The Role of the Retail Store in 2023
Now the worst days of the global COVID-19 crisis are [hopefully] behind us, attention must turn to getting things back to some sense of normality. In 2023, this will mean a returned focus on physical stores and their position in the greater retail landscape.
According to CNN, in-store retail sales in May of 2022 grew at a rate of 13.4% compared to the same period of the previous year. This growth represents a faster rate than their online equivalent which only grew by 2.2%.
"The trend is a sharp reversal of the rush to online ordering during the early phases of the pandemic,” reported CNN. "That has upended predictions that the consumer shift to online purchasing would be permanent. But as businesses reopened in the summer and fall of 2020, a reversal began taking place. Consumers dashed out to hit malls, spruce up their wardrobes and make long-awaited purchases. Top companies say they’re noticing more shoppers returning stores.”
Retail in 2023
This brings us nicely to the coming year and what physical retail stores can expect from customers and the market during 2023.
Whilst the news of customers returning to in-person shopping is sure to be welcomed, we are likely to still see some of the reduction in the retail footprint of many larger store brands we were witnessing before the pandemic became part of our daily lives. Even massive retail giants such as Amazon are reducing their presence in some areas with news from the UK that it will be closing three of its warehouses in the country. The company has also reported similar moves here in the US and is subletting some warehouse space to other brands in an effort to reduce excess capacity added to meet pandemic demand.
However, with many big brands reducing the number of stores they are operating, this could provide an opportunity for smaller more niche retailers to move in and enjoy some success in the spaces vacated by their more well-known peers. During the pandemic we saw people flocking to support small local businesses and help them survive the challenges of the time. Smaller brands can capitalize on this warm sentiment to thrive in 2023 and potentially move to occupy high street spaces which were previously occupied by larger brands now seeking to reduce costs.
Challenges
While there is certainly opportunity in the retail landscape of 2023, this period of time is not without its challenges as well.
Rising inflation and subsequent geopolitical events such as the COVID-19 crisis and the Russian invasion of Ukraine have been driving up the cost of wholesale energy and many staple grocery products, meaning many customers are having to shift their priorities when it comes to where their money is spent. This situation means people have less disposable income to spend on more frivolous or luxury items and are seeking to make savings wherever they can.
However, in this environment there still exists an opportunity for retailers to draw in new audiences. During the last great fiscal crisis of 2008, pizza chain Dominoes was one of the few businesses to actually open more new stores than it closed. It achieved this by recognizing that, even during times of financial hardship, people still desired treats and luxury experiences. To meet this desire, the fast-food brand slashed its prices and offered hungry customers amazing deals which meant they could feed their families and provide the occasional treat without breaking the bank.
Retailers looking to succeed during these current crises would do well to consider a similar strategy and offer customers exclusive deals or experiences which make it easier for them to justify spending on non-essential products even when funds are low. Those retailers which are selling essential products such as groceries need to offer ways for customers to get more bang for their buck with unique offers if they want to stand out among their competitors.
Final Thoughts
After the pandemic kept everyone locked inside for prolonged periods of time, people are looking for excuses to get out and enjoy the physical shopping experience once again. Even during a period of financial instability this fact holds true and retailers in 2023 should be finding ways to nudge customers over that line from considering going shopping to putting on their shoes and leaving the house.
"As the pandemic has subsided, you’re seeing consumers get back to their pre-pandemic activities,” said Brian Nagel, who covers the retail sector at Oppenheimer & Co. "Consumers see benefits to shopping in stores. Shopping in stores is a social activity.”
The position of physical retail in the post-pandemic landscape is sure to be part of the conversation at Future Stores Seattle 2023, being held in June at The Sheraton Seattle.
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