No Match Found
2022 was quite a year for the retail sector. Consumer sentiment continued to fall throughout the year, from its high in Summer 2021, as the cost-of-living crisis bit and inflation increased pressure on already tight margins. But we also saw store closures ease and a blockbuster Black Friday. After a lot of negativity in the press and nervousness in the market, we even had a surprisingly positive Christmas trading period for many. As we move into 2023, will this volatility remain and how should retailers respond? And what are the trends that they need to focus on for success?
The success of this year’s Golden Quarter was defined by four key takeaways: Normality, accessibility, attractiveness, and polarisation.
Watch the recording of our Retail Briefing 2023, where we explore the all-important Christmas trading period, underlying trends and themes behind a quite positive Golden Quarter. We also look forward to the economic, political and consumer outlook for the year and what this all means for the market, retailers and consumers.
We’re cautiously optimistic about the year ahead. While it may not deliver the surprise success that we saw in 2022, there will be opportunities for retailers that get it right. It will, however, remain a challenging environment, for some areas more than others.
Our 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 - 9% now tell us they are either struggling or in trouble, slightly down from 13% in September 2022.
But even though inflation will ease, other financial concerns and job security will see consumers cut back. The cost of living crisis will continue to dominate thoughts, with 57% expecting to spend less because of the rising costs of everyday products. Elsewhere, worries over income (37%) and debts (37%) will also affect what people spend this year.
That will see discretionary spending squeezed over the next 12 months, with eating out, going out and clothing likely to be hit the hardest. Even in grocery there’ll be more switching and trading down, and we’ll also see many cut back on hospitality spending over the next year, similar to what we saw in the last recession when discretionary spending was being squeezed.
Even so, in more positive news, all consumers’ net spending intentions have increased slightly since the Autumn. And people tell us they intend to prioritise experiences, home and family this year.
We’re now starting to see 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, with 25% of over 65s and 20% of under 25s expecting to keep up their standard of living - largely a result of younger people living at home and getting wage increases, and older people having savings and benefitting from the pensions triple lock - compared to only 9% of 55 to 64 year olds. And that polarisation is evident not just in how much they’ll spend, but what they’ll spend on and where they’ll spend it.
Our 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.