Payments have evolved dramatically over time, starting with bartering and progressing to coins, currency notes, checks, credit and debit cards, and now modern methods such as using smartwatches at point-of-sale terminals. Looking at the transformation over the years, it can be challenging to predict retail trends for 2023 as the industry is constantly evolving and can be influenced by a variety of factors. Some of these are technological advancements, how consumer behaviors change, and the impact economic conditions will have on 2023 retail trends.
Nonetheless, some of the biggest trends for 2023 have been gaining momentum in recent years and are likely to continue shaping the retail industry. In this article, we look at some of the biggest retail trends for 2023 that merchants and consumers should watch out for. Some specific advancements in payments technology and AI will significantly impact 2023 retail trends as the latest innovations. Other trends have been prevalent for some time and will continue to leave a lasting mark on the retail industry through continuous development.
eCommerce will continue to grow and transform
There will be a continuation of the increased focus on e-commerce and online sales. The acceleration and the shift towards online shopping, which has been ongoing for well over a decade and intensified over the last couple of years, will continue to gain traction. The eCommerce segment was forecast to exceed one trillion dollars in 2022. Many retailers continue to invest in eCommerce capabilities to meet this growing demand. With the increased use of AI and automation, retailers will discover innovative ways to improve efficiencies and enhance the customer experience.
More businesses will focus on continuing to lure shoppers back even as the economy wanes. To turbocharge flailing growth, many merchants may launch e-loyalty programs. Most retailers already have programs to get their customers to sign up with personally identifying credentials to build a profile on their consumer base and effectively target their clientele as they continuously collect data on them. As inflation begins to bite, more consumers may be tempted to enroll in these loyalty programs, especially if there are deals on brands they love.
And the data suggests that the results of loyalty programs garner results for both increased customer loyalty and profitability, according to joint research by the Harvard Business School and Bain & Company.
eCommerce has undergone its morphosis over the past few years with the advent of mCommerce in which more consumers take to their smartphones for their shopping needs. mCommerce is expected to grow past $700 billion by 2026, making up 41% of all retail eCommerce., according to Insider Intelligence, a digital media advertising and research firm. But that’s not the whole story; the retail trends in 2023 for eCommerce will be how it transforms from eCommerce to mCommerce to Social Commerce.
TikTok took the world by storm and has upended legacy social media firms such as Meta. It now poses a menacing threat in retail with its tried-and-true formula its parent company ByteDance succeeded with in China, shaping the future of social commerce in the US. TikTok’s discovery-first approach aligns well with Gen Z’s approach to purchasing trends. The platform is expected to add nearly 10 million social buyers in the coming year, motivated mainly by Gen Z, a mobile-first demographic experimenting with various online shopping experiences. According to a June survey, Gen Z consumers made their most recent social media purchases mainly because they found a product they liked.
The In-store Customer Experiences will leap forward
In recent years, consumers have noticed a trend towards more accessible and faster payment processing in retail, making shopping more convenient and encouraging more in-store visits. The key to successful payment innovation is to make the technology widely available, user-friendly, secure, and free or low-cost. The payment feature can also be added to other products to increase customer loyalty.
The payments and retail industries have become increasingly competitive, with many new businesses entering the market at the intersection of retail, eCommerce, and cloud technology, allowing for faster business startups. Additionally, customers have increased their online retail purchases with more disposable income, resulting in higher prices, margins, and profitability for retailers and payment companies.
As we kick off a new year, it’s essential to keep an eye on in-store technology as one of several critical retail trends in 2023, which will have a significant impact on consumer behavior and are likely to offer even more convenience and speed, encouraging more spending in stores, both in-store and online.
As customers return to physical stores, retailers are evaluating ways to improve the in-store experience, focusing mainly on the payment process, which was neglected in recent years. Over the past few years, retailers invested heavily in e-commerce. However, as e-commerce now accounts for 16.4% of all retail shopping, down from its peak of 18.8% a few years ago, merchants are starting to tackle a long-ignored problem; failing to modernize in-store technology, which could lead to lost customers.
One major retailer is exploring the use of a technology that facilitates the transfer of payments through sound waves. This advanced technology, previously utilized by military forces, will allow smartphone customers to initiate the app, send instruction encoding data into sound waves, and transmit them to another device through the speaker.
Other new technologies that can enhance the payment process for customers and provide the same seamless experience as when shopping online are also being evaluated. Although the cost of these investments may be a significant hurdle, the cost of doing nothing will be a more significant threat.
Retail will become more cashless and compete in Payments
The adoption of digital payments has been on a consistent rise for over a decade and will continue to grow in 2023. Today, over 80% of all transactions are non-cash transactions. That is one retail trend for 2023 that will intensify. The introduction of smartphones and technologies by companies such as Square and Stripe made it easier for merchants to accept card payments on the go. As apps became more popular, payment technology was integrated into smartphones, making it convenient for consumers to make payments. Mobile wallets and digital payment platforms like Apple Pay, Google Pay, PayPal, and Zelle have made it easy for customers to send payments and even pay bills and taxes.
Additionally, companies like Plaid provide a secure way for financial institutions and fintech apps to connect and facilitate the flow of funds. The main driver for this trend is the focus on customer convenience and the development of technological infrastructure to support digital payments. According to the AmEx Digital Trendex Digital Payments report, convenience is the number one driver of consumers’ adoption of digital payments. The report is aptly titled Digital Convenience Is Here to Stay.
Overall, payments will be one of the biggest retail trends for 2023, with retailers likely to ramp up offers of their own payment solutions to increase revenue and improve customer lifetime value. This trend, similar to the launch of store-branded cards, will allow retailers to leverage their brand and trust customers to offer payment options. However, implementing a payment solution is a complex process and will come with its own set of challenges. Merchants will need to work with financial intermediaries to set up merchant accounts and comply with security and fraud protection regulations. Additionally, the payments industry is a highly competitive market and may pose a significant challenge for new retailers. The recent example of Facebook’s Libra/ Diem initiative demonstrates that even a successful company in one industry with a massive consumer base can struggle to translate that success into payments.
Retailers will also venture into Buy Now Pay Later (BNPL), a payment trend that allows customers to purchase a product now and pay for it later. Third-party companies, such as Klarna and AfterPay, act as intermediaries between buyers and sellers, offering financing to customers and often obtaining discounts from manufacturers. Despite some BNPL companies experiencing a drop in valuations due to increased competition, the new mode of payment is still popular among customers. It may become even more so, given the current economic environment. As a result, BNPL will be one of the 2023 retail trends in which retailers will launch their own BNPL solutions.
There are concerns about the potential negative consequences of BNPL, such as it being compared to the exploitive payday loan industry of the digital era and limited oversight of the industry. Additionally, there needs to be centralized reporting of BNPL transactions, making it difficult for creditors to anticipate potential household liquidity issues. In 2023, it is possible that the Consumer Financial Protection Bureau may start mandating centralized reporting of BNPL transactions to credit bureaus. Despite these concerns, large companies such as Block, PayPal, and Apple have already waded into BNPL waters and are investing in and expanding their product offerings to include it.
AI will play a more prominent role
It was 20 years ago Kiva Systems started revolutionizing warehousing for many retailers. Mick Mountz, the founder of Kiva Systems, knew that his company would disrupt the material-handling industry by introducing mobile robots to warehouse pick-and-pack processes. However, he also understood that it wasn’t enough to have a novel idea and create the technology; he had to take on the risk of the innovation himself by pricing it in a way that made Kiva responsible for the performance, providing all components of the solution, and designing the company to deliver the entire customer experience. At the time, even that wasn’t enough. Mick had to help his customers mitigate the risk of buying a technology that was, as innovative as it was, still untested in the market.
Artificial Intelligence, or AI, is expected to play a significant role in retail in 2023. It has already been used to optimize pricing, personalize recommendations, improve supply chain efficiency, and enhance the customer experience through chatbots and virtual assistants. Additionally, AI-powered image and voice recognition can be used in physical stores for inventory management and checkout-free shopping tasks. 2022 was the year in which the world was introduced to award-winning art from artificial intelligence.
As a result, the customer journey will be pivotal as one of the major retail trends of 2023. Customers will be offered a more curated and white-glove experience within in-store retail. Retailers using technology to provide customers with more personalized and customized experiences will become more common, ranging from product recommendations to specifically curated marketing messages. Furthermore, with the help of AI, in-store shopping will continue to transform where retailers create experiences such as pop-up shops, experiential stores, or community spaces.
The widespread use of technology and AI impacting the customer experience will also make its mark on the logistics of getting the items to the consumer. With delivery times already becoming increasingly important, next-day and same-day delivery will be another one of many retail trends of 2023 in which retailers will find ways to speed up their delivery options. Amazon has been piloting drone deliveries within hours of orders being placed and is expected to start delivering packages using this system in 2023. Some other ways that AI will be a part of retail trends of 2023 include:
- Personalized product recommendations: AI-powered systems can analyze customer data and recommend products they are more likely to be interested in.
- Chatbots: Retailers will use chatbots to interact with customers in real-time, answering questions and assisting with purchases.
- Inventory management: AI-powered systems will be able to analyze sales data and predict future demand for products, helping retailers to optimize their inventory levels.
- Price optimization: AI-powered systems will be able to analyze market data and adjust prices in real-time to remain competitive.
- Automation of store operations with Robotics: AI-powered systems will automate tasks such as restocking shelves and tracking inventory, allowing retailers to reduce labor costs and improve efficiency.
- Augmented Reality: Retailers will use AR to enhance the in-store shopping experience, allowing customers to visualize products in their own space and make more informed purchasing decisions.
Integrating physical stores with digital technologies such as mobile payments, augmented reality, and digital displays, one of the biggest retail trends of 2023, will be an integrated and seamless end-to-end experience.
Conclusion
The retail trends of 2023 are expected to continue the shift towards e-commerce and online sales, with retailers investing in e-commerce capabilities to meet the growing demand. AI and automation will also play a significant role in improving efficiency and enhancing the customer experience. Additionally, more businesses will focus on e-loyalty programs and social commerce through platforms such as TikTok. In-store customer experiences will also see a leap forward with advancements in payment processing technology, making shopping more convenient. It’s important to note that these trends are influenced by various factors and constantly evolving, but retailers should keep an eye on these key trends to stay ahead in the game.
