Retail Trends 2023: Profitable Lessons Learned After Three Years Of Turmoil
Recording-breaking online Black Friday sales in the US – over $9B – do not auger the end of in-person shopping. Shoppers are adept at finding the goods they want, be it sourcing ideas from social media influencers, checking inventories on store apps, or walking into the store to make their purchase. In fact, some retail industry experts think the omnichannel moniker is ripe for an update.
SAP is among the industry leaders attending NRF 2023, the National Retail Federation’s annual event being held in New York City on January 15-17. After an unexpectedly healthy holiday shopping season, retailers are entering the new year with renewed optimism, hoping to overcome market turbulence with winning customer experiences. Here are four significant lessons learned based on some of the top retail industry predictions for 2023.
Use predictive data analytics to balance deals with profits
There’s ample room for improvement of the customer experience in retail sales. According to Forrester analysts, just 33% of US online adults believe that “companies do a good job creating relevant experiences for me.” It’s easy to see why forward-thinking retailers are investing in technologies to understand, anticipate, and better meet consumer desires.
IDC analysts predicted that by 2025, 20% of the top 100 global retailers will drive holistic business results using distributed AI systems with integrated data across retail planning, decisions, operations, and optimization. These analysts said that 50% of retailers will increase data management and governance technology investments by at least 20% to harness insights from spiraling amounts of data to grow omnichannel revenue. By 2026, IDC researchers expected retailers to solve the challenge of matching inventory plans to omnichannel orders, resulting in a 15% reduction in split shipments, 7% reduction in packaging, and a 20% increase in customer experience.
“Retailers need real-time, integrated data to stay on trend with fast-changing consumer demands and maximize profitability,” said Schneider. “For example, using SAP S/4HANA, a European-based retailer streamlined demand forecasting and cut planning cycles by 50%. With an immediate global view of inventory and customer demand signals, they can quickly tailor assortments, promotion, and pricing to each channel, customer segment, and location.”
Foster brand loyalty with data intelligence, not discounts
Retailers are investing in loyalty programs to strengthen customer engagement. Forrester analysts advised retailers to cultivate “devotee” customers who are “emotionally connected to brands, help acquire new customers by recommending the brand to friends and family — and generate more revenue than other customers.” With intelligent insights about consumer brand interactions, retailers can simplify offers that build long lasting and profitable relationships.
“Retailers have realized they can motivate purchases by meeting the customer where they are with the same discount as everyone else,” said Schneider. “It’s personalized marketing of the offer, not personalized pricing.”
Collaborate for supply chain resiliency
Gartner research found that investments in supply chain agility and resilience were a priority for 96% and 90% of retailers, respectively. This will lead to unheard-of collaboration. Forrester researchers predicted B2B mega-distributors will “form unprecedented alliances to enable selling from their combined inventory sources into all channels to avoid stockouts cooperatively.” By the end of next year, IDC analysts expected 60% of retailers worldwide will use API integration to connect owned, third-party, and social commerce platforms and optimize customers’ interfaces through multidimensional marketplaces.
Supply chain collaboration is also central to meeting sustainability expectations. A Gartner survey found that over half of customers will do business only with companies that practice environmental and social sustainability; that applies to the entire product life cycle. IDC analysts said that by 2027, 40% of retailers will implement critical product life-cycle KPIs that tie environmental factors to supplier selection at all tiers of supply.
Explore metaverse as a marketing channel
I’d be remiss if I didn’t mention Metaverse, the latest buzzword du jour. Forrester predicted “lots of metaverse washing,” but said that instead of repackaging immersive media experiences, smart brands would “reimagine hybrid experiences to seek new sources of revenue, insights, and customer engagement.” IDC expected 65% of retailers to “invest in visual commerce to enable personalization through 3D product configuration and virtual try-on” for an increasingly immersive customer experience by 2024. They also expected 60% of retailers to integrate metaverse capabilities into commerce strategies during the next two years. In their words, “the store is a marketing vehicle as much as it is a point of commerce.”
Similar to many next big things, the metaverse is aspirational for now, but likely to emerge in bits and pieces in the future. Meantime, as fashionistas delight in digital avatars to help discover and try on the perfect fitting pair of shoes, leading retailers are revolutionizing the shopping experience to make the magic happen much more profitably.
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