Take a deeper dive into our thoughts about data analytics, technology, strategy, and developments.
NRF 2023: Trends Shaping Retail
DAS42 kicked off 2023 by sponsoring NRF: Retail’s Biggest Show. The team spent five days conversing with and learning from some of the biggest names in Retail. Over 16,000 global industry leaders, vendors, and partners shared insights, lessons learned, and predictions for the Retail industry. There were several consistent themes throughout these conversations that are likely to influence shopping, marketing, and consumer behavior this year.
As products and offerings become more diverse, shoppers increasingly seek a more personalized experience and products that reflect their unique needs. Retailers who can capitalize on personalization see increases in conversion and repeat purchases. In their NRF presentation, Givex projected a 5x growth in sales from loyalty programs over the next five years - and that loyalty is driven by personalization.
Loyalty programs like discounts and cashback are trends, but personalization is emotional; it’s loyalty driven by identity. Personalization happens not only at the product level but throughout the experience and shopper journey, in-store and virtually. For online channels, guided selling helps mimic the personalized in-store experience by asking shoppers questions to narrow their search and offer products that fulfill their specific needs. Also mimicking the personalized in-store experience is the rise of digital live chat and chatbots. According to Square, 86% of consumers want to communicate with the businesses they frequent. Rather than requiring shoppers to visit a basic FAQ page, the rise of live chat makes it easier for shoppers to get quick, specific answers or resolutions to their issues.
Retail is entering a hyper-digital era as consumers seek experiences to accompany their purchases. One way retailers can meet that desire is by providing a space for a community. Shoppers want to hear from other customers, not from a company. Square’s Future of Commerce 2023 report was released in conjunction with NRF and highlighted several key figures on why building a community is critical for retailers:
- 32% of shoppers are liking or following businesses profiles on social media
- 24% of shoppers like to comment on pages and posts
- 21% of shoppers have watched a live video from a business.
Brands that successfully build communities effectively turn happy customers into brand ambassadors. Beyond social media platforms, retailers can help grow community by leveraging Social Influence. For digital channels, this includes tools such as customer reviews, customer photos, and user-generated FAQs. For in-store experiences, Social Influence can be leveraged through events, promotions, and outreach - or, most obviously, through retail associates. Social Influence throughout the customer journey guides product discovery, provides inspiration, and enables customers to shop with confidence.
A specific set of shoppers drives the rise of both Personalization and Community: Gen Z. Currently, this demographic accounts for around 20% of the United States population and for about 36% of the spending share. This generation’s spending, communication, and shopping preferences differ from previous generations in most ways - and retailers should already be prepared to accommodate.
According to Square, 43% of retailers already use or are planning a different marketing approach for Gen Z. Primarily, this means meeting them on social media platforms like Instagram and TikTok, but there has also been a rise in live shopping experiences. Major apps like Instagram and Amazon provide a live platform, but there’s been an increasing number of apps specifically focused on live shopping, like GoLive and ShopShops. The rise of live shopping indicates how Gen Z’s preferences are changing the retail experience: higher engagement, personalization, and creation of online communities.
Gen Z has introduced a change in how they are funding their purchases. Shaped by several economic slumps, Gen Z is more wary of credit cards than previous generations. They have instead become early adopters of Buy Now, Pay Later (BNPL) programs like Affirm and Afterpay; nearly half of BNPL users are under the age of 33. The expectation is that BNPL would increase conversion rates - especially for higher-priced items. However, since most BNPL platforms pass along the fee to the merchant, retailers should be prepared for how this shift may impact their revenue models.
This generation is focused on community, individuality, and sustainability. Over 50% of Gen Z say they would support a small business, and most of Gen Z does not plan to dial back spending in 2023-2024. This generation is also responsible for a shift in sustainable goods, with an emergence of a new term: Recommerce. Of major retailers, over 25% now offer a Recommerce program like trade-in, second-hand, or pre-loved.
Long-Term Investment vs. Short-Term ROI
Given the current economic climate and rising interest rates, retailers may be hesitant to spend too freely. However, experts throughout NRF cautioned against sacrificing long-term investment in brand, retention, and CLV in favor of short-sighted wins.
One example of this is the current hot topic of free returns and exchanges. A strained supply chain has made a mess of deliveries and returns, and some retailers are starting to phase out what was once the industry standard of free returns for customers. In 2021, an estimated 16% of purchases were returned, and in 2023 many retailers are betting that phasing out a free return policy will deter the customer from returning items. However, free returns were responsible for lifts in overall conversion, with many consumers deciding to take a chance on products that offered free returns. Shoppers were more willing to spend on products they were unsure about, versus avoid the purchase altogether.
Further, free returns are a significant lever in customer loyalty. While eliminating free returns may stabilize inventory and revenue projections, it can also lower conversions and loyalty. Eliminating free returns may prove a significant blow for retailers focused on long-term customer growth.
While the current economic state may tighten the market, the majority of consumers said they were more likely to become picky about what to buy, but do not plan on dialing back on overall spend. Consumers are also tolerant of the rising cost of items, with 88% understanding if local businesses had to raise prices.
It wouldn’t be a list of Retail Themes if omnichannel wasn’t mentioned. Omnichannel is not a trend, and it’s certainly nothing new to retail; it is now the expectation for the majority of shoppers to have an omnichannel experience. Creating the omnichannel shopping experience is an overall strategy that overlays all other retail trends: it is activated by loyalty programs, grown by social engagement, and is the core of customer experience.
Sellers use, on average, four channels, and omnichannel strategy tasks retailers with creating a cohesive and seamless experience across all platforms and devices. One marker in the expansion of omnichannel relevance is the decline in eCommerce sales. According to Square, business revenue from online sales in 2022 was down 5% from 2021 to 43%. In parallel, consumers said that 30% of their monthly retail purchases were made online, a drop from the 34% reported in 2021. This decline indicates a change in channel preference post-pandemic, as shoppers are shifting back to in-person shopping. However, shoppers are still demanding a seamless omnichannel experience. Solutions to this gap may include test-to-buy, buy online-pick up in-store (POBIS), or in-person shopping but mobile customer service.
The complexity of executing an omnichannel strategy, let alone coordinating the people and systems needed to keep it running, is also increasing. However, it is less about a particular omnichannel solution and more about the interoperability of those platforms. Retailers must focus on maximizing the outcomes of any channels a retailer chooses to leverage.
The trends in retail all signal two things: the complexity of systems and the complexity of data. As full-stack data experts, we specialize in designing accessible data and technology solutions based on your business goals and needs. Breaking down barriers so your entire company can work together toward common goals requires a holistic view of your organization and a single source of truth. If your organization needs assistance transforming your data ecosystem from archaic and cumbersome into a modern, flexible, self-service process, contact DAS42.
Sign up for our newsletter
Ready to talk about your data needs?
Contact us to start building a data culture.