The consumer dilemma Save or spend?

The world of retail is moving faster than a new PlayStation console on launch day. Luckily, we’ve got bags of consumer insight at the ready to help you work out what’s next for the industry.

Big questions are swirling around the future retail trends of 2023:

  • What are people spending more on? 
  • Which generations are cutting back most?
  • What does the future of luxury look like?
  • Do consumers really care about brand sustainability?

Navigate the uncertainty and make better strategic decisions with the help of these top 10 retail trends worth adding to your basket.

1. 47% of consumers predict their online shopping behavior will increase in future

When it comes to the big battle of in-store vs online ecommerce, our May Zeitgeist data shows where we’re headed. Almost half of consumers think they’ll do more online shopping in the future, with just 12% expecting this behavior to decline. 

But as our global data proves, physical retail continues to be a major contender. 2 in 5 Generation Z consumers say they prefer to shop in-store than online, a figure that’s stayed consistent since 2020. This may seem surprising, given the mass store closures seen during the pandemic and consumer demand for faster delivery times – yet it reminds us the in-store experience still holds a lot of cards.

We see no end to brands moving to brick and mortar stores, especially within clothing and grocery categories as Ted Baker, Lidl, Moss Bros, and Screwfix all plan to open new stores in 2023. Supermarket contender Amazon Fresh is also one to watch, set to roll out a whopping 260 stores across the UK in the next three years thanks to impressive retail growth.

In a shift toward what some are calling ‘phygital retail’, businesses are combining the best bits of physical stores and digital retail to create a hybrid shopping experience for customers. Take Deliveroo, for example, who just opened their first physical grocery store with digital kiosks. This movement may explain why many high street brands are choosing to bridge the gap now.

2. 57% of consumers think their personal finances will improve in the next 6 months

While it’s true people are becoming more price-conscious (and some are preparing for the worst), financial optimism isn’t as low as you might expect, given the current cost of living crisis

In July, 70% of consumers said they were very or somewhat financially secure. And many are still treating themselves to everyday luxuries.

‘Treat purchases’ bought by internet users in the last six months include:

  • Clothing (37%)
  • Accessories (28%)
  • Technology (28%)
  • Beauty products (22%)

Despite all the negative news surrounding inflation and rising prices, retail trends prove customers are still willing to make room for affordable luxuries.

More on this next.

3. Year-on-year, there’s been a 10% rise in people buying hair styling tools

There’s something in the hair. Compared to this time last year, consumers seem to be going out more often – with more people buying travel (up 15%) and concert tickets (up 26%). 

With that in mind, it’s no wonder purchases of fragrances, shoes, and hair styling products have all risen slightly too. This is a key trend we’ve seen in earlier recessions; in times of hardship, people turn to smaller, more affordable treats, like cosmetics. Economists dub this “the lipstick effect” – or as Coty recently redefined it: “the fragrance effect”.

On the flip side, bigger and more expensive purchases like white goods and home furniture are in for a tougher time. 

Not only are consumers spending less time at home than a year ago, they’re buying less home exercise equipment (down 15%), garden furniture (down 9%), and home furniture (down 13%). 

4. 23% of consumers say they’ve become more price-conscious about luxuries in the last 3 months 

Many price-conscious consumers are cutting back on luxury goods, but some are actually splashing out and spending more on them.

That’s why high-end brands continue to report record sales and profits, while mass retailers are trimming their outlooks for autumn and winter. Lamborghini is reporting record total retail sales, while Ferrari is raising its full-year forecasts.

These retail trends align with the consumer behavior we’re seeing in our data. Since Q2 2020, the number of US consumers interested in buying a Ferrari or a Lamborghini has jumped a whopping 121%. 

It’s safe to assume post-Covid revenge spending from high rollers is responsible.

5. Under half (43%) of consumers say they spend time looking for the best deals

Deals and discounts are powerful, but the number who say they spend time looking for them has dropped a little since 2020. 

Coupons matter more to older consumers, with 42% of baby boomers saying they make them more likely to buy a product online. Retailers looking to target younger customers should consider a different strategy fueled by audience insight

On the whole, people care more about quality (53%) than cost (36%) when deciding which brands to buy from. Value for money is front of mind. In fact, perceived cost-effectiveness is helping to drive more sales for brands – even if their products aren’t actually costing any less. 

Reliability and trust go a long way with today’s shoppers.

6. 58% of consumers would rather pay more for an eco-friendly product

On the surface, this sounds like a positive trend for the retail industry. But let’s look at the bigger picture here.

Yes, the majority of consumers would rather pay more for an eco-friendly product than less for one that isn’t. But that figure has dropped 6% in the last two years.

As the cost of living crisis escalates, sadly, sustainability is becoming more of a ‘luxury’ problem. As in, people will only make eco-friendly choices if they can afford to. There’s a big difference between what they’d rather do, and what they’re actually doing – and consumers in the United States are a prime example.

Our Core Plus research sees a similar decline across four key European markets. When choosing an energy provider, the number of consumers saying environmental credentials are the most important factor has plummeted 14% since 2021. 

Customers still want to be sustainable, but it’s become harder to prioritize this with everything else going on in recent years. 

7. 36% of online shoppers use filters/effects/lenses on Instagram, TikTok, and Snapchat each month

Beauty and fashion industry brands helped lead the way with AR technology during the pandemic, allowing customers to try on products via a virtual experience and boosting ecommerce sales.

Now an integral part of social commerce, AR is expanding to cater for more hybrid shopping experiences. And many big brands are taking note.

Just look at Walmart, which is rolling out two new app-based AR tools to enhance the experiences of both online and in-store shoppers. These new apps will allow customers to view Walmart furniture in their home, and also see personalized product information based on their preferences.

The retail giant is also making its first foray into the world of metaverse shopping, with two new branded experiences in Roblox targeting younger consumers.

It’s crucial for brands to keep experimenting with social media marketing and find ways to engage today’s customers. Use retail trends to your advantage. The more personalized, interactive, and frictionless you can make virtual shopping experiences, the more effective they’ll be.

8. 4 in 10 Gen Z impulse buy online at least once every 2-3 weeks

Speaking of younger shoppers – did you know they’re more likely to impulse buy? 

It’s likely because they’re using social media much more for product research. If you’re worried about the effect this could have on returns logistics, rest assured – 65% of impulse buyers say they’re satisfied with these purchases every time or most of the time.

That doesn’t, however, rule out future logistics challenges. Going forward, every online retailer should focus on improving this figure by giving product information plenty of TLC. Making descriptions more reliable and personalized will go a long way with younger consumers and help balance out declining trust in online reviews.

Impulse spending is a big opportunity for ecommerce, and retailers that can best target the needs and desires of these customers will reap the rewards.

9. Since 2020, there’s been a 14% rise in Instagrammers using the app’s Shopping Bag feature each month

Following on from our last point, social media shopping is slowly gaining traction. Almost 1 in 5 impulse buyers say social media ‘buy’ buttons are one of the most common reasons they make unplanned purchases.

Despite Instagram considering changes to in-app shopping features, retail trends show being able to browse items and check out in a few taps is driving consumer confidence in social shopping. With retail technology directly embedded into platforms, it’s almost too easy for today’s shoppers to go on a spending spree.

The takeaway here? Make customer journeys as smooth and easy as possible, and you’re onto a winning formula.

10. 54% of those who return items bought online say they’d be at least somewhat likely to pay to send things back

The pandemic supercharged the online delivery market. No longer a point of differentiation, but a necessity to compete in the retail industry, many companies have a big decision to make about their supply chain. 

Free returns come with costs for companies (and the planet), but many customers still consider them a minimum standard of service, and any additional costs could put them off as the cost of living crisis worsens. 

Despite these concerns, online shopping’s golden age of free returns may well be coming to an end. Boohoo is the latest brand to charge customers for returns, joining the likes of Zara, Next, UNIQLO, Sports Direct, and more. 

As more brands jump on the bandwagon and paid returns are normalized, it’ll become easier for customers to embrace the change, should retailers choose to make it. 

Is this what the future of commerce will look like in 2023? Only time, and retail trends, will tell.

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