Jacksonville, Fla. (Jan. 12, 2023) – 2023 brings some lingering economic challenges -- inflation, labor shortages and supply chain issues -- that directly impact shopper behavior. But with these challenges comes a breadth of opportunities for brands and retailers to innovate and grow consumer engagement.
From utilizing first-party data to further personalize the shopping experience to using robots to increase efficiency in foodservice, Acosta has conducted extensive research and uncovered insights from real shoppers to inform its top six predictions for 2023.
1. Recession or Not, Perception is Reality
Whether it’s officially deemed a recession or not, shoppers are adjusting their behaviors to the current economic environment, and we expect to see this continue throughout 2023.
Nearly half of all shoppers believe we’re in a recession. According to Acosta 2022 shopper insights survey, 61% of consumers claim they are eating out less, and 52% are spending less on entertainment. While these trade-down/trade-out behaviors may have negative implications, some categories may actually benefit. For example, more consumers are likely to cook a restaurant-quality meal at home using premium products. 47% of shoppers are spending more time looking for deals, so focusing on value through opening price points, assortment, and promotions will be critical for brands in the new year.
Shoppers will cope in unique ways. 25% of shoppers say they are snacking more than usual, and chocolate sales are reportedly stronger than ever. While 67% of consumers are spending less on discretionary items like clothing, other categories, such as Health and Beauty, may see some growth as women use makeup, particularly lipstick, as a way to treat themselves by looking good even if they don’t feel good.
2. Transforming into a Hybrid World
For 2023 and the years to come, brands and retailers should expect to see hybrid everything. Due to the years-long Covid-19 pandemic, people are coming to expect hybrid options in all aspects of their lives -- shopping, working, driving, health care -- and a return to the pre-pandemic world is not in the cards.
Hybrid retail is here to stay. With over half of the workforce now participating in hybrid work, at-home meal occasions have increased, particularly for breakfast and lunch. But according to Acosta’s November 2022 shopper insights survey, shoppers don’t have a distinct preference when it comes to buying their groceries online vs. in-store. Over half of shoppers (61%) buy groceries online, yet they also prefer the in-store experience. Roughly one in two shoppers of non-grocery categories (home improvement, pet, baby care, beauty care, home and kitchen electronics, apparel, toys) said they’ve bought both online and in-store in the last six months.
Transportation is increasingly becoming hybrid. A CNBC report predicts that electric vehicles will be nine times what they are today (30% of new car sales) by the decade’s end. Hybrid vehicles open a world of opportunity for retailers, especially convenience stores (C-stores). While a historic trip to a C-store was a quick run-in to grab a snack or beverage while getting gas, a C-store visit in 2023 and beyond will require more consumers to spend more time browsing in-store while they wait for their vehicle to charge. Retailers can take advantage of this by enhancing the in-store experience with higher-quality meal options, rentable workstations with WiFi, streaming video booths, and auto detailing services.
Hybrid medicine is on track to become the future of primary care. 57% of providers in the U.S. view telehealth more favorably than before the pandemic and 64% are more comfortable using it. This provides an opportunity for brands and retailers, especially those in self-care, to align with providers to offer products to consumers within the telehealth platform.
3. Retail Experiences that Surprise and Delight
Shoppers still like to go into the store, but table-stakes expectations must be met to compete effectively in 2023 and beyond. They want enjoyment but also convenience, and they desperately need value. There's still ample opportunity for brands and retailers to bring that in-store experience online and the digital experience into the store. Seamless omnichannel experiences are becoming the norm. With the integration of social commerce and, eventually, metaverse, it will be an everywhere, anytime demand environment.
Retailers are building loyalty beyond the transaction. With the current state of the economy, brands and retailers, especially those in non-essential categories, are having to compete for consumer spending more than ever before. Retailers are testing experiential formats to increase shopper loyalty; we expect to see more in 2023.
Brands and retailers are encouraging increased browsing behavior and discovery. Retailers like Walmart are transitioning from the “stack it high” model, where the goal was for shoppers to get in and out fast, to a “time well spent” model enabled by technology. They’ll be incorporating interactive product displays with smart screens that provide reviews based on the product a consumer has in their hand and QR codes that provide consumers with additional product content. Integrating elements of experiential marketing into retailer apps is creating the most seamless omnichannel shopping experience we’ve seen yet.
More retailers are meeting consumers where they are. This year we’ll see more big box stores opening smaller formats and offering special services, while traditionally online-only retailers are opening stores to capitalize on the power of in-person shopping experiences. And with 5G adoption in retail stores set to triple by 2024, shopping will become more connected, engaging, and fun for consumers.
4. Committing to Collective Wellness
In 2023, the meaning of wellness will continue to expand beyond oneself. Consumers are becoming increasingly more interested in brands that promote wellness for all -- self, family, the earth, and animals. According to the Global Wellness Institute, self-wellness is valued at $4.5 trillion, with an expected growth rate of about 5.5% year over year, reaching $7.7 trillion by 2030. This, coupled with the fact that 79% of global consumers want to buy environmentally sustainable products, is why brands should focus on their wellness and sustainability strategy this year.
Retailers will accelerate healthcare strategies. With in-store clinics currently generating $4.4 billion, it’s clear that consumers are embracing the one-stop shop even when it comes to healthcare. There’s an enormous opportunity for drug retailers and health and beauty brands to deliver on consumer wants.
Consumer sustainability concerns rise. Although most consumers want to buy environmentally sustainable products, the increased cost of living due to inflation prevents many from doing so. Many competitively priced brands are already making a substantial effort regarding sustainability, but consumers are unaware. By highlighting sustainability efforts and including them on product labels, L’Oreal’s new rollout of their Product Impact Labeling System (PILS) is an example of how brands can tap into this consumer desire to do good.
Continued growth of plant-based products. Concerns for the environment and overall health will continue to drive strong growth for plant-based products in 2023. Global retail sales are predicted to reach $162B by 2030, up from $29B in 2020. Growth will continue even in the current environment because by purchasing and consuming plant-based products, shoppers make healthy choices for themselves, the environment, and animals. With 57% of shoppers stating they’ll buy plant-based foods for the rest of their lives, this behavior isn’t going away anytime soon.
5. Let’s Get Personal
In 2023, first-party retail data will get up close and even more personal. The retail media explosion will create opportunities for more personalized, targeted offers; selling data will become as important as selling products. ROI will take on increasing importance since media's influence on sales will now be trackable.
Retail media spending will continue to grow. By 2024, U.S. retail media ad spending will surpass $60 billion. Amazon, Instacart, and Walmart are leading the way, but others are quickly getting on board. The Kroger and Albertson's merger will result in a household reach of 85 million. 7-Eleven jumped on the train in December announcing its new Gulp Media Network.
Retail media + technology = in-the-moment deals in the aisle. With 90% of grocery sales still happening in stores, there is a $1+ trillion opportunity for advertisers to target more accurately with access to more informative data.
Retailers will invest in in-store technology to personalize customer experiences. From interactive shelf displays to omnichannel sales training for store associates, shoppers will find and purchase the products they want, when and where they are.
With advances in AI technology, brands and retailers can implement in-store solutions like electronic shelf labels that provide almost limitless ad inventory and improve shopper engagement via proximity offers through the retailer’s app. Online content can be customized and personalized to the shopper. To capitalize on this trend, brands should rethink promotion playbooks focusing on ways to reallocate spending to create more personalized experiences for shoppers.
6. Dining out: It’s Complicated
Continued supply chain, inflation, and labor challenges create lasting complexities for the foodservice industry. While complications remain, innovation is a bright spot. Unique value solutions, drive-thru technology innovation, and loyalty programs are some trends to watch in 2023.
Supply chain issues will remain. While slightly mitigated, foodservice professionals expect challenges for the foreseeable future. Almost half of those surveyed expect it to be at least a year before things trickle down to a much less volatile rate.
Foodservice labor challenges continue. Although their wages have increased (the average non-supervisory food service hourly wage has gone up 21% since 2020 from about $14 to $17 per hour), unionization is spreading, and workers are fighting for additional wage hikes. To combat labor shortages, the National Restaurant Association has proposed legislation for foreign workers on non-immigrant visas to fill essential jobs that don’t require a college degree. Some companies are using technology such as robotics to perform specific tasks and introducing mobile ordering to create efficiencies and help alleviate some of the pain felt by worker shortages.
Inflation looms in foodservice, but increasingly expensive groceries blur the value gap between food at home vs. away from home. While most consumers are shying away from eating out to save money, some see value in this option. According to Acosta's October 2022 Inflation Impact & Actions study, 28% of shoppers have eaten one of their meals from a fast-food restaurant, specifically, because it's a cheaper option than cooking at home.
Pent-up consumer dine-In demand. Coming out of the pandemic, people wanted that on-premise, in-restaurant experience. Over the last couple of years, we have seen an increase in dining in restaurants, but it's still not back to pre-pandemic levels. And now, with inflation and other economic factors, there will be a struggle to get there this year.
To entice consumers to eat out, brands are innovating the experience and focusing on making dining in more inviting. Brands are transforming their operating models to give consumers restaurant-quality experiences on their terms, from expanding full-service bars in fast-casual concepts to adding game rooms and outdoor patios.
The Bottom Line
While inflation, supply chain issues, and labor shortages are not new to 2023, we will see an increase in recessionary consumer behaviors this year. But by transforming operating models to align with a hybrid world, introducing innovative omnichannel retail experiences, committing to collective wellness, using first-party data to personalize shopping, and creatively using technology as a solution, brands and retailers can meet these challenges and continue to expand consumer engagement.
To learn more about the Acosta Shopper Community research included in this piece, reach out to insights@acosta.com.
ADDITIONAL SOURCES:
Acosta Shopper Community Survey - October 2022
Acosta Shopper Community Survey - The Why Behind The Buy - November 2022
Acosta Shopper Community Survey – March 2022