told CO—. Walmart and brands such as Steve Madden and MAC cosmetics are using the Buywith platform.
When it announced a $9.5 million funding round last year, Buywith said its videos are driving an eight-times increase in e-commerce conversion rates, roughly a 40% increase in engagement, and a tenfold return on investment.
Retailers also are adding voice-assisted shopping options and making them available not just on smart speakers, but on their mobile apps.
In addition, the retail show featured more than a dozen companies selling tech to help brands create metaverse experiences, or to give consumers ways to interact with products using augmented reality and virtual reality.
Invest in a smarter supply chain with real-time inventory tracking
Shortages during the first years of the pandemic and overstocks this past holiday season have made investing in supply chain tech top of mind for retailers.
“With sales slipping and on-hand inventories remaining high, retailers heading into 2023 will need to keep stock levels [SKU] closer to actual demand to avoid further pileups that lead to price margin erosion,” Inna Kuznetsova, CEO of ToolsGroup, a supply chain planning and optimization firm, told CO—.
The complexity of omnichannel commerce “makes maintaining product availability while keeping stock at a minimum especially challenging for retailers serving both online and in-store consumers,” Kuznetsova said.
Solutions offered at the show by ToolsGroup and other vendors included real-time inventory tracking, data-enhanced forecasting, and platforms that allow various parts of the supply chain to share information about stock level and demand.
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