3 Key Retail Predictions for 2023
Posted by Amanda McLaughlin on Dec 22, 2022
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There was a lot of turmoil and trickiness in 2022. Omnichannel journeys have sprouted up everywhere as brands and retailers pursue essential unified customer experiences. Some have nailed it. Others are struggling with siloed systems that are starting to wobble and fall over.
As a result, many business leaders are asking the same question: how can we stop playing whack-a-mole across physical and digital channels, and craft experiences that turn customers into brand addicts in the year ahead?
To that end, we’ve identified three key retail predictions for 2023:
Below we dig into each retail prediction to help you better understand and relate them to your business.
Stores will have a starring role in 2023. In fact, Forrester predicts that 76% of total U.S. sales will occur offline next year. And while online shopping will never go away, the company’s research also highlights that web penetration has shrunk to 1.5% (compared to 3.5% in 2020) as customers settle back into pre-pandemic behaviors.
What the last few years have confirmed is that customers are now more accustomed to omnichannel shopping experiences than ever before. Of course, omnichannel includes online and offline retail (among other channels). This means brands without a physical presence stand to lose out on a huge share of the market.
In 2023, customers will expect you to let them choose when and how they discover, research, test, buy, receive, and return products. They will reward brands that offer this level of convenience. As we know, omnichannel consumers shop 1.7 times more often than single-channel customers and spend more when they do. Therefore, pure play retail brands (i.e., those that operate only online) will struggle to capture customers’ hearts and wallets.
It’s not enough to just have a store, though; successful brands will need to leverage their physical locations to enhance and differentiate the customer experience. For those that do, stores will grow beyond sales channels, becoming:
Brands will continue to double down on alternative pickup and shipping methods to reduce friction in the buying process significantly. This will pivot around one core concept: getting orders to customers faster.
Businesses will also invest more in technology that helps aggregate data from across channels and place that knowledge in associates’ hands, enabling quick and easy in-store pickup (or click-and-collect), store fulfillment, and ship-from-store.
Brands in our customer base, like Marine Layer, have proven how effective using your physical presence to grow is. Marine Layer, for one, ships 15% of all its ecommerce orders from the store. As a result, the brand has not only reduced shipping times and alleviated friction in the buying process, but it has also seen a 21% increase insales.
Ad spend in the year ahead is only likely to pay off for juggernaut brands like Amazon, which is already predicted to win 69% of the market in the next two years. Therefore, specialty brands and retailers will need to take a different approach, instead focusing on advertising and marketing in their stores.
Consumers continue to crave authentic experiences, and there’s nothing more authentic than the words and content of existing customers. Actually, 90% of customers claim user-generated content (UGC) holds more influence over their buying decisions than other advertising and marketing content.
In 2023, expect to see brands up the use of user-generated content in-store to instill trust in new and existing customers. This will likely also impact store design, creating more opportunities for customers to capture, create, and share content. Stores are going to get more immersive and interactive, a trend we’ve been watching for a few years but are looking forward to finally (maybe) seeing at scale.
People crave connection, so there will always be an appetite for physical shopping. In-store experiences matter more than ever, especially when it comes to experience. Research from Salesforce found that 80% of customers agree that the experience brands offer is just as important as the products or services.
Retailers in 2023 will focus on positioning their stores as microcosms of delight, designed to encourage customers to engage with, rave about, and share their time in-store with others. Some specific areas they’ll double down on include:
To deliver here, they will prioritize capabilities that facilitate customer-centric retail without losing the crucial human element, like clienteling.
This is where pure play retail brands will begin to see the gap widen. The unique selling points of online are now offset by supply chain and inventory issues – problems that omnichannel retailers can dance past.
To sum things up, brands will need a human experience to delight customers in 2023. More specifically, they need a physical presence, be it a permanent store, a shop-in-shop, or a series of pop-up stores. A physical presence, whether settled or nomadic, will give brands a place on stage in 2023.
The 2022 Black Friday and Cyber Monday period saw a record 48% of all online sales and 78% of web traffic in the U.S. come from smartphones. Thanksgiving online sales from mobile also rose to 55% of all online revenue, up 8.3% from 2021. Last year, 71% of online sales for Shopify merchants came from mobile shopping, with smartphone retail sales predicted to reach over $400 billion by 2024.
Mobile shopping penetration will rise across the board in 2023 as brands and retailers wake up to its importance for customers. According to the results of our recent consumer survey, almost a third of U.S. shoppers (31%) prefer shopping in mobile apps to all other channels. More specifically, our survey highlighted that 60% of consumers preferred mobile shopping apps over mobile-optimized websites.
In Q3 of 2022 alone, the Apple App Store accumulated $21.2 billion in consumer spending on apps. We live in a mobile-first economy and mobile app usage, downloads, and in-app spend are only going to keep going up. Aside from this, there are no less than seven additional reasons why you need a shopping app in 2023. Let’s quickly cover them.
Your customers are more mobile minded than they’ve ever been. They’re in-app more often than ever, be it browsing or buying. Over a third of consumers worldwide check their phones within five minutes of waking up, and 20% check their mobile over 50 times per day. By having a mobile app, you’re meeting customers where they already are.
