Retailers have jumped through some pretty tough hoops over the past three years, and the disruptions remain in 2023. A tight labor market, supply chain turmoil, and sustained high prices continue to test retailers’ ability to grow while remaining profitable. The brands that pass muster will be those that are able to build customer loyalty as they weather the effects of continued economic headwinds.
So, what does retail success look like this year? Here’s a hint: Focus on the customer. Keeping them satisfied while running your business efficiently is the key. In our conversations with retailers, it’s clear that many are looking to stay agile and resilient. They’re rethinking the role of associates. They’re restructuring their fulfillment. They’re reinventing white-glove service.
Here, we share our five predictions for retail in 2023, and describe what you can do now to increase brand loyalty and become more efficient.
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Retail prediction 1: Retailers will use data to expand into new industries
Just a 5% increase in customer retention can boost profits anywhere from 25% to 95%. With that in mind, we predict retailers will focus on growing customer lifetime value by expanding into new industries. The challenge? Customers have no problem switching brands now, and basic rewards-for-transactions loyalty schemes don’t work anymore.
As a result, retailers are getting more creative with loyalty programs. They’re also looking to grow by expanding into health, technology, logistics, and media. Retail media networks, in particular, increase revenue by mapping ad space to customer interests and help you expand your products and services without the added inventory costs. As customers shop in new categories, you’ll learn even more about their preferences and shopping habits, enabling you to deliver more personalized offers faster.
What you can do today. Retailers spent heavily to attract new customers when empty shelves forced shoppers to consider new brands; tightening margins mean they’re facing pressure to get a return on that investment. Putting first-party data at the center of your retention strategy ensures you can deliver personalized offers – to customers in both current and new industries – to increase customer engagement and lifetime value.
Retail prediction 2: Frontline workers will influence digital sales
Store associates — your most important brand ambassadors — are expanding their roles, taking on areas such as personal stylists, fulfillment experts, and service agents. Given this, we predict 60% of digital sales will be influenced by physical stores and associates, regardless of where demand is generated or fulfilled.
The store has progressively evolved from a place to scan and bag products to one of nine touchpoints that a consumer interacts with throughout the shopping journey. To compete effectively in 2023, retailers must design the store and empower the associates according to this redefined brick-and-mortar reality.
What you can do today. Give your associates on-the-sales-floor access to your customers’ data and interactions across all touchpoints, such as ecommerce, marketing, and service. This helps them answer questions about product availability, locate merchandise, place orders, track deliveries, and efficiently manage returns.
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Retail prediction 3: Store associates will also accelerate live streaming
In 2023, we predict that store associates will follow the lead of influencers and Chinese retailers and increasingly interact live with customers online. Why? Brands that currently use live streaming to promote product drops, launches, and the best deals expect revenue from this source to grow between 10% and 50% over the next two years.
What you can do today. The good news is you can jump aboard the live-streaming train without technical headaches. More brands are adopting headless architectures so they can quickly and affordably add new digital capabilities like live streaming. In fact, 77% of companies that use headless said they’re more likely to rapidly expand into new channels.
Make sure you motivate your associates with the right incentives. Look beyond the length-of-queue and sales-per-square-foot metrics. Offer them bonuses based on engagement, followers, and sales. Giving them the right work environment matters, too. Schedule time and space devoted exclusively to live streaming so your associates won’t be distracted by competing responsibilities in the store.
Retail prediction 4: Customer service will continue to extend beyond the call center
Since excellent service makes 94% of customers more likely to buy again (and it’s much more costly to attract new shoppers than retain existing ones), we expect retailers will focus on engaging customers on their terms. With 57% of customers preferring to connect with companies online, look for retailers to dial up the volume on digital channels like video, text, and chat.
Leading retailers are also turning to digital tools that help employees provide excellent service and work more productively from anywhere – and that’s increasingly outside the traditional call center. Store associates, for example, can use devices that give them detailed shopper information such as favorite brands or loyalty perks. This allows them to provide efficient white-glove service from the sales floor or even from home.
What about customers who want to handle their own tasks, like tracking an order or generating a return — an experience 59% of customers prefer? Artificial intelligence (AI) and automation empowers customers and frees up your associates’ time to handle more complicated problems.
No matter how they choose to engage, customers get consistent and connected service. This matters for retailers because 80% of shoppers abandon a brand after three bad experiences. So, this year, embrace digital for service. Not only will you satisfy your customers, you’ll also reduce case volume and operational costs.
What you can do today. Provide tools that let associates become service agents — from anywhere — so they can pick up microshifts to provide service via email, text, and chat. When you schedule employees for short or fragmented durations, you give them more flexibility and reduce business costs (thanks to the reduced risk of overstaffing).
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Retail prediction 5: The supply chain will move to the front office
Offering customers inventory visibility and flexible fulfillment has been essential over the last few years. In 2023, retailers will up the ante as chief digital officers and chief customer officers dig into how fulfillment and return rates affect customer experience. For some retailers, this might mean becoming even more vertically integrated – and, in some cases, expanding their private label assortment – to ensure better control, faster time to market, and larger margins.
Nearly every retailer is looking for new and creative ways to manage fulfillment and returns. Approaches will include using brick-and-mortar locations, partnering with other brands, using last-mile carriers, and even taking advantage of resale platforms. Customers will appreciate these flexible and convenient options. And by focusing on operational efficiencies, you’ll reduce carrying and shipping costs.
Retailers will also focus on reducing the cost of merchandise returns — which, last year, totaled $761 billion in lost sales in the U.S. alone – by not only streamlining returns, but preventing them altogether. They’ll enhance product detail pages with reviews, videos, images, and user forums to give customers the information they need to make smarter decisions. And look for retailers to rein in their liberal return policies, curtailing return windows and offering final sales on heavily discounted items.
What you can do today. Customers want to know how quickly they can get a product from the moment they discover it online. A nimble inventory and order management system will give customers more visibility and flexibility when choosing how, when, and where to get an order fulfilled, while optimizing your costs and margin.
Retailers that scale their operations in 2023 to efficiently satisfy changing customer demands are poised to emerge from an uncertain economy stronger than before. As customers continue to expect a frictionless shopping experience, retailers must focus on increasing loyalty while reducing operational complexity and cost.
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