Dec 22, 2022

2022 was another year in flux. While the restrictions of the Covid-19 pandemic have slowly been pulled back, other global financial, social and geopolitical conflict factors have meant that this year has not been a return to ‘normality’.

Consumers have been returning to physical stores but also continue to buy online. Some are back at their place of work but remote work – either full or part-time – remains prevalent. Many consumers are now looking to save money through cutbacks or brand switching.

This backdrop has made it more difficult than ever to determine the trends that are meaningful and matter from those that are just hype – until now.

Below are five of the most important retail trends from 2022 and what they mean for the year ahead.

1. Rethinking Supply Chains and Logistics

The supply chain fallout of Covid-19, including shipping congestion making it hard to get hold of goods on time, has remained a key feature of retail in 2022.

Those who could afford to take matters into their own hands to alleviate the impact. In the case of brands like Amazon, Target, Walmart, and Costco this included chartering their own container ships in 2021.

But getting hold of stock isn’t the only challenge retailers have faced. Storing it is another. Many retailers were left with large quantities of unsold stock – and the costs associated with storing it – due to the coronavirus pandemic and changing customer buying behaviors. In a survey of US retailers by Coupa, 90% say they are experiencing excess inventory.

In an interview with WBUR, Boston’s National Public Radio station, Tony Bell, Assistant Professor of Professional Practice at Rutgers Business School, said of retailers, “why is it they’re so good at planning for economic uncertainty but not uncertainty in the supply chain?”

Retailers appear to recognize this. New global research from Capgemini has revealed that less than 20% of organizations feel equipped to handle disruptions in the global supply chain. An increasing focus by consumers on sustainability and supply chain transparency is adding another layer of complexity.

As a result, this year retailers have begun the hard work of rethinking and revamping their supply chains and logistics operations. This will continue into 2023 and beyond. Capgemini reported that over the next three years organizations, on average, plan to invest 17% more in supply chain transformation.

Technology like artificial intelligence (AI) is being increasingly explored to help with demand planning and inventory management. Walmart is one retailer who is already using AI in this way.

Meanwhile, Amazon Web Services has announced a new supply chain application to help customers make decisions based on real-time information. It believes this will help reduce risk and errors and lower costs.

Other retailers are making use of their physical network like Macy’s who has converted 1 million square feet of space across 35 of its stores into mini distribution centers. These semi-automated centers are helping the retailer to fulfill orders more quickly, but also free up space elsewhere to hold new products as they come in.

The big question all retailers need to be asking themselves right now is how can they get inventory to where it needs to be at the right time in the most efficient way. For many, this will require considerable investment but will pay off in the long run by giving them more flexibility to deal with changes in the future.

Ultimately, this results in the digital commerce trend of supply chain transformation, as businesses must adapt to the current market conditions and artificial intelligence is one of the most effective ways to do this.

Social media is the go-to channel for younger shoppers with 61% of US 25-34-year-olds saying they buy on social media.

2. Physical Retail Remains Key for Brand Awareness

While it’s true that e-commerce’s share of retail sales grows every year, physical retail still accounts for the majority of all purchases.

A research report by Service Management Corp. found that eight out of 10 consumers have been back shopping in-store over the past 12 months. What’s more, 52% say they prefer to buy in-store.

However, physical retail continues to prove its value outside of just sales. With competition higher than ever online and the costs of digital advertising increasing, many brands opened physical stores in 2022 as a form of advertising and brand awareness.

As in previous years, this has included many digital-native and emerging brands. For example, fast fashion e-commerce company Shein has opened a permanent store in Tokyo, alongside pop-ups elsewhere in the world.

Natural fragrance brand Ffern has just opened its first physical store in London having previously only sold its seasonal perfumes to customers who join its online waitlist. Pop-ups remain popular as immersive versions of billboards as seen in the space from fitness brand Bala earlier this year.

In 2022 though, another interesting branch of the store as brand awareness emerged. Long-established brands have begun to take the plunge and open their own physical spaces.

In New York, Hanky Panky – a 40-year-old intimates brand – opened its first-ever standalone store. Dickies, the 100-year-old workwear company, has launched its first brand store in Europe on London’s Carnaby Street.

Military-inspired apparel brand Alpha Industries made its first move into physical retail with a New York pop-up. The brand was established over 60 years ago as a US military contractor.

It seems that all brands – new or old – recognize the competitive advantage of having a store when it comes to customer awareness. There are only so many storefronts, whereas e-commerce is an ever-expanding catalog. Opening a physical location is not always an optimal decision, but the fusion of physical locations with knowledge of current digital commerce trends currently appears to be a recipe for success in the retail sphere.

3. Social Commerce Keeps Growing

Multiple sources, including Statista, report that over 50% of the world’s population (around 4.2 billion people) use social networks.

In BazaarVoice’s 2022 Shopper Experience Index, 69% of consumers said they have been inspired to make a purchase by social media. Social media has proven to be far more than just a digital commerce trend; it seems to be one of the most effective channels of the modern age.

It’s no surprise then that earlier this year Accenture predicted that social commerce will grow three times as fast as traditional e-commerce. The consultancy reports that globally $492 billion of sales took place on social media in 2021, and it expects this to reach $1.2 trillion by 2025. Statista, meanwhile, estimates that social commerce could grow to over $2 trillion by 2025.

Social commerce continues to evolve from consumers clicking on social media links to be redirected to a retailer’s website to buy, to transactions directly taking place within social media channels. This digital commerce trend also requires a heightened sense of identity and access management, as the seller in this equation doesn’t have the same access to the selling platform as they traditionally would with a proprietary marketplace.

