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Category: Industry News, Investing 101, Net Lease Retail Tags: 2023

2023 Top Trends for Retail

The world of retail is constantly changing. External factors like the pandemic, rising inflation, and the threat of recession have all affected consumer buying habits. However, while times of inflation hold several challenges, inflation is also full of opportunities. From a digitally altered shopping experience to global supply chain disruptions and a pandemic that refuses to abate, merchants can bet on one thing: people will continue to shop.


1. E-Commerce is more popular than ever before

A worldwide shutdown did not stop people from shopping. Instead, much of consumer spending shifted online during the pandemic, and this trend has continued even after two years since the first shutdown. According to PWC, the e-commerce share of retail sales (excluding auto-related sales) shot up from 13 percent in 2019 to a peak of 20 percent during the initial national lockdown. This increase in online shopping drained a lot of spending from physical retailers and several of the nation’s shopping centers. This permanent shift to more lavish online spending ultimately means that fewer shopping centers and retail space can survive.

As local economies have reopened, consumer spending patterns have returned to in-store shopping, but the future of retail still relies on e-commerce. Retailers need to understand that consumers love ease and convenience. By leveraging e-commerce and the in-store shopping experience, retailers can broaden their target audience. Combining both worlds for a seamless shopping experience is key to store success.


2. Social Media Selling

Unsurprisingly, consumers spend much of their time scrolling through social media. According to recent data, people in North America spend an average of 2 hours and 6 minutes on social media daily. With this in mind, brands have taken advantage of each app’s addictive algorithm and have found ways to sell or advertise their products to consumers. Social selling not only provides reach to a brand’s target market, but it also raises the possibility of purchase.


3. Don’t count out physical retailers just yet

Although brick-and-mortar retailers showed signs of slowing down during the pandemic, in-store shopping is here to stay. With the growth in online spending slowing, physical retailers will have an opportunity to regain some lost market share. The most successful retailers will be the ones who can successfully bridge the gap between e-commerce and physical stores.

In-store purchasing provides advantages that e-commerce shopping cannot possibly offer. There’s the pleasure of immediate gratification, trying on physical clothes, and the assistance of store staff. Customers are also less likely to deal with returns because they can see, test, and try on things before purchasing them. This is when an omnichannel system would aid the company’s overall success and profits.

Given the significant obstacles that retail has encountered in recent years and the looming economic uncertainties, it is easy to predict that the consensus view for the retail sector in 2023 will be bleak. Instead, there is a widespread sense of cautious optimism regarding the overall path of the economy.


4. Emergence of more omnichannel tools

Omnichannel retail is when retailers interact with customers through various digital and physical touchpoints. As clients travel through multiple channels, applications and data follow. This results in a consistent, on-brand experience from beginning to end. This includes buy-online and pick-up in-store capabilities.

Retail has always had to change faster than other property types because the consumer sector is constantly evolving and doing so quicker than ever before. Since consumers are now utilizing both digital and physical shopping, companies that create a convenient omnichannel shopping experience will have better success in the market. According to McKinsey, approximately 60 to 70 percent of consumers are now shopping via omnichannel capabilities. Omnichannel is the future of shopping, and successful retailers must be where the consumers are going.


5. Retail Inventories Increasing after the Pandemic

Retailers benefited from direct government aid and individual stimulus payments, allowing consumers to continue purchasing even if they were out of work. This increased inventories rapidly over six months, from February to July 2022.

Inventory increased rapidly in the six months from February to July 2022, increasing by nine percent on a net basis for wholesale and retail. All merchants’ inventory-to-sales ratio in July 2022 was over four percent lower than the average in 2019. This is a sign of promising growth for brick-and-mortar retailers, proving yet again what a resilient property type they are.


6. Increase in automated technology

The nation’s labor shortage has been ongoing, especially in the retail sector. Several retailers are worried about staff retention, and with the holiday season right around the corner, physical retailers need to act fast.

Several retailers are employing or planning to use automation to reduce their team’s time spent on hands-on work. The top three areas where retailers claim automated technology will help replace workforce deficits are streamlining efficiencies for operations like tracking orders, maintaining customer loyalty programs, and connecting with customers. Automated technology is a great solution to combat the changing needs of the hiring landscape.


7. Store Closures Slow but Supply Chain Issues Rise

Though increasing at a favorable rate, retail inventories have yet to return to pre-pandemic levels. Lower inventory levels mean that there is not enough supply to keep up with the consumer’s needs. Supply chain issues have caused several stores to be forced to close since they could not recover their inventories after the pandemic.

In addition to these recent supply chain concerns, retail has had the lowest ranking of any property type for almost a decade, although it appears to have stabilized. Other major retailers also have been cutting back their disruption expansion plans.

On a positive note, since 2018, 2021 saw the smallest number of retail chain closures. Closure plans published for 2022 may result in the lowest number of closures in a decade. According to PWC, since 2021, new store additions have greatly surpassed closures (the market recorded its most substantial occupancy growth numbers in five years, and this pattern should hold through the remainder of 2022).


8. Rapid Same Day Delivery and Curbside Pickup

Consumers love immediate gratification, especially today. People are becoming less patient, and retailers lose customers if their turnover time is too long. Several retailers have begun launching new campaigns for consumers to get same-day delivery. This is becoming increasingly popular for grocery shopping. Retailers like Target see an increase in purchase frequency after applying this new system.

This need for speed is changing the way retail works. The most successful brands, such as Amazon, are popular because consumers can get their orders quickly.

The pandemic increased the importance of providing efficient fulfillment services. Retailers stepped up to the plate and continued to use the curbside pick-up and buy online pick-up in-store to boost sales and customer satisfaction.


9. Net lease retail remains in high demand

For most of the last decade, grocery-anchored assets and net lease retail opportunities dominated the retail investment scene. This is likely to stay the same in 2023. According to several survey respondents, net lease retail is in high demand due to the recession-resiliency of many tenants.

The best retail prospects remain in grocery-anchored community and neighborhood centers, especially in primary or high-population growth regions in the Sun Belt of Mountain states.


10. The Resilient Retailers

When market participants were questioned about the most significant obstacles that retail will face in the future, economic conditions received the most comments. However, retail stores have remained resilient during unprecedented times and are likely to stay resilient during all economic conditions. The dramatic swing in retail demand since 2020 best exemplifies this resiliency.

After each economic downturn, retail trends tend to behave the same way. There may be a slight lull in retail spending, as seen after 9/11, the 2008 recession, and the COVID -19 pandemic, but the retail industry continues to thrive. Despite their worries about inflation, Americans still go shopping, which keeps the economy expanding for another quarter.

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