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Learn the 9 shopping trends driving the retail industry forward.
Retail sure isn’t what it used to be. Over the last decade, we’ve seen a lot of change. While big box stores are still powerful, they must now contend with an omnichannel approach. There are more media channels than ever before. Plus, Gen Z is a new species of shopper, especially compared to boomers. These shopping trends impact retailers of all sizes—and even our economy as a whole.
So, how can retailers make sense of all the change?
Recently, Rachel Tipograph, Founder & CEO of MikMak, joined Suzy Founder & CEO, Matt Britton on The State of the Consumer webinar, How End-of-Year Consumer Shopping Can Uncover 2023 Insights. In this article, we’ll explore the latest shopping trends and consumer behaviors to help you prepare for 2023.
Watch the full recording now, or for a quick recap, check out our key takeaways below.
First, let's take stock of the economy
From the boom spurred by low interest rates and fiscal stimuli to the crash of crypto and the impact of inflation, it’s been a tough year for brand marketers, Britton explained. Not only has the boom-bust cycle impacted their business, whether it's the supply chain or pricing, but most importantly it's impacted their consumer—especially going into the holiday shopping season.
Many consumers have record credit card debt in the US. Millennial and Gen Z consumers are also especially taking advantage of “buy now, pay later” services, which adds to consumer debt loads. That debt will impact consumers' ability to buy and do other things down the road in 2023.73% of consumers are concerned about a potential recession.
Plus, with layoffs in the big tech space, some upper-middle-class consumers may have to cut back due to unemployment, which may significantly impact the economy in 2023.
But not everyone is suffering from inflation, Tipograph explained. The luxury market and consumer electronics have been able to lean into inflation by raising prices. As always, it comes down to the customer segment you’re going after. High-income consumers are spending more than ever before and they're willing to do it.
Now, let’s talk about Black Friday and Cyber Monday
The news was better than the expected doom and gloom. Sales beat initial predictions, leaving retailers more hopeful than anything. There was even a bump in online spending, with online Black Friday shopping growing 2.5% year-over-year in 2022.
Ultimately, consumers are willing to show up for deals. Consumers largely shopped for necessities, but electronics also enjoyed a bump in sales. Black Friday and Cyber Monday are also beginning to blend for consumers, especially as they work from home. With deals over four days, consumers now have the opportunity to build their baskets and make decisions about where to spend their money.
After all the deals, retailers will likely see a huge drop off for the rest of the holiday season. With this in mind, let’s dig into some of the retail insights defining the 2022 holiday season and kicking off 2023.
Shopping trends for 2023
1. Consumers are trading down
While consumers aren’t entirely cutting out their purchases, they may be cutting back. Instead of buying the $150 bottle of whiskey, maybe they’ll buy the $75 bottle of whiskey. For brands, it’s important to make sure that you have a portfolio that speaks to these different price points right now, according to Tipograph.
According to our data, people are most likely to scale back on spending when it comes to electronics at 39% and clothes at 37%. These are typically big-ticket items when it comes to holiday shopping, so these will be categories to watch over the next couple of months.
telling moment this year was Amazon Prime Day. During typical Prime Day shopping, electronics are some of the top purchases. But things were different during the two Prime days this year. Instead, household staples rose to the top. “It was a very, very telling moment that right now people are being way more cautious with their spending,” Tipograph explained.
2. A shift to necessities
It’s not only Prime Day shopping where consumers are shifting to necessities. During July, Target’s major sales were first groceries, then toys and electronics. In October, groceries were still number one, then health and personal care. And that is consistent across retailers. Tipograph explained, “The retailers that win are the ones that have the SKUs within grocery household items and alcohol.”
MikMak’s data shows that consumers are willing to put competitive SKUs in their cart if a preferred brand isn’t available due to stock availability. They are also taking care of their services, buying hair removal products and nail products to skip the salon.
3. Shopping moments train consumers to buy
Black Friday and Cyber Monday are not the only “shopping moments” that retailers can train consumers to shop on. Tipograph explains that MikMak consistently sees in their data that consumers start shopping for a holiday two weeks in advance, be it Valentine’s Day or Memorial Weekend. Essentially, consumers have been trained through promotional messaging and advertising. With that in mind, retailers need to plan ahead, or things are going to sell out.
Or, take brand shopping days, like Prime Day, for example. Now, Walmart, Target, Sephora, and Ulta have all created their unique days of big sales. These are big shopping moments that America has gotten behind and they’re here to say. Essentially, people will show up when there are deals.
