2023retailindustryoutlook2023retailindustryoutlookContentsIntroduction3Economicoutlookfortheretailindustry4Achallengingenvironment5Lessonsfromleaders7Imperativesforprofitability9Summary12Endnotes1422023retailindustryoutlookIntroductionRetailersshouldembracethechangingconsumerandconsiderstrategicinvestmentsthatcouldenableprofitablegrowthduringinflationarytimesChangecanbegood,butconstantchangecanbedaunting.Retailerstodayarefeelingthehangoverofsuchvolatilityoccurringinthemostcondensedtimeframeofanyrecentbusinesscycle.Retailexecutivesarepreparingforthetidestoshiftagainin2023astherealityofeconomicheadwinds,geopoliticalstrife,arapidlychangingconsumer,supplychaindisruptions,andlingeringlaborissuescomeintoplay.Asweheadintothenewyear,onlyone-thirdofretailexecutivessurveyedareveryconfidentaboutmaintainingorimprovingprofitmarginsinwhatareexpectedtobeturbulenttimes.-1Ofcourse,manyoftheirtopconcernsarebeyondtheircontrol.Notably,nearlyallexecutivessurveyedexpectinflationtopressuretheirprofitmargins.Sixin10respondentsexpectinflationtoraiseoperatingcosts,andwhilepassinghigherpricesontoconsumershasbeenthenorm,manyquestionhowlongtheycancontinuethetrend.Theseretailexecutivesarealsopredictinghardtimesforconsumers,withnearlyallanticipatingdiminishedconsumptionin2023,resultingfromrisingfinancialconcerns.Inaddition,manyretailersfacedifficultyear-over-yearcomparisonsfromnestingpreferencesduringpandemiclockdownsthatcreatedastrongdurablegoodscycle.Otherretailersbenefitedfromgovernmentstimuliandconsumersreturningtoworkandschoolandarenowleftforecastingandprovidingguidancebasedontrendsthatcanbedifficulttodecipher,ifstructuralorepisodic.Buttheretailoutlookisnotallgloomanddoom;retailershavelearnedmuchaboutresiliencyinthepastfewyears.Massivedemandfluctuationsduringthepandemicforcedretailerstorethinkarchaicsystemsinfavorofmorepliableoperations.Seeminglyovernight,retailersrolledouthealthandsafetyprotocolsandestablishedomnichannelcapabilities.Andtheylearnedthatrapidlyevolvingconsumerpreferencesrequiremoreeffectiveanalyticsandtoolstobuildloyalty.Ifanything,thepastfewyearsshouldgiveexecutivesconfidenceintheirabilitytoweatherthenextstorm.Theworkforexecutivesin2023istoadvancetheinnovationscreatedduringthepandemic:todrivemoreprofitfromthecuratedexperiences,last-mileoptions,andconveniencesthatretailersrolledout—allatatimewhenthepursestringsmayneedtotighten.Tocheckthepulseofretailexecutives,weasked50leadersabouttheirexpectationsregardingchallengesandopportunitiesintheupcomingyear.Wewantedtobetterunderstandwhattraitsseparateleadersfromtherestofthepackandanalyzeplannedstrategiesandinvestmentsfor2023.Theresultsprovideauniqueoutlookonhowtoday’smarket,futureexpectations,andchangingconsumerneedsinformstrategiesfortheyear(s)ahead.32023retailindustryoutlookEconomicoutlookfortheretailindustryAnotefromDeloitteUSEconomistsDannyBachmanandAkrurBaruaThreekeyeconomictrendswilllikelyinfluenceretailsales.2First,aslowingeconomywillkeepretailsalesgrowthincheck.3Inourbaselinescenario(55%probability),weforecastGDPgrowthtoslowto0.9%in2023fromanestimated2%in2022and5.9%in2021.4Arelativelyhealthylabormarketwill,however,continuetoboostsales.Andthereisasignificantchancethatarecessionwouldmakethingsmuchworse.Intheeventofarecession(whichDeloitteratesata35%probability),theeconomywouldcontract,andunemploymentwouldrise.Suchaturnofeventswouldlikelyhitconsumerandbusinessdemandharderthanexpected,therebydentingretailsales.Second,inflationhasloweredconsumers’purchasingpower,despitegainsinnominalincomeduetothestronglabormarket.Eventhoughnominalaverageweeklyearningshaveincreasedby8.3%sinceDecember2020,realearningshavefallenby5%.5Thiswillweighonconsumerdemandand,hence,retailsalesvolume.Risingprices,however,willraisethenominalvalueofretailsales.Figure1showsnominalretailsalesandrealretailsales6sinceFebruary2020,withthetwoseriesdivergingsinceMarch2021duetotheimpactofinflation.

Whilenominalsaleshaverisen11.7%sinceMarch2021,realsalesaredownby0.7%.Also,highhomepricesandrisingmortgagerateswilldentdemandforhousing,therebyaffectingsalesatstoretypesthatincludebuildingmaterialsdealersandfurnitureandhomefurnishings.Third,consumerspending7onserviceshasbeenpickingupsteadilyasconsumersreturntobarsandrestaurants,takevacations,andenjoysportingeventsastheydidbeforethepandemic.Tosomeextent,consumersaredippingintotheirsavingstomakeupforwhattheymissedduring2020and2021.Thepersonalsavingrateisnowat3.1%,muchlowerthanpre-pandemiclevels.Ashiftinspendingtoserviceswillthereforeweighonretailsalesatstoressellingconsumergoods.However,thetransitiontoservicesisexpectedtoprovidesometailwindtofoodservicesanddrinkingvenues.Overall,weexpectrealpersonalconsumerexpenditures(PCE)ondurablegoodstocontractby1.8%in2023.Incontrast,servicesPCEisexpectedtorise3.6%in2023,accordingtoourbaselinescenario(figure2).Figure1.Whileretailsalesvolumeisslowing,nominalvalueofsaleshasgoneupduetoinflationIndexofretailsales(Feb2020=100)1351301251201151101051009590858075Feb20Jun20Oct20Feb21Jun21Oct21Feb22Jun22Oct22Nominalvalueofretailsales Realretailsales

Figure2.Consumerspendingindurablesisexpectedtocontractby1.8%in2023GrowthinPCEandcomponents(%)25Forecasts20151050-5-1020162017201820192020202120222023202420252026PCE Durablegoods Nondurablegoods ServicesNotes:Thedataisseasonallyadjusted.Realretailsalesarecalculatedbyadjustingnominalsaleswithheadlineinflation.Sources:UnitedStatesDepartmentofCommerce;DeloitteServicesLPeconomicanalysis.

Notes:ForecastsarebytheDeloitteUSEconomicsteam.Sources:UnitedStatesDepartmentofCommerce;DeloitteServicesLPeconomicanalysis.42023retailindustryoutlookAchallengingenvironmentAchangingrelationshipwithconsumersAsnotedintheeconomicoutlook,shiftingconsumerbehaviorwilllikelyweighheavilyonretailersin2023.Andotherconsumertransformationswilllikelycompoundtheissue.Retailers’roleintheconsumerjourneyhaschanged.Thepandemicacceleratedatrendalreadyinmotion:Consumersexpectthebestpriceinthemostconvenientwaypossible.Tocompete,retailershaverolledouttheactual(andvirtual)redcarpet,offeringfastlast-mileserviceslikecurbsidepickupandsame-daydelivery,personalshoppers,fitpredictingtools,andpaymentplans.Andretailershavemetconsumerswheretheyare—fromtraditionalbrick-and-mortarstorestometaversestorefrontsandeverywhereinbetween.So,itmaycomeasnosurprisethatcustomeracquisitionandretentioncostsarerising.Evenbeforethepandemicanddiscussionofthemetaverse,acquisitioncostsincreasedbymorethan60%between2013and2018.8Thissituationcouldbecomemoreproblematicin2023.Nearlyallexecutivesinoursurveysayconsumerswillexpectaseamlessshoppingexperienceacrosschannelsintheupcomingyear.Buttheyexpectconsumerstobesignificantlymoreprice-conscious,makingconsumersmorelikelytoshiftfromsourcetosource,poweredbypeerrecommendationsandpricecomparisonshoppingastheygo.Figure3.ThechangingconsumerWealthdistribution

Two-thirdsofsurveyedexecutivesexpectpricetobemoreimportantthanbrandorretailerloyalty,apotentiallytroublingpredicamentwheninvestorsarepressuringretailerstopushpriceincreases.9Overthenextdecade,consumersociodemographicshiftsareexpectedtooccuratanunprecedentedratecreatingever-expandinganddiverseneedsanddesires.Theemergingconsumerisgettingolder,moreobese,multi-ethnic,gender-positive,sex-positive,sexual-identityauthentic,mobile,moredigitallyreliant,andlessfinanciallysecure(seefigure3).TheyalsohavehigherexpectationsforcompaniestoupholdhigherESG(environmental,social,