From a user experience perspective this makes sense as it allows consumers to stay within the platform they want to be on – their social media channel of choice – rather than forcing them elsewhere. Wunderman Thompson Commerce’s Future Shopper Report 2022 notes that 56% of global shoppers want to remain on their preferred social media platform to make purchases. Businesses must be keenly aware of what consumers want to take advantage of this digital commerce trend.

With this evolution, social commerce continues to push its way into more platforms than ever.

Video streaming platform YouTube has expanded its social commerce offering to its short-form video concept Shorts. Consumers can now shop from their Shorts feed. Short video rival TikTok has also brought its social commerce capability to the US, enabling users to buy directly through TikTok’s app while watching content. Even OnlyFans has just added the ability for creators to sell merchandise directly to users of the platform.

Experimentation is still the name of the game in social commerce. In December 2022, Amazon launched Inspire, a new shoppable content feed of videos and photos within the Amazon app. Naturally, customers can click to buy directly through Amazon.

For Amazon, this may be a way to increase time spent on its app given that currently customers mainly only open it when they want to buy. While a survey of US consumers conducted by CivicScience earlier this year found that 46% turn to Amazon first when searching for products online, 18% of Gen Z shoppers said they go to TikTok first.

Research by Mintel also found that social media is the go-to channel for younger shoppers with 61% of US 25-34-year-olds saying they buy on social media.

As such, we may see more retailers exploring whether adding content to their apps can make consumers more likely to use them.

4. More Customer Control over the Buying Experience

Much of the retail experience is out of the hands of the consumer. The retailer decides what products go on sale, when, what they cost, and how much stock there is, among other things.

They also dictate how customers complete transactions, such as requiring them to go to a checkout to pay.

Increasingly though, some brands are giving customers more control over their buying experience. In many cases, this goes hand-in-hand with the ability of the buyer to self-serve. Buyer self-service has been an ongoing trend for the past decade, with the advent of self-checkout, but self-service as a digital commerce trend is still developing in form and function

For example, earlier this year Amazon introduced a new feature for its Alexa devices that lets customers get up to 24 hours advance notice of deals on items that are in their Amazon shopping basket or on their wishlist. If they want to buy, they can ask Alexa to order for them.

This gives customers more decision-making power over what to buy and when. It means they get the best prices without having to spend time and effort checking Amazon’s site.

Similarly, Target is empowering its e-commerce shoppers through its Forgot Something? and Backup Items features. Available on same-day orders, these services tackle some of the biggest frustrations around online shopping.

Forgot Something? allows consumers to add a forgotten item to their order after they placed it and collect everything at the same time. Backup Items, as the name suggests, let customers set a preferred alternative item in case their chosen product is unavailable. This ensures they don’t get an unsuitable substituted product or have something missing from their order.

Self-service technology is another aspect of this increased consumer control. A global survey by Zebra Technologies found that 45% of retailers are converting more cash register space to self-checkout areas and 43% are making room for contactless checkout kiosks in-store.

There is a bottom-line benefit to giving customers more say in the buying experience. A 2021 survey by PepsiCo FoodService revealed that spending increased by 20- 40% during unattended transactions.

We can expect to see more growth in this area as retailers look for ways to enhance the customer experience and make it easier for consumers to buy through them. This may prove to be a key competitive advantage in retaining customer loyalty.

5. Experiential Retail Worth Paying For

Experiential retail has been an industry buzzword for some time, but it is only recently that we’ve seen the emergence of true ‘experiences’ that consumers are willing to pay for.

Companies like CAMP and the Sloomoo Institute are reinventing toy retail with hands-on sensory craft and play experiences. CAMP has even teamed up with big-name brands such as Disney, Nike, and Paw Patrol to offer immersive ticketed experiences.

Sports retailer Wilson has found a way to monetize the trend of offering in-store sports courts and playing fields for visitors to play sports on. Its new Upper East Side store in New York has an equipment room where customers can rent products to try before they buy.

Another side of this trend is lifestyle experiences. These are less retail-focused and more about giving fans a new way to engage with a brand – often for a price.

An early pioneer of the lifestyle experience is Gucci Garden. Located in the Palazzo della Mercanzia in Florence, which once was home to the Gucci Museum, it combines a retail store, restaurant, and exhibition rooms.

RH, the home furnishings brand previously known as Restoration Hardware, has now opened a guest house in New York that takes bookings by inquiry only. Louis Vuitton is converting its Paris headquarters into a hotel. Gaming company Atari and sports giant FILA are also opening hotels.

Some brands are experimenting with pop-up lifestyle experiences. So far, fast food giant KFC has opened a pop-up hotel and a pop-up pub in London, all themed around its famous chicken.

In all of these cases, customers have to hand over money to take part in the experience. But creating an experience good enough that consumers will pay for it isn’t just an additional income stream. It also helps brands to build their reputation and relationship with customers.

If they can get consumers to choose them for leisure and entertainment, they get to be associated with the memories that the visitor has, which can be a powerful way to build loyalty.

What’s Next for Retail Trends in 2023?

The most meaningful retail trends are never short-term concepts. As such, the five trends noted above will all remain relevant throughout 2023 with retailers and brands continuing to build upon them.

Many of the trends that we predict will have the biggest impact in 2023 also stem from the trends above. For example, new ways of solving the returns challenge will emerge in connection with supply chain and logistics management. Businesses will have to continue making strides to learn about what their customers want, and these physical and digital commerce trends are sure to shape the outcome of the upcoming year for your business.

Resale and phygital will also be big focuses as retailers continue to make sense of their physical retail networks and how to use these to meet consumer demands.

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