PwC UK has released its Retail Outlook 2023 report, which provides insights into the trends and themes that retailers should focus on for success in the upcoming year. The report highlights that while the retail sector had a successful Golden Quarter in 2022, it remains a challenging environment for retailers. The report also outlines the trends that retailers should focus on, including normality, accessibility, attractiveness, and polarisation.
Key Takeaways from the Golden Quarter 2022
The success of the Golden Quarter in 2022 was defined by four key takeaways:
Normality: A return to a more normal Christmas saw many people getting together with loved ones, which encouraged greater spending.
Accessibility: Winners this year were those in the right location and across multiple channels, such as other people’s stores, websites, and marketplaces. Convenience was also important for consumers.
Attractiveness: Value for money was more critical than ever to consumers. Not just the lowest price but factors such as quality, price per use, innovation, and investment in products and ranging that allowed shoppers to trade up and down to match their finances.
Polarisation: There was a continued polarisation of shopping spend and trends across age groups and earning demographics.
Outlook for 2023
PwC UK is cautiously optimistic about the year ahead. While it may not deliver the surprise success that was seen in 2022, there will be opportunities for retailers that get it right. However, it will remain a challenging environment, particularly for some areas.
PwC UK's January Consumer Sentiment Survey has seen consumer sentiment improve slightly to -32 (from -44 pre-Christmas). While it remains firmly in negative territory, it is beginning to trend in the right direction. Most consumers are just about making ends meet, with even a small improvement in consumers’ financial situation.
Consumers will continue to cut back on discretionary spending, and there will be more switching and trading down, particularly in eating out, going out, and clothing. Even in grocery, there will be cutbacks on hospitality spending over the next year.
Trends for 2023
PwC UK's findings highlight a need for interventions if retailers are to find long-term viability and growth, and win share of wallet. From accelerating transformation through technology to capitalising on changing consumer trends, or from building greater supply chain resilience and sustainability, to investing in financially sustainable business models, there are actions retailers can take for success this year and beyond.
Finding Value in Challenging Times
Cutting costs across the board is an ineffective strategy that is likely to undermine future success.
A better option is to focus on the ‘good costs’ that boost capabilities and drive value while eliminating the ‘bad costs’ in areas such as process inefficiencies and working capital leakage.
Difficult trading conditions can often be a good opportunity to accelerate renewal, particularly for those that take a strategic approach to investments.
Organisations should be seeking out visionary ways to protect and deliver value, showing innovation to identify new opportunities, and using technology to help realise deal and investment success.
Capitalising on any investment strategy will likely mean complementing deep industry and market experience with powerful data-driven insights and digital innovation.
There is significant polarisation between those who are financially healthy and those struggling.
The youngest and oldest age groups are now likely to be the most protected, compared to only 9% of 55 to 64-year-olds.
The polarisation is evident not just in how much consumers will spend, but what they’ll spend on and where they’ll spend it.
The report concludes by highlighting that retailers should adapt to their consumers’ position for success.
In conclusion, the PwC UK Retail Outlook 2023 report highlights the challenges that retailers will face in the upcoming year but also provides insights into the trends and themes that retailers should focus on for success. Retailers need to adapt to changing consumer behaviour and preferences and invest in technology, supply chain resilience, and sustainability to remain competitive in the market.
Additionally, retailers should focus on hiring the right talent to drive innovation and growth in their businesses.