After experiencing a surge in growth in 2021, US retail sales growth began to slow last year, a pattern which will continue into 2023. According to our forecast, sales will rise by less than 3% this year, reaching over $7.3 trillion.
Here are five charts about what is contributing to the slowdown, and what is driving growth for the retail industry.
Inflation will continue to pressure consumers this year, shaping shopping behaviors. Retailers who want to win customers need to prioritize value, using deals and discounts to score sales.
Expect to see more cutting back from consumers and more Prime Day-type events from Amazon and other retailers.
Speaking of winning over customers, let’s talk loyalty.
“The old-school approach to loyalty programs just isn’t going to cut it anymore,” said our analyst Paul Verna during our virtual summit last year.
Looking ahead, retailers need to reevaluate their loyalty programs to provide more value to customers, whether that’s through ad-supported tiers, expanded features, or partner development.
If 2022 was the year that retail media made a splash, 2023 may be the year it becomes a tidal wave.
While Amazon will see the lion’s share of ad revenues next year, both Walmart and Instacart will experience the strongest growth, increasing their ad revenues by 42% and 41%, respectively.
According to our analyst Andrew Lipsman, as the third wave of digital advertising, retail media will continue to pull dollar share from the duopoly of Google and Meta, both of which previously dominated the space.
In 2023, social commerce will see a “return to basics,” according to our analyst Jasmine Enberg, meaning ads will be the primary driver of social shopping and sales.
Instead of investing in proprietary checkout solutions, platforms will lean on the discovery aspect of social media.
TikTok, in particular, is well positioned. The platform is reportedly building fulfillment centers in the US and has recently brought its TikTok Shop feature to US merchants.
Over the holidays, buy now, pay later (BNPL) use picked up as consumers looked for alternative ways to fund their shopping.
This year, BNPL will continue gaining users and growing payment value by 25.5% to reach $94.87 billion. By 2026, nearly 40% of internet users will have used a BNPL solution.
At last year’s Money20/20 event, our analyst Dan Van Dyke claimed that BNPL 2.0 was coming, marked by new business models that are more customer-focused.
The takeaway: It’s going to be another tough year, but there are some silver linings, specifically in the form of retail media and growing social commerce sales. Whether through discounts, bundles, or partnerships, retailers must play into what customers really want: getting more for less.
This was originally featured in the Retail Daily newsletter. For more retail insights, statistics, and trends, subscribe here.
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