Wholesale Blog

2023 Outlook: How to Navigate the Current Economic Climate

While we’ve moved beyond the pandemic, 2023 will bring many challenges for retailers who are still trying to recover from the turbulent times of the past three years. With the current economic uncertainty, here are five ways to succeed in 2023.

Mary Zubritsky

While we’ve moved beyond the pandemic, 2023 will bring many challenges for retailers who are still trying to recover from the turbulent times of the past three years. With the looming threat of a recession, high inflation, layoffs, and general feelings of economic uncertainty amongst consumers, we may be heading into another roller coaster year in the retail industry, but it’s not all bad news.

Even though prices increased an average of 6.5% in 2022, both inflation and the Consumer Price Index declined slightly between November and December, and if this becomes a downward trend, we may be back to business as usual. But what does that look like nowadays? For starters, supply chain disruptions seem to have been resolved, shipping costs have decreased slightly, and foot traffic has increased in stores again. But as China’s Zero COVID policy eases and people continue to move back to pre-pandemic life, retailers are kicking off 2023 with a renewed sense of optimism, despite potential challenges in the near future.

2023 Retail Industry Trends

Consumers are still optimistic—it turns out it may take a little retail therapy to change someone’s disposition. And while a recession is likely to occur this year, economists have predicted a mid-single-digit growth in retail sales in 2023 with trends like circular fashion and resale leading the way.

But with all the obstacles retailers may face, there are a few areas you should prioritize and embrace this year to create efficiencies and stay on top of the changing habits of the consumer.

Tip #1: Correct Supply & Inventory Issues

In the past two years, almost every industry has been plagued by global supply chain issues, inventory excess, and shipping delays. But looking ahead, the supply chain outlook for 2023 is positive, with goods expected to flow more freely, as retailers will have to keep a closer eye on inventory and sales ratios and lean into supply chains.

While 2023 may have more consumption mechanisms and channels than ever, the expenses will still add up, partially due to complex manufacturing challenges and difficulty getting products into the hands of consumers. With last-minute delivery challenges, plus reliance on suppliers that may experience bottlenecks themselves, retailers will need to review their inventory distribution network to create a seamless experience around a unified commerce approach.

After learning some tough lessons in the past few years, inventory planning and delivery will be much easier in 2023. Since the supply chain issue has settled, heavy backlogs have been resolved, transportation costs have gone down, returns have slowed, and consumers are now receiving products on time, the outlook is very positive.

Despite the good news, supply chain costs are quite high, and retailers are still reeling from excess inventory orders of the past few years which was a result of surging demand due to the pandemic. Stuck with too much inventory, retailers began heavily discounting products to make room for new stock.

In 2023, retailers will take a more conservative approach to stock products (and avoid running out) by decreasing orders, launching fewer collections, creating more limited-edition items, reducing packaging expenses, and focusing more on hero products that are guaranteed sale. They’ll be investing in tools to manage sales, customer data, and stock with automation and AI to help with supply and demand.

Tip #2: Focus on Digital & Social Commerce

Did you know acquiring a new customer can be up to six or seven times more costly than retaining an old one? That’s why it’s especially important to embrace social commerce (or shopping via social platforms)–because you want to retain and engage current customers and attract new ones too.

In 2023, retailers need to invest in social commerce to promote and sell consumer goods and services on social media platforms to offer convenience, provide a seamless purchasing experience, entertain shoppers, influence someone to complete a sale, and create brand loyalty. By enabling shoppable tags, in-app transactions, and embedding the brand’s website into the social media page, you can create a positive and simplified shopping journey. And while Facebook and Instagram have been incredibly popular and successful the past few years with their shoppable posts, live-selling options are taking the retail industry by storm. In fact, according to Insider Intelligence, US retail social commerce sales are expected to reach up to $79.64 billion by 2025. Digital and social commerce will also rely heavily on the quality of the product, exceptional marketing, innovation, and expert storytelling to ensure you connect with your audience and encourage them to complete a purchase.

Tip #3: Embrace Omnichannel Retail

In 2023, convenience will be key and as a result, retailers who embrace omnichannel shopping and fulfillment will see the biggest gains. While some customers prefer to shop in-store, others may browse in-store and then order online, and a third group will shop and complete their purchase entirely online but would like to have the ability to return the item in-store. This is why retailers need to be flexible and maximize the customer experience with an omnichannel retail approach.

If you have a physical store, encourage customers to either shop in person, or order online and pick up at the store to reduce shipping costs, increase speed, and ensure timely delivery—and so they can check out what you’ve got in store, in person. But make sure your stores are set up for this increase in omnichannel fulfillment with increased inventory levels, set up back rooms for quick fulfillment, and train your associates accordingly.

Tip #4: Invest in the Metaverse

The increase in metaverse activations and transactions will likely continue as top brands enter virtual spaces to promote their products and services, engage with consumers, and attract a younger clientele. While many have said they’re either unsure or uninterested in the metaverse, McKinsey & Company estimated the metaverse may create $5 trillion in value by 2030.

For the retail industry, the metaverse isn’t just a fad. It’s a digital environment where retailers can connect with consumers across genders, locations, and ages, and it creates new opportunities for transactions in digital and physical spaces. The metaverse also offers unique and creative experiences, takes personalization to the next level, provides exceptional customer service and support, and helps a brand reach new audiences.

For example, Tommy Hilfiger, Zara, and Dolce & Gabbana showed at the first Metaverse Fashion Week in 2022 and it was a huge success.

Tip #5: Increase Personalization

Today, consumers want to feel like they’re seen, and retailers get them, and that’s why personalized experiences will be a big trend in 2023.

What is personalization and how does it work in retail? Personalization is when retailers use personal data gathered from customers to provide tailored experiences in the retail environment, designed to serve each person based on their own individual needs. To achieve this, retailers will need to accumulate data on customers, analyze it to figure out what they want, target the customer, and then deliver a personalized experience based on that data. If you’re looking to personalize experiences in your online or brick-and-mortar store, we suggest you:

  • Personalize the homepage and navigation based on a shopper’s geographic location.

  • Create shoppable social media posts so the consumer can click on the label of the product and be taken to the landing page where they’ll hopefully make a purchase. Make it as easy as possible for them!

  • Send a handwritten thank you note after a sale.

  • Invest in customer service to provide a seamless experience, including call centers, email inquiries, social media responses and consider ChatBots too.

  • Explore retail CRMs so you can use online data in-store to provide staff with customer information, real-time company updates, stock details, and train the staff rigorously so they have tons of product knowledge.

  • Retarget your customers before they leave the site with pop-ups, browsing history, product recommendations, and an update on their cart.

  • Send out-of-stock alerts along with recommendations that are similar. Also up-sell a more upscale version, cross-sell an item related to the one that’s out-of-stock, and display the most popular items.