Apps, by definition, are closer to your customers. Your brand is literally in their hand (or pocket). While proximity is a powerful ally, it also grants additional benefits, like access to data on customer purchasing behaviors and preferences, which you can use to better understand how to serve them. This data can help you personalize better, and ensure you have the right merchandise available at the right times and prices.
With a mobile app you can avoid the competition and budget drain of advertising. Instead of sinking dollars into search ads, your app sits on your customer’s home screen, just a tap away. It’s almost always front-of mind.
As app usage grows, so will sales. Especially among digital-native millennials and Gen Zers. Native apps (and native it must be – mobile websites simply don’t cut it) are built with experience in mind, reducing friction in areas that can lead to cart abandonment. As a result, consumers can convert up to 5-7x more than they would on your mobile website.
Where website audiences are fleeting, mobile audiences are engaged and loyal. This is because with a mobile app you can consistently provide value to customers by sending highly personalized messages, offers, and timely discounts. Having an app means you have more ways to engage customers, which also more opportunities to encourage them to continue to shop with you.
One thing is clear: customers don’t want a re-skinned version of your website on mobile. Here shines a native app. Native apps take advantage of the features of the device it runs on, like performance and security, and can seamlessly adapt to the customer journey. It’s a shopping app at home and a customer service app in-store.
Native apps perfectly combine the engagement and conversion benefits of video, with the branding benefits of lookbooks and the shoppability of an online storefront.
Return on investment will be more important than ever in 2023 (something we say every year!), so it’s important you get something back for your efforts. Mobile apps are a solid bet – customers buy more, and buy more often, when shopping through them. Shoeby, for example, earns over 40% of its revenue from its mobile app.
Shopping apps are all about experience, giving users access to extra content, exclusive campaigns, and extra perks. These are areas customers care about, and that’s why brands will hone-in on providing a native mobile app in 2023.
(For more information on how you can create a five-star app in 2023, check out our eBook.)
With monoliths beginning to wobble under the strain of performance and stability issues as well as slow development cycles, retail in 2023 will see an intense focus on digital transformation. Expect to see brands turn to the new rising standard in modern retail technology, specifically – MACH architecture.
MACH adoption is high on the agenda for many technology and transformation leaders. In the past year alone, 19% more companies have moved away from monolithic architectures to best-of-breed systems. As a matter of fact, the U.S. sits in the top three countries worldwide with a strong MACH presence in the front office, with 34% of companies having already adopted the technology (along with Germany at 60% and the U.K. at 53%.)
Adoption rates will accelerate further in 2023. Brands, unable to deny the boom of composable architecture for creating omnichannel journeys, will prioritize MACH to unite digital and physical and remain relevant.
Retailers are acutely aware that they must create experiences worthy of their customers’ time. They will achieve this by bringing MACH technology to bear in four critical capacities.
Better connected, more personal experiences are a priority for retail brands – one that never goes away. Using the remarkable flexibility it offers, retailers will embed experimentation into business culture with microservices architecture. This will allow them to test, test, and test again in pursuit of what really matters to their customers.
Retailers can then customize more with simple integrations and create a tech stack that is designed around customers – ultimately improving loyalty, sales, and revenue.
Using APIs (technology that helps different applications talk to one another) to connect their systems together, retailers can create a unique customer experience that looks and works exactly how you want it to on any device. This will allow retailers to get creative.
Instead of implementing just one new technology, API architecture lets you experiment with a variety. Swap in, swap out, and experiment to your (and your customers’) heart’s content, ultimately creating a truly connected omnichannel experience.
Monolithic architectures are proving to be the single point of failure, leaving retailers vulnerable to being outplayed and outclassed. To keep up, retailers will increasingly turn to cloud-based models – primarily for the freedom and flexibility to deploy applications on different servers, and allowing development teams to do what they do best with the technology they’re experts in.
The high availability and decreased computing usage means no matter what promotion you’re running or what time of year it is, you’ll be able to handle it cost-effectively.
Brands must think harder and invest faster to meet customers where they want to shop. To keep up the pace, many will continue to invest in headless architecture to unify physical and digital. Despite the slight mysticism that surrounds the term, headless architecture has proven time and time again to be the correct choice for brands seeking to be as proactive as possible. In 2023, that will be every brand.
With omnichannel momentum reaching a head, retail brands will consider how they can bring more front ends into the omnichannel experience to satisfy customers. They will prioritize headless technology to meet omnichannel challenges (now omnichannel imperatives) like BOPIS, curbside pickup, inventory management, cross-channel pricing, loyalty programs, and personalization.
To no one’s surprise, customer experience will be key in 2023. And delivering an exceptional customer experience will be possible if the above three predictions play out.
We suspect budgets in 2023 will be spent on developing experiences that get customers excited about shopping again, especially in-store. Brands without a physical presence will seek ways to attain one in cost-effective, yet experiential ways.
A laser focus on your missions and strengths – and a willingness to shed distractions that don’t generate results – will be the defining factor for success in 2023.
Looking to get ahead? NewStore can support your digital transformation – reach out!
