Find out what retail trends you need to watch to help your business adapt to the upcoming challenges in 2023.
As 2023 rolls around and pandemic pressures are replaced by new economic uncertainties, retail businesses will continue to face some serious challenges. We take a closer look at the key trends to watch and how resilient retailers can adapt.
The last few years have been a turbulent and transformative time for retail, with supply chain interruptions, staff shortages, and disruptive technologies all having their impact. In 2022, inflation and cost of living concerns have added layers of complexity, setting the scene for the further challenges ahead. These include:
In this article, we explore how retailers can successfully navigate these developments and meet the challenges head-on.
Consumers have shown the industry they want flexibility, convenience, and choice, when it comes to their payment options. At the same time, the new wave of consumer finance products, such as BNPL, are posing both financial risks for consumers and reputational risks for retailers. The increased calls for responsible lending are being heard as policymakers strengthen their resolve for tighter regulation. This will impact two key areas:
The Australian, UK, and US governments are all striving to close legislative loopholes and to reclassify products such as BNPL as “credit” to ensure consumers are adequately informed and protected. This includes the need for transparent marketing and sales tactics that make all interest, charges, and terms clear during the sales process.
In the UK, financial promotion rules were amended in 2022 to ensure BNPL advertising is fair, clear, and not misleading. Australia looks to be following suit, with similar regulation now being considered and recent fines for misleading advertising, as seen when ASIC took major retailer Harvey Norman and credit provider Latitude Finance to court.
In line with calls for responsible lending in an environment of rising inflation, governments around the world are considering affordability checks.
In 2022, the UK government confirmed it will require certain lenders to carry out affordability checks. Similar legislation has been proposed in Australia and the US, a sign that regulation may tighten across the world.
“Overall, it’s becoming clear that offering transparent, fair, and ethical consumer finance is the way forward. Retailers who get in early to review their finance options ahead of the regulations can show they're committed to doing the right thing by their customers”.
James McCusker, Chief Credit Risk Officer
Globally, developed economies are facing a series of challenges, including rising inflation, higher borrowing costs, and stagnant wages. For example, Australia is experiencing the largest supply chain price spikes since the 1990s, and in the UK, the Retail Price Index is up 11.1% from last year. It all adds up to a retail environment where consumers are cutting back on discretionary spending and focusing on considered value-driven purchases.
Even with this shift and the expected drop in consumer confidence, there are ways for retailers to retain a competitive edge through pre-emptive planning, and concentrating on what matters most to their customer base.
History has shown that taking proactive measures with a focus on maintaining quality and communicating value can provide businesses with a significant safety buffer during recessions. Examples include:
The customer experience is one of the biggest drivers of loyalty and can be particularly powerful when customers are looking to limit their spending. Retailers can build loyalty with great experiences shaped by:
See our full list in our article ‘How to get customers shopping with confidence in tough times’.
"While the economic outlook isn’t great for 2023, it’s not all bad news for retailers who can adapt. There’s enough research and real-life examples to show that retailers who are prepared, resilient, and make decisions fast are more likely to come out on top”.
Chris Truscott, Business Development Manager
Sustainability and ethics have come into focus for more consumers in recent years and the research suggests it’s a trend that’s here to stay. For example, Google searches related to sustainable products have increased by more than 70% since 2016. Surveys indicate that 85% of global consumers have made more sustainable purchase decisions in the past five years. And further research shows that many consumers are willing to pay more for the privilege.
The fact that sustainability has become a top consumer priority creates an obligation for retailers to keep pace. Retailers that align their business practices with demands for environmentally sustainable and socially conscious practices will be rewarded. Those who ignore these developments, or take too long to act, risk their reputation and profits in ways they may not be able to recover from.
“Building sustainability and ethics into your retail business requires a multi-faceted approach. You need to look at your environmental and social impact as a whole – from working with ethical suppliers to using recyclable packaging to hiring with a commitment to diversity and inclusion. It helps to start with what matters to your customers most and making sure you communicate these practices.”
Carolina Schuiling, Head of Marketing
Cybersecurity is increasingly front of mind for both retailers and consumers. In Australia, high-profile attacks on telco Optus and health insurer Medibank left customers’ data exposed and resulted in costly PR nightmares for both businesses. In the UK, retail chain The Works was hit by a widespread cyberattack that compromised the security of payments on their POS systems, and led to a shutdown of stores, delivery disruptions, and prolonged online order times.
There’s no question that the impact of these attacks is enormous. Following the attacks, all three companies were hit with plunging share prices and reputational damage that will take years to recover from. As a result, people are becoming more cautious about sharing their information, with a recent survey by KPMG showing consumers want more control over their personal data and insisting that both businesses and governments play a more active role in protecting them.
“The recent spike in high-profile data breaches highlights the importance of having secure data protection and management practices in place. Retailers need to think about the kind of information they collect, why they are collecting it, and when they dispose of customer information. Where information is stored, how it is protected and who has access to it, needs to be carefully considered by retailers, moving forward.”
Kevin Tham, Chief Information Security Officer
In an environment where retailers need to do more with less, understanding the biggest retail trends for 2023 is an essential first step. Armed with these insights, forward-thinking retailers can start preparing now to adapt, build resilience, and get a few steps ahead of their competitors.
Interested in getting ahead of the trend for fairer, transparent consumer finance? Get in touch with the etika team today.