4. Basket sizes are getting bigger
With shoppers taking fewer trips to retailers, their basket sizes are increasing. At MikMak, Tipograph says they’ve been paying close attention to this data. “When news headlines were predicting doom and gloom holiday season that consumers weren't going to come out to shop, we didn't feel that way. We said, ‘Hey, consumers are going to come out, they're going to come out for the deals and they're going to drive bigger baskets because that's what we've consistently seen in our data over the calendar year,’” Tipograph explains.
This trend has been happening for the last two years. US consumers now see eCommerce as a vehicle to drive convenience so they don't have to shop as often. Before the pandemic, the average American went to the grocery store one and half times per week. Now, they've essentially reduced their shopping by 30% by driving bigger baskets and having convenience at home.
5. Private label is on the rise
During economic hardship, private label is and always has been a growing category. When it comes down to purchasing the necessities, consumers will get the store brand to make ends meet.
With major retailers, like Amazon, defaulting to their own private label brands in eCommerce spaces, it puts brand manufacturers in a tough spot. “Because basically the retailers control the rails…they're going to push their own products because they obviously have higher margins there,” Britton explained.
It happens at brick-and-mortar stores too. When Target first highlighted the revenue of Good and Gather, their private label grocery brand, it did a billion dollars in revenue in 2020. The top categories for private label products are necessities and household items, including food. Amazon and Target also have success with apparel.
6. Retail media is changing ad spend
Retail media, or the use of first-party consumer data by retailers like Amazon, Target, and Walmart, is another major trend shaking up the retail space. Essentially, these big retailers are building advertising platforms on top of that data—which puts them into direct competition with Meta and Google and anywhere else brands could previously buy media. For example, retailers know which consumers purchased diapers last week and can now hit them with a replenishment ad.
Retailers are gaining power thanks to a cookie-less internet and the pivot to first-party data. Retailers also have a different advantage over advertisers than traditional digital and social platforms. If brands want to do business, they have to keep retailers happy. Thus, retailers can negotiate with brands for more advertising dollars. But ultimately, the system is likely to balance. Brands need to see ROI from retail media, which may impact their spend.
7. Social commerce is now mid and upper funnel
The changes that occurred in iOS 14 carried over into this year. Now, many brands see social as an upper and mid-funnel channel. Retail media and search will take care of lower funnel. That started some shift in spend.
TikTok has also continued to rise. In the past few years, most brands have considered it an experiential channel and didn’t dedicate a lot of spend to TikTok. But now, spend is growing, moving away from Meta, and Twitter 2.0.
Social and retail media are also beginning to blend. Take the deal Kroger did with Pinterest, where brands could buy Pinterest ads against Kroger data. The difficulty is that these types of programs are built in a bespoke manner, so brands may be reaching the same consumer over and over. Retail media groups will need to be about to prove incremental revenue.
8. Big box stores are stealing market share
Ultimately, all these trends add up to one mega-trend: big box stores are stealing market share from specialty retailers. As it stands now, big box stores, like Walmart, are beginning to gain real market share.
This year, Walmart is the top retailer for beauty, grocery, and personal care. In particular, Walmart is particularly poised to gain market share, selling the household products and necessities that consumers need right now. Right now America prefers Walmart even over things like Amazon,” Tipograph explains.
9. Tactics for specialty retailers
To win in this hyper-competitive environment, retailers need to have a wide breadth of SKUs. So, specialty retailers need to focus on their market strategy. “Basically go niche, try to find that tribe, so to speak, if you're going to be a specialty retailer,” Britton said. Specialty retailers can also focus on creating experiences and services for target consumers like PetCo has by rebranding itself as a pet wellness company and investing in vet services.
Last Words
As we head into the new year, retailers need to remember these trends. Consumers are still looking for deals, but they’re also looking for quality products and a good shopping experience. Retailers need to find a way to offer both. That may mean adapting to new technologies or shifting their focus to necessities instead of luxuries. Whatever the solution, it’s important to stay ahead of the curve to remain competitive.
Tapp into consumer insights and behavior with Suzy. As an end to end consumer insights platform with integrated quant, qual, and high quality audiences into a single connected research cloud. Suzy lets teams conduct iterative research, with agency-quality rigor, in less time and at a fraction of the cost. To learn more about Suzy, book a demo today.
