The recent decline in retail sales volume during the December quarter of 2022, coupled with the ongoing cost of living challenges for many Australians, suggests that consumers may continue to be cautious with their discretionary spending.
The latest data from the Australian Bureau of Statistics reveals a drop in retail sales volumes of 0.2 per cent in the December quarter of 2022, with five out of eight states and territories recording a decrease in retail trade. This decrease highlights the ongoing cost of living challenges faced by many Australians.
A 0.3 per cent increase in retail sales in the September quarter of 2022 was followed by the December quarter’s decline. According to Ben Dorber, ABS Head of Retail Statistics, the decrease was due to consumers cutting back on discretionary spending due to mounting cost of living pressures.
Despite high retail prices, the growth rate slowed to 1.1 per cent in December. The largest volume decrease was seen in department stores (-2.9 per cent), followed by other retailing (-2.4 per cent), clothing, footwear and personal accessory retailing (-2.3 per cent), and household goods retailing (-2.0 per cent).
The retail sector’s future in 2023 is full of uncertainty as various factors, such as the state of the economy, consumer spending trends, and the aftermath of the pandemic, influence it.
To get a clearer picture of what’s to come, Dynamic Business turned to Jordan Sim, an expert in the field who serves as the Senior Director of Product Management at BigCommerce, to gain insight into how the mounting cost of living pressures and the shift towards purpose-driven consumption may impact the retail industry in 2023.
How can retailers prepare for 2023?
Jordan: “Consumers are shopping smarter and want the convenience of shopping where they want when they want, and how they want.
“Optimising data feeds across all social and marketplace channels will continue to be crucial for retailers. A successful strategy will require an optimised and structured data feed mapped and aligned with how users search for specific products on various marketing channels.
“Retailers can also invest more into advancing their omnichannel strategies through modern technologies like AI and live broadcast shopping to ensure shopping experiences feel personal — both online and in-store.
“Meeting shoppers where they are and delivering customised experiences will continue to take priority for retailers as we move through 2023.”
What are the top retail trends expected in 2023? Should we expect a shift in offline buying habits?
Jordan: “We anticipate a shift in both online and offline buying habits this year. Retailers need to remain laser-focused on the cost of living, factoring into the purchasing decisions of Aussie shoppers who will more than likely be re-evaluating their purchasing decisions to focus more on essentials.
“Below are three top retail trends we expect to see take hold in 2023:
Composable commerce will emerge as the future of modern commerce
“Composable commerce allows retailers to combine best-in-breed vendors to create a robust, functional digital technology stack, allowing them to customise and replace components as needs evolve and they grow.
“With unstable economic conditions as a backdrop, now is the time retailers must assess and make smart digital tech investments to future-proof their e-commerce operations. Modern enterprises will need to invest in the right technologies that provide the flexibility and agility needed to respond to unexpected change and secure staying power.
Alternative payment methods will move further to the forefront and be a major opportunity for retailers to boost sales revenue
“Click and collect has been growing in popularity for a few years, but the trend exploded in 2021 following the pandemic. Digital Wallets such as PayPal, Visa Checkout and Masterpass will continue to reign as we expect to see more providers enter the space.
“With hybrid shopping in full swing, we will also see more retailers embrace alternative payment methods across niche industries, including fashion and home & garden. Credit cards won’t become obsolete but will be used on a needed or required basis, forcing retailers to upgrade payment methods to stay competitive.
Headless technology will become the future of modern B2B commerce
“Headless technology has been around for a number of years, providing a modern B2B commerce solution for businesses that need to ditch legacy monolithic platforms. Traditionally the technology has catered to DTC merchants, but that is changing.
“Expect to see B2B businesses turning to headless as a critical business strategy to modernise their e-commerce operations to provide their buyers with B2B functionalities for business-specific purchasing while offering the visual, content-focused experience that gives the feel of a B2C site.”
Can we expect a turnaround in global supply chains?
“We’ll continue to see the shift from the “I will fulfil myself” mentality to outsourcing to third-party logistics providers in order for retailers to leverage an omnichannel strategy better, accelerate delivery times and reduce costs. Merchants that fulfil themselves will continue to be at a disadvantage as carrier costs continue to increase.
“The exorbitant long lead-times retailers have become accustomed to over the last 24 months will go away, exchanged with higher prices due to inflation and lower demand. Brands will need to get back to efficient buying to avoid major inventory issues.
“And finally, the global expansion will accelerate as it’s becoming easier for retailers to think of the world without borders and actually sell directly – and through channels – to consumers outside the brand’s home country.
“In summary, retailers must continue looking at supply chains from a global lens in 2023, as there are often unique opportunities for certain products or services to be in demand across different markets, which could result in further growth for the business.”
What are your thoughts on social commerce?
“As online shopping experiences continue to evolve, customers aren’t settling for the same cookie-cutter experiences when looking to purchase products. They want to be wowed and taken on a personalised and engaging shopping journey.
“Social commerce and live shopping experiences are transforming how retailers create these journeys. Through simple camera setups, live shopping streams on social platforms like Instagram, TikTok and YouTube allow online retailers to “open their doors” and take customers on in-store walkthroughs. They can showcase new or featured merchandise, special promotions or hands-on sneak peeks and product demos. Brands can tag items from their product catalogue to appear on the bottom of the screen, where customers can click directly to the brand’s website to influence the path to purchase.
“As opposed to more traditional sales approaches, social commerce also enables its users with checkouts directly available on social media platforms. In some cases, links lead to the merchant’s website, streamlining the sale process for shoppers even further.
“As more consumers use social media as part of their buying journey, the value of live shopping experiences gives retailers the opportunity to deliver fresh and exciting ways to drive more meaningful brand engagement and deeper customer loyalty.
Should we see an increase in Direct-to-Consumer (DTC) businesses in 2023?
“In 2023, we anticipate more DTC businesses will enter the space in order to double down to grow margins. Over the holidays, we saw a string of DTC pop-ups. The last two years also saw a lot of brick-and-mortar and traditional brands shifting to DTC, such as Nike for example.
“We also anticipate a similarly positive outlook for wholesalers. The COVID conditions of the past two years have shaped higher expectations from wholesale buyers, who have grown accustomed to the convenience of a digital buying experience. Relational-driven buying will still exist, but we anticipate more wholesalers digitising their buying process moving forward.”