Retail is changing. Here's what merchants need to know...
Retail has always been trend-driven and fast-paced, but the past few years have been more tumultuous than ever. After a global pandemic, a surge in e-commerce, and a subsequent swing back to in-store shopping, retailers are facing historically high inflation rates.
As we enter a new year, many retailers may well be wondering: what’s next?
To help retailers chart their path towards success in 2023, Square worked with Wakefield Research to survey 500 US retailers and 2,000 nationally representative consumers over the age of 18 for its annual Future of Commerce report. Square sellers also shared insights from their point of view on steps they're taking firsthand or plan to take to navigate the future of their retail store and the needs of their customers.
At a glance...
Expanding selling channels
A rise in experiential retail
Here are the 2023 retail trends that merchants and retailers need to know…
As online shopping becomes more entrenched, expectations around delivery are also maturing. In 2023, consumers will only expect faster, more convenient shipping and delivery.
For retailers, this means offering more shipping options, from standard shipping to express and same-day delivery options, as well as buy online, pick up in-store if possible.
Retailers should consider staggered pricing options to avoid being stung by higher delivery fees and implement strategies to reduce returns, says Shippit CMO Brett Chester. When returns do happen, over 55% of shoppers across all generations prefer to shop with brands who allow online purchases to be returned in-store.
As part of the larger Future of Commerce report, the Square Future of Retail report found that consumers are increasingly open to and even looking for efficiency in their shopping experience. In fact, 41% would choose tech when making pickup or delivery arrangements. Don't forget to keep Gen Z shoppers in mind. A 2022 Afterpay report on Gen Z found that 48% of Gen Z consumers reported shopping in-store to avoid delivery fees.
Beyond shipping, the ways in which businesses can optimize their workflows and processes are growing and changing faster than ever. As lines between sales channels blur, and businesses need to connect with customers across more channels, businesses may look to automation to decrease the time their staff spends on time-consuming menial tasks.
The more you can free up time for your staff, the more your staff can focus on creating meaningful and memorable experiences for their customers. Beyond that, with staff retention being tricker than ever, freeing up manual resources to allow your employees to focus on the more meaningful sides of the job increases their engagement. The Future of Retail report found that 41% of retailers are planning to automate operations to increase staff efficiency. Other top-mentioned areas for automation include inventory management and customer communications.
Other potential areas for automation:
Payroll & benefits
Customer loyalty & incentives (Tip: Check out Square's automated loyalty program)
Automated email marketing program
Although it can be intimidating to begin the process of automating pieces of your business, it's important to think of these updates through the consumers' lense. 75% of consumers surveyed in the Future of Retail report noted that automation technology wouldn't deter them from shopping at a retailer, and, in fact, 23% said that modernization would make them more likely to shop there.
Self-service isn't a new concept in retail, but traditionally it's been used within the realm of discount retailers and supermarkets.
That's slowly changing thanks to the rise of online shopping, which has seen customers become accustomed to having complete control over their shopping journey. As a result, growing numbers of brick-and-mortar retailers are offering self-serve features that mimic the convenience, speed, and autonomy of online shopping.
For some retailers, like Uniqlo, that looks like self-checkout; for other's, it's about allowing customers to easily find and access products (rather than having to ask staff or requiring assistants to bring the product out from storage). Buy online, pick up in-store is another form of self-service, by giving customers more control over checkout and when they pick up their products.
While physical stores took a major hit during the height of COVID-19, the scales are beginning to equalize as consumers return in store to shop. The net effect - a hybrid of online and in-store purchasing.
But while in-store shopping may have returned, it's evolving too. Ana Piteira, the founder of Reliquia Jewellery and Blanca, opened a store two years ago and says she views her brick-and-mortar presence as "an extension of our online presence." She continues, "It's not only about the sales that you're generating; it's about having a showroom for your product where people can go and see, touch and feel the range."
Her sentiments are echoed by AllBirds co-founder Tim Brown, who has described the brand's 54 stores as a "powerful word-of-mouth awareness" tool that drives loyalty and "a customer acquisition vehicle" for the best customers that we have within our ecosystem."
Experts predict that for brick-and-mortar stores, the emphasis will be on experiences rather than simply sales. 94% of retailers said they plan to focus on enhancing their in-store customer experience, turning commerce into an event.
For some retailers that means hosting events in-store (lululemon, for example, holds yoga classes in-store); for others it's about enhancing the day-to-day customer experience with interactive features such as touch-screen mirrors or product demonstrations.
As inflation rises, along with customer acquisition costs, attracting and retaining consumers will become more important than ever in 2023. While the outlook may seem ominous, there is still plenty that retailers can do to stay one step ahead.
Across generations, shoppers will be savvier with their hard-earned dollars, reporting that the top reason for purchasing from a brand again being that they offer good discounts and sales.
If you already have customers coming back to shop at your store, be sure to have an automatic loyalty program set up. This both encourages shoppers with incentives, as well as provides you with valuable customer information to help inform their shopping experience.
Customers who enroll in a rewards program like Square Loyalty are twice as likely to be repeat customers. They also spend an average of 43% more than customers who aren't enrolled in a loyalty program.
As the data bears out, there's a clear trend between customers frequenting their favorite businesses and wanting to stay in touch. In fact, the Square Future of Retail Report found that 86% of them prefer to stay in some kind of communication with their top shopping destinations. To best stay in touch, businesses should meet their consumers where they are and aim to interact on their favorite channels, all of which can be leveraged without paid media dollars:
31% text message
22% social media direct message
14% chat on website
As automation frees up time from time-consuming tasks, it allows employees to focus more on connecting with customers - and there are more ways to connect with them than ever before. Retailers surveyed within the Future of Retail report now sell their goods on an average of four different channels, with 81% of retailers planning to expand the number of digital channels they sell on over the next 12 months.
58% of consumers are open to trying newer, digital methods of shopping, and they're interested in:
26% social media purchases
22% virtual reality experiences
20% QR code window shopping
19% text message or chat sales (Tip: Check out Square Text Message Marketing)
18% live-streamed events
If you're not selling through social media, you're missing out on a huge opportunity. According to the Future of Commerce report, in 2022 the number of retailers selling goods directly through social channels rose to 91%, up 10% from the year before.
Through the pandemic, businesses had to adapt and shift to online sales, many businesses seeing huge growth in eCommerce (according to the U.S. Census Bureau). But in 2022, retailers saw a 5% decrease in online sales from the year prior. While this may be a seemingly small shift, it's important that businesses adapt and meet customers where they are.
Wherever your customers are shopping, make sure checkout is fast and easy. The Future of Retail report found that 34% of businesses ant to provide more payment options, like BNPL and 28% want to provide a quick, hands-off purchase process. Again keeping in mind the next generation of consumers — almost 1 in 5 Gen Zs — have abandoned a purchase in the last 12 months because their preferred payment method was not available (with 44% of Gen Zs using BNPL in the last 12 months).
In the words of Afterpay's Head of Sales, Alex Fisher, "Gen Zs and millennials have experienced multiple recessions, which has changed the way they navigate the world when it comes to saving and spending. Due to these microeconomic impacts, younger generations are increasingly credit averse, preferring to pay over time with BNPL. As BNPL adoption goes mainstream, retailers will need to meet this Gen Z and millennial demand for payment optionality — enabling them to truly shop omnichannel."
Download the full Future of Retail report here.
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