In the krunchbox sponsored 2023 Retail Trends & Disruptions report published earlier this year, inflation and recession were hot topics. When the surveys were being circulated in September 2022 we were in the early stages of what has become a long series of regular interest rate rises, which are still going on at the time of writing.
It doesn’t take a Professor of Economics to observe that rising inflation coupled with increasing interest rates increase the cost of borrowing and make it harder for consumers to obtain credit. As a result, purchasing power declines which leads to lower retail spending.
Whilst different parts of the globe are in slightly different phases of the cycle, it would be fair to say that globally, consumer confidence has been trending down, leading to a negative impact on retail sales.
That said there have been very different impacts in different retail channels. Non discretionary sales channels such as supermarket retail sales have been holding up, supported by higher retail prices. Cafes and restaurants are also trending higher versus a year ago because COVID was impacting the channel this time last year. Apparel, footwear and accessories are also trending higher for the same reason. Conversely, some of the home hardware, housewares and consumer electronics categories are recording negative year on year growth having enjoyed such strong sales through COVID.
In that context, we know that in tightening economic conditions, discretionary spending falls. Consumers become more risk averse and postpone buying non essential items. They may trade down to cheaper alternatives (such as house brands as opposed to manufacturer brands). Consumers reduce the frequency of purchases or buy smaller pack sizes.
It is therefore all the more important to review range breadth and depth at these times, to make sure that the offer is adapting to shifting purchasing behaviour and that the offer is remaining relevant to the consumer.
In any environment, but especially in these periods of tough retailing conditions, Point of Sale Data (POS) should be your best friend.
POS data provides insights into customer purchasing patterns, preferences, and trends. Retailers and vendors can use this information to create targeted marketing campaigns and promotions to drive sales, enhance customer loyalty, and maintain market share.
In a downturn, consumers are more price-sensitive, and competition intensifies. Retailers and vendors can use POS data to analyze pricing trends, identify opportunities for discounts or value-added offerings, and adjust pricing strategy to attract and retain customers.
POS data helps vendors and retailers identify emerging trends, changes in consumer behaviour, and sales patterns. This information allows you to adapt your product offerings, adjust store layouts, or make other changes to better meet customer needs and preferences.
Retailers and their vendors alike need to be more cautious about tying up cash in inventory. POS data helps businesses track inventory levels, forecast demand, and optimize stock levels to avoid both overstocking and stockouts. This enables you to reduce costs and improve cash flow.
A key observation in the 2023 Retail Trends and Disruptions report is the importance of data driven decision making. Whenever there is uncertainty in the wind, businesses need to rely on data and analytics to make informed decisions.
In an environment of rising interest rates and creeping inflation, POS data serves as an extremely valuable source of information that can help navigate the challenges and make strategic decisions to ensure survival and long term success.
Interested in the 2023 Retail Trends and Disruptions report? Access the full report below.
Some Key Highlights
- 72% of respondents revealed that their YoY sales were either higher or stayed the same, despite shifting consumer habits and supply chain issues.
- 64% of respondents attributed their sales growth to product innovation.
- 86% of top executives believe there will be a recession in 2023