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What key trends will emerge in the retail sector in 2023?

A new white paper from identifies ​​​​​​nine key trends that may play an important role in the retail sector in 2023.

The retail sector has had to evolve an awful lot in a short few years, and 2023 is set to see continued changes and innovations, according to a wide-ranging new white paper from foot traffic analytics firm

Ttitled, Retail Trends Forecast 2023, the white paper finds that brands responding to pandemics, inflation and more have “uncovered opportunities to establish new channels, grow into new markets and cater to new audience segments,” which could lead to success in years to come. The white paper outlines nine key trends that believes will play a big role in the sector in the future.

[Read more: Transparency influences shopper’s beauty, personal care purchases]

Key trends identified in the report:

  • Retail Media Networks: In-store media networks are an exciting channel that could help drive increased revenues for retailers, landlords and product companies. But their true value comes from the shift they necessitate in widening our understanding of the full potential of the retail location. Retail media networks don’t just signal a new and critical channel, but a fundamental step forward in how retail will evolve.

Companies like Amazon, Best Buy, Walmart, Target and Albertsons are all investing in retail media networks as a way of increasing revenue and profitability and capitalizing on the immense levels of traffic coming through locations.

For advertisers, the key attraction lies in the level of intent of visitors and the proximity to the point of purchase that physical locations provide. Looking at physical stores for their marketing and advertising value also allows retailers and the product companies that advertise through them to think about audience segmentation in fundamentally different ways.

For example, cross-visitation between a grocer and local fitness chains could be a far better indicator of the performance of protein bar promotions than standard demographic analyses. Even more, retail media networks enable advertisers to think about physical store visits and their unique impressions through a similar lens as that used to think of standard online or television placements. This makes for a better apples to apples comparison and allows advertisers to more effectively measure impact across all advertising channels. 

Yet, this is just the beginning. Investments in everything from billboards to endcaps to stadium naming rights and concert promotions also drive a more nuanced and granular ability to measure and analyze. And this means better utilization and efficiency – not to mention the wide opportunity that comes from a marketing channel still in its infancy. The development of retail media networks also is coinciding with a deeper recognition that the value of a physical location goes far beyond sales per square foot. Marketing, logistics, fulfillment and returns can all be improved with a wider appreciation of the impact of a store. And retail media networks don’t just offer a short term ability to improve revenues; they also are am integral part of this longer term shift in the way we value physical locations.

  • Tenant Diversity: The definition of what belongs in a retail center is changing, and with this blurring of traditional tenancy perspectives come powerful opportunities. Landlords can create more immersive experiences that augment performance by strengthening current non-peak periods and creating more reasons for a visit;
  • Format Evolutions: Retail is being defined by a push to flexibility – in the overall size of stores, in the things being sold within them and in the places where they are located. From shop-in-shop concepts to adjusting store footprints to drive more exciting innovations and/or to reach different audiences in premium locations – the shift is on and its impact will be significant. This is especially true because it empowers retailers to maximize each store's impact and identify the ideal path to market penetration less limited by traditional constraints.

Starting with maximizing the space within, retailers from Target to Kohl's to Lowe's have jumped headfirst into the world of shop-in-shop concepts, looking to drive visits, increase basket size and create engagement with new audiences. The rationale behind these partnerships is relatively straightforward. The larger retailer fills a gap in its product assortment, differentiates itself from competitors, improves engagement and increases basket size. The smaller retailer gets a capital-efficient way to broaden its target audience and, in many cases, leverages the larger retailer’s online ordering and distribution platform. 

[Read more: Store brands shine as consumer wallets tighten]

  • Mall Waterfall: Top-tier malls are thriving, and retailers have made a major push to increase their presence in these locations. This is happening at the same time as many of these malls are looking to decrease their focus on traditional tenants and widen their focus to non-traditional tenants. The result is greater competition for limited spaces. So where will the tenants go? While there is a range of options, one area that could see an immediate boost is second-tier malls. And if they embrace the shift and focus on differentiation and better audience targeting, the wider bump that top-tier malls have seen could drive a trickle-down process of success to others below;
  • Dining Resilience: COVID and inflation have challenged many major dining chains, but the ability of companies such as Chipotle to overcome the successive obstacles indicates that the right strategy can still lead to success. Other dining concepts looking to offset rising costs by boosting traffic can learn from Chipotle’s approach and introduce menu innovations, engage in effective digital marketing and open new stores and drive-thrus in smaller, high-demand markets; 
  • Migration: Migration patterns are settling, enabling companies to understand better which shifts were longer-lasting and which were more a “flash in the pan.” The result is an opportunity to focus on addressing new needs early and grabbing a first-mover advantage to serve and develop relationships with recently migrated audiences;
  • Office: Office work was fundamentally disrupted over COVID, and while a comeback has certainly occurred, visits are still far from where they were pre-pandemic. While virtual work’s impact will last, the true magnitude is still unclear – but the long-term effects of the shift to hybrid and remote work should become far clearer in the coming year. In short, the “new normal” is not here yet, but we should be able to define it in 2023;
  • Q1 Retail Bump: Omicron's rise heavily affected brick-and-mortar performance in Q1 of 2022, and this low bar should give some sectors the chance to show outsized gains to start the year. The Q1 2023 bump could be especially important for segments like fitness, which traditionally see major peaks to start the year; and
  • Patience: The pandemic kicked off an extended, multi-year period of tremendous volatility. And as a result, some companies and segments look much worse – or in some cases better – than they should. The need for patience is critical, as the return of greater degrees of retail normalcy will provide significant boosts to some and limitations to others. But the question of how much of the success/failure for this chain is related to external factors and not their core strength is a significant one to keep in mind.
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