Retail Market Current Trends
Retail investors have remained resilient amid soaring inflation, recession fears, and the current economic environment. The retail market was one of the hardest-hit sectors in 2020, but since the pandemic, it has recovered. With a continued rebound in consumer spending and supply that will remain muted this year, there are opportunities for investor growth, buoyed by occupancy rates and retail rents.
Compared to the previous year, retail sales in 2022 continued to advance as the labor market remains strong at a 3.7 percent unemployment rate as of October 2022. According to the National Association of Realtors, retail sales excluding auto, gasoline, and non-store retailers (brick-and-mortar), pushed to a new record high of $384 billion in September, a 25 percent increase relative to pre-pandemic levels. Despite the multi-decade-high rate of inflation, retail sales remain well above long-term growth trends.
Pent-Up Consumer Demand
As the sector rebounds, retailers’ focus has shifted from the closing of stores to the revival of their growth plans, resulting in more demand for physical store spaces. Retails are reenergizing their stores and making investments in their physical store layout and experience because apart from serving as showrooms, physical stores offer consumers a convenient place to pick up or exchange goods. Plus, omnichannel marketing and physical stores will be vital sales channels in the long run as online shopping cannot replace the benefits and satisfaction. This is especially true when looking at recent foot traffic at retail destinations.
Brick-and-mortar gyms recovered with incredible speed and have exceeded pre-pandemic monthly visits for the past five months.
The fitness sector’s comeback offers useful lessons for brick-and-mortar brands looking to succeed in the face of continuing challenges. A key takeaway is that customers want choices: a single digital or brick-and-mortar channel doesn’t always fit. Customers want value and price seems to be one area where many of the more successful fitness brands are succeeding at providing what customers are after.
In-Store and Online Retail Strategies
E-commerce and brick-and-mortar are two channels providing unique benefits, but experts say brick-and-mortar will need to be savvier moving forward. With both channels offering strong values to consumers, combining an online and in-store strategy is proving to be a key trend.
The future success of retailers will ultimately depend on creating a cohesive customer experience, both online and in stores. – Harvard Business Review
When shoppers are in stores, retailers need to think like e-retailers. Stores can do this by offering personalized services or preference-aware options that shoppers usually see online, and online brands can implement hyper-intelligent enterprise-grade search capabilities that are as smart and intuitive in similar service from a highly experienced store representative – someone who understands shopper nuances, desires, and quirks.
Looking Ahead to 2023 for Retail Investors
There’s no doubt that the shift in spending behavior is impacting businesses. Companies catering to value-seeking customers are positioned to do well as people trade down from their usual choices and seek out new alternatives. However, it is important to note that the current challenges are coming after two years of sustained offline innovation. The pandemic forced many brands to rethink their strategies, incorporate digital channels, and find creative ways to attract customers back into stores – and many have emerged from COVID-19 stronger than they were in 2019. This trend has shown that brick-and-mortar leaders are also likely to rise to the occasion, finding opportunities for growth despite current challenges.
Regardless of market conditions, essential retail concepts remain high-priority targets for investors. Quick-service restaurants (QSRs), grocers, drugstores, and others are trading at high volumes and can be comfortable assets to own during market uncertainty.