As shoppers reset, retail’s future includes authentic experiences — and automation
NRF 2023: Experts and trendwatchers on what’s in store for the next few years
February 9, 2023
New year, new possibilities. A variety of sessions at NRF 2023: Retail’s Big Show laid out trends and observations for the days to come. We rounded up the most important trends to watch from five of our most popular trend sessions at the event.
Grocery growth to steady
The grocery sector has seen tremendous growth, thanks to shifts in buying online and eating at home. Has a tipping point been reached?
Sajal Kohli, senior partner and global leader of consumer goods and retail practice, McKinsey & Company, discussed competitive positioning, digital penetration, value and more during “North American grocery retailing trends for 2023.” Ecommerce penetration has reached an all-time high, Kohli said, expanding from about 3% in 2020 to around 11% today. He anticipates it will come back to a steady state but remain higher overall.
McKinsey’s frequent consumer sentiment surveys show that shoppers are uncertain about their spending patterns for the year, “but their wants continue to increase.” That includes a desire to be healthier, which is translating into shopping behavior.
Kohli anticipates increased focus on sharpening competitive position and value proposition. Although consumers have tighter balance sheets, they don’t want to compromise on value. Consumers also want more sustainable products and operations but aren’t willing to pay for them. Finally, Kohli anticipates additional scrutiny on partnerships, as investors will want to ensure jointly created value.
Inflation and monetary policy: ‘Not in a recession right now’
Ira Kalish, chief global economist, Deloitte Touche Tohmatsu Ltd., said it seems things are getting back to normal, but “not entirely. We’ve been through a lot of change in the past year.” He provided a look at both the current and future economic state during “A look ahead to 2023: Impasse or opportunity for a new path.”
"We’ve been through a lot of change in the past year."
Ira Kalish, Deloitte Touche Tohmatsu Ltd.
Similar trends in the United States, United Kingdom and Germany indicate that inflation isn’t due to individual government policies as much as global factors. One of the things that “worries those who worry about inflation,” he said, is the labor market. Inflation can lead to a wage-price spiral. So far, however, that hasn’t happened.
Kalish expects inflation to be “significantly lower than it is right now” by the end of the year. And yet, wage increases are likely to remain steady, or even go higher by next year.
As for that recession? Deloitte’s view is that there’s a “one-in-three chance” that the U.S. will go into recession this year. If it happens, it will be modest and short-lived. Recession in Europe is more likely, and China’s rebound might be modest as well.
Crisis after crisis?
Andrea Bell, vice president of consumer insights, WGSN, began her discussion of “Future drivers 2025: Strategies that will shape your business” with an admittedly dark trend: the polycrisis era, a time in which “we get rid of one crisis and there’s another one.” But her other trends were much more positive — and much more adaptable to retail.
One key factor that retailers will embrace is “making nature a board member.” The shifting digital landscape is another area to watch, particularly as generations split on how they use the internet and social media. Digital is “going from macro to micro,” Bell said.
There’s mass migration, including moral migration, digital nomads and climate refugees, offering opportunities for targeted initiatives. She cited one European coworking space in which a digital nomad can rent a loft for 30 days, access a coworking space, utilize a community manager to make key connections and have access to a fitness facility and food for $2,700 per month.
The most disruptive trend is what Bell called “synthetic creativity” through tech-driven tools. Virtual influencers are on the rise. Most people can’t tell the difference — and virtual influencers tend to be more trusted.
Shoppers to ‘reset’ as retail sales grow
Rachel Dalton, head of retailer insights, Kantar, kicked off “Retail redefined: 2023 and beyond” with six retail themes for the coming year. They include new macrorealities and a shopper “reset,” with consumers reconsidering where they want to shop, how they want to shop, what they want to buy, how much they want to spend, etc., in a tighter economic environment.
Two other trends are managing contradictions by balancing heavy investment in technologies and delivering shareholder profitability, and the rapid expansion of the digital playground — especially in fulfillment, building experiential relationships and omni-connected technologies.
Finally, there’s the new social contract — a cultural context in which consumers support the companies and brands that share their values; and share of life, or the ability to go beyond the individual transaction to integrate into the consumer’s lifestyle.
Kantar expects overall U.S. retail sales to grow roughly 4.5% to $3.7 trillion by 2027. Online continues to outpace this growth, Dalton said, projected to expand about 10.1% in the same timeframe. At the same time, sales are shifting back to stores. She projects “about an even split” in 2027 between bricks-and-mortar and online sales added.
Nail-painting robots, experiential retail and authenticity
Michelle Evans, global lead of retail and digital consumer insights, Euromonitor International, explored “Top global trends for retail in 2023,” highlighting the rise of the environmentally conscious consumer and the impact of the current economy on consumer habits.
"Machines offer more convenience and speed, but really we shouldn’t underestimate the power of emotional connection with a brand. Ultimately it comes down to authenticity."
Michelle Evans, Euromonitor International
She also referenced “authentic automation,” finding the balance between human and bot. “Machines offer more convenience and speed,” she said, “but really, we shouldn’t underestimate the power of emotional connection with a brand. Ultimately it comes down to authenticity.”
There is a generation gap: Euromonitor research shows that 80% of consumers under 29 are comfortable interacting with bots; that’s not always the case for those who are older.
What does this interaction look like? A nail-painting robot from Clockwork, for example, is currently being tested in six U.S. Target stores. It paints clean and trimmed nails in 10 minutes, with a human who can remove problem polish nearby. Evans doubts it will replace the traditional nail experience, but it does increase accessibility and awareness.
Experiential retail is back after a pandemic pause. Consumers plan to increase social outings in the coming year, which will obviously benefit fashion and beauty, as well as food, service and hospitality.