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JACKSONVILLE, Fla. — Acosta, a national sales and marketing services provider, has identified several opportunities and challenges for brands and retailers as they navigate a dynamic and uncertain consumer marketplace in the coming year.
“The economic challenges of the past year will continue to impact consumer behavior in 2023, providing overarching context for what shoppers most care about and how they want to shop,” says Kathy Risch, senior vice president of consumer insights and trends at Acosta. “We foresee continued impact from economic challenges as consumers are heightening their expectations for personalized, hybrid and omnichannel shopping, and their redefined focus on wellness for themselves, others and the planet.”
What follows are Acosta’s predictions for 2023.
Recession or Not, Perception is Reality: The ongoing state of inflation, combined with other economic challenges, has resulted in nearly half of all shoppers believing that we are in a recession, despite a lack of consensus among economic experts.
“When shoppers believe we are in a recession, they will behave as though we’re in a recession,” says Risch. “They are doing less; trading down; practicing smart, conservative and creative behaviors that are likely to last,” she continues. Acosta proprietary shopper insights reflect that 67% are spending less on discretionary items like clothing, 63% are eating the food they have on hand before buying more, 61% are eating out less, 52% are spending less on entertainment, and 46% are saving less.
To cope, consumers are sometimes seeking affordable indulgences, like snacks and beauty products. 25% of shoppers say they’re snacking more than usual, seeking comfort food. For beauty products, this is known as the “lipstick effect” — a behavior in recessionary times when shoppers splurge on makeup.
Retail Experiences That Surprise and Delight, In-Store and Online: Shoppers have three key expectations in 2023 for their in-store shopping experiences: enjoyment, convenience and value. Seamless omnichannel shopper experiences are table stakes, and retailers will want to bring in-store experiences online and digital experiences into the store.
• Shopper experience matters — both digital and physical — it isn’t just about price and assortment.
• New retail formats are being tested to keep customers coming back, building loyalty based on experience as well as product selection.
• Tech-enabled in-store design will encourage discovery, browsing and purchasing — from QR codes throughout the store to smart screens that share product reviews when an item is selected from the shelf.
• Connectivity increases, with 5G adoption expected to triple in retail stores by 2024.
• Smaller-format big box stores are opening to support convenience, offering specialized services, tech-enabled stylists and restaurants.
Personalization Is Evolving Rapidly: First-party retail data is becoming more targeted to the individual shopper. Value, discovery and trial can be provided on a personalized basis to the shopper based on new technology, including AI, and the retail media explosion.
By 2024, U.S. retail media ad spending will exceed $60 billion with Instacart, Walmart and Amazon in the lead and others quickly following. Retail media will employ technology for in-the-moment deals in aisles. With 90% of grocery sales still happening in stores; there is a $1 trillion opportunity for advertisers to target more accurately with the right data. In-store AI technology like electronic shelf labels provide nearly limitless ad inventory and inform shoppers of proximity value offerings. And online content can be customized and personalized for the shopper.
Committing to Collective Wellness: In 2023, wellness assumes a holistic, comprehensive position for shoppers — extending from personal wellness (health and happiness) to the family’s health and well-being, and to the earth and animals.
The global “self-wellness” economy today is a $4.5 trillion market, and it is expected to generate $7.7 trillion by 2030, according to the Global Wellness Institute. Personal care, beauty and antiaging products today represent a quarter of those sales, at $1.08 billion. Key shifts guiding the future of wellness include balancing physical and virtual connections, addressing mental well-being, and the ongoing global “value reset” with people seeking more economic, environment and social justice, and more meaning in their lives.
Retailers will provide more in-store clinics and other health services — currently a $4.4 billion business. Acosta also notes that consumers globally are concerned about sustainability, and the concern will escalate in the U.S. Currently 69% of U.S. consumers rate sustainability as important, regardless of age or gender. And sales of plant-based products continue to grow, with global retail sales predicted to be $162 billion by 2030 — up from $29 billion in 2020.
Transforming Into a Hybrid World: While the hybrid evolution was already under way in some channels, COVID moved the needle further, faster and deeper, resulting in a new hybrid world. Shoppers will expect brands and retailers to reflect this “new normal.”
Hybrid shopping is here to stay. Today, nearly half of all shoppers buy many types of products both in-store and online, such as: Apparel (57%), beauty care (48%), electronics (44%), and home and kitchen (50%). And it’s not just shopping. Hybrid medicine is on track to become the future of primary care, potentially reducing health care spending by 15% to 20%. The market is expected to grow to $396.76 billion in 2027, up from $79.79 billion in 2020.
Dining Out: It’s Complicated: Ongoing challenges from inflation, supply chain, labor and customer patterns of “staying home,” are balanced by exciting innovation and a pent-up demand for dining in. Insights show that on-premises dining continues to increase but may not recover to pre-pandemic levels for some time, providing opportunities for freshly prepared meals at grocery to provide that dining out experience at home.
Risch concludes that brands and retailers will need to continue to make significant shifts in how they provide value, quality, entertainment, service and convenience to shoppers in 2023: “The most successful organizations will expediate the seamless shopping and branding experience, also understanding that consumers want to make informed, smart, values-driven choices for themselves and their families.”
