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4 Lessons for Retailers to Gain a Competitive Edge in 2023

Retail had to adapt to significant changes in consumer behavior and market volatility in 2022. While inflation reached record highs, stores maintained competitive pricing and convenient shopping options to attract consumers despite ongoing economic uncertainty. 

In 2023, retailers can use lessons from 2022 to do well this year. Here are a few strategies they should consider. 

1. Dynamic pricing can help with fluctuations in consumer behavior. 

As economic uncertainty lingers into 2023, consumers are still price sensitive and will be looking for ways to save. Competitive pricing will be key to maintaining and attracting shoppers. More specifically, using dynamic pricing—varying the cost of products or services based on market conditions and demand—will allow retailers to compete effectively.

There are currently AI tools available to help interpret market variables and recommend an ideal price. These will be important for retailers to consider in a fluctuating market.

Deloitte found that 42% of shoppers are concerned about their financial stability and are less likely to make nonessential purchases. McKinsey’s 2022 holiday season report notes that “consumer demand has softened, while inventory levels are higher than they’ve been in years.” 

With this in mind, retailers should consider consumer expectations when setting prices. Certain items, such as trendy fashion pieces, are better candidates than others for dynamic pricing, but overall it can help stores stay competitive and fulfill shoppers’ desire to save.

2. Prepare for the unexpected with supply chains—agility is a must.

The economy has been highly unpredictable this year, and big shifts in consumer behavior have impacted supply chains. This has forced many companies to rethink their fulfillment models, logistics and strategies around consumer demand. 

Supply chain disruptions are likely to continue, so retailers must retain or adopt agile operations. For instance, nearly 90% of small-and medium-sized U.S. businesses are looking to move their suppliers closer to home in 2023 to reduce logistical and inventory-related challenges.

Seasonal forecasting can also lessen excess inventory concerns.

Shopper insights are crucial to retailers, but many businesses consider themselves “newbies” at incorporating this valuable and timely data into their decision-making processes. And stores like Target, Kohl’s, Under Armour, Bed Bath & Beyond and Gap have seen profits dip as sales have slowed and inventory has piled up. 

If brands invest in ways to predict customer behaviors seasonally while also keeping their logistic processes flexible, they’ll be better equipped to navigate instability in the year ahead.

3. The in-person customer experience should be a priority.

Many consumers still prefer shopping in-person, so retailers can’t neglect their physical stores. Eighty percent of shopping still happens in stores, according to the National Retail Federation. And per the U.S. Census Bureau, ecommerce accounted for less than 15% of total retail sales in the third quarter of 2022. 

Brick-and-mortar buying isn’t going anywhere, and shopping trends reflect that. Retailers should listen to meet consumer demand.

A recent OnePoll survey revealed that consumers want to shop in stores for many reasons, including “instant gratification, better deals, no shipping costs and a better overall customer experience.” Although online buying spiked during the COVID-19 pandemic, physical stores offer an engaging experience that doesn’t exist online. 

When consumers buy online, their interaction with a brand is mostly transactional: they usually know what they want and make decisions based on factors like availability, price, shipping costs and speed. But in-store shopping allows brands to make a greater impression. 

It’s imperative for retailers to prioritize fostering an environment and culture that makes in-person shopping pleasant for customers. 

4. Embracing marketing capabilities on social media is crucial.

Social buying trends are taking off as more consumers turn to social media platforms for their shopping research. 

U.S. retail sales via social media are expected to reach $53 billion this year and hit double-digit growth over the next three years, rising to a whopping $107.2 billion. This means that by 2025, more than 114 million users will spend an average of close to $1,000 a year on purchases via social media.

Meta is currently the leader—thanks to Facebook Marketplace and Instagram — but TikTok isn’t far behind. It is in the process of expanding its TikTok Shop to feature U.S. businesses and is also planning to launch product fulfillment centers in the U.S.

It comes as no surprise that Gen Z and millennials are the “biggest adopters of social commerce,” with about half of each using social media platforms to shop. 

But it’s not just younger consumers using these sites: Deloitte’s 2022 holiday retail survey found that overall, 34% of consumers planned to use social media for holiday shopping, up from 28% in 2021. 

Stores should aim to stay current and competitive by embracing the marketing capabilities available on social media.

In 2022, retail proved to be resilient despite economic and supply chain challenges. And the upcoming year will likely present more opportunities for retailers to show their endurance. By implementing lessons learned and new strategies, retailers will be better positioned to demonstrate that their sector is not only highly responsive but also incredibly innovative.