Retail in 2023 — How Retailers Are Preparing and Investing for Success
According to Adobe, total sales revenue reached $211.7 billion during the 2022 holiday shopping season. Consumers returned to stores in droves following a several year hiatus and online sales continued to climb — creating a near perfect storm for many retail businesses. Now, after a successful holiday shopping season, retailers have turned their attention to 2023. A recent survey from Avalara uncovered what retailers from India, the U.K., and the U.S. are preparing for, investments they're making, and what has them concerned in the new year.
Economic Concerns Are Hitting Retailers
While experts remain divided on the likelihood of an impending or current recession, retailers are preparing for the worst. In fact, the survey found retailers are deeply concerned about rising inflation and recession conditions, with 46 percent citing an economic downturn as the biggest challenge they will have to navigate in 2023.
With this uncertainty in mind, retailers are planning to make investments strategically to keep customers coming back and increase efficiency wherever possible. As part of this strategy, retailers are looking closely at their customer experience and backend technology to drive satisfaction and increase their return on investment.
Customer Experience Remains a Top Priority
The survey found that 45 percent of retailers believe that attracting and retaining repeat customers is their main customer experience challenge. Investing in the customer experience isn’t a new approach for retailers, but as they move forward into 2023, how and where they invest may look different.
Of U.S. retailers surveyed, 63 percent plan on investing in technology to improve the customer experience. The top two areas they plan to focus investments in include:
- how they communicate with customers directly (57 percent); and
- optimization of the product line to reach new customers (50 percent).
Throughout 2023, we will likely see retailers prioritize each subset of customers — existing and new — as they work to improve communications and streamline their experiences.
Automation Adoption Soars to New Heights
Fear of missing out (FOMO) was a common theme from retailers surveyed, specifically as it related to having automation technology in place for the 2022 holiday season. U.S. retailers had the most remorse, with 87 percent wishing they would have invested in technology ahead of the holidays. As such, automation is a top priority for retailers in 2023, but similar to customer experience, where retailers plan to implement technology may vary.
Most retailers plan to implement automation in two key financial areas: forecast planning and tax compliance (57 percent of U.S. retailers for each). Similarly, 51 percent plan to invest in automation to streamline operations and enhance their inventory management.
Growing economic uncertainty and a need to do more with less may be driving the need for automation on the backend. Automating functions, like tax collection, can free up retailers to focus on higher value tasks, like the customer experience, while also mitigating the risk that comes along with it.
Omnichannel Expansion Will Continue
The power and promise of omnichannel commerce for retailers has been on full display over the past few years. Retailers have benefited from the options available to consumers to look for and make purchases, so it makes sense that 87 percent of retailers are basing much of their future business plans on their omnichannel strategy. Furthermore, 45 percent plan to continue expanding the sales channels they use in 2023. The top two channels for expansion are direct-to-consumer websites (61 percent in the U.S.) and marketplaces (45 percent in the U.S.).
Retailers are also keen on expanding their omnichannel presence beyond traditionally available mediums, like the metaverse. A large portion of retailers (86 percent) now think the metaverse is an important channel, yet only 31 percent are actively planning to use the technology.
Whether it’s an expansion across existing online channels or a foray into new worlds, channel expansion is top of mind for retailers everywhere.
If 2022 was any indication, 2023 could be a positive year for retailers. As retailers move further into the year, it’s likely that more will invest in strategic areas that align with their business goals, like customer experience and backend optimization. Regardless of what retailers have planned, it’s clear that technology will play a key role in the success of their ongoing strategies and future growth.
George Trantas is senior director of global marketplaces at Avalara, a provider of tax compliance software and automated solutions.
Related story: 2022 Predictions: Tax Challenges Will Take Center Stage for Retailers
George is senior director of global marketplaces at Avalara. In his role, George oversees the business development operations strategy for Avalara’s global online marketplace business. George has extensive experience leading business development strategies in the ecommerce and marketplace industry. Prior to Avalara, George was vice president of client success commerce services at Pitney Bowes. He also spent more than four years at eBay where he supported the logistics, motor parts, and emerging verticals business units. George holds a Bachelor's of Business Administration and Marketing from Elon University.