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NEW YORK — It’s been a volatile few years for retailers, and now tides are fluctuating again amid continued financial pressures and a shift in consumer spending toward services that will weigh on retail sales. This instability has prompted retailers to think on their feet and become more resilient than ever, according to Deloitte’s 2023 Retail Industry Outlook.
The report is based on a series of interviews with 50 senior retail leaders, 70% of which are from companies with an annual revenue of $10 billion or more, as well as Deloitte’s economic outlook for the retail industry. Key highlights include:
- Volitivity Shakes Retailers: The retail sector has been through a lot during the most condensed time frame of any recent business cycle. As a result, only one-third of retail executives are very confident about maintaining or improving profit margins this year.
- Inflation Digs Deep: All surveyed executives expect inflation to pressure their profit margins, and 6 in 10 expecting inflation to raise operating costs. And while passing higher prices to consumers has been standard, nearly all retailers (8 in 10) anticipate diminished consumption this year as a result of financial instability.
- The Transforming Consumer: The changing consumer will be a key challenge, as two-thirds of executives expect price to be more important than brand or retailer loyalty. Nearly all executives (9 in 10) say consumers will expect seamless shopping experiences across all channels.
- Three Hot Button Issues: As ESG is becoming increasingly important to consumers, 6 in 10 retailers say the industry will face increased scrutiny on the topic, but more than half are planning minimal to no ESG investments. Additionally, retail theft is expected to increase, posing concerns for retailers. And labor issues will come into play as 7 in 10 retail executives predict it will be their number one challenge this year.
- Supply Chain Disruptions Continue: Seven in 10 executives note that supply chain disruption will impact growth, leaving only 3 in 10 who feel confident in navigating domestic supply chain disruptions. To combat disruption, 8 in 10 executives said they plan to make moderate-to-major investments to modernize their supply chain this year.
- Social Commerce Strengthens: Six in 10 executives foresee strengthening digital commerce offerings as a top growth opportunity, with another 6 in 10 anticipating consumers using social media platforms to purchase products directly. Moreover, 7 in 10 executives expect retailers to collaborate with social media networks and influencers to grow social commerce.
The 2023 Retail Industry Outlook is available for download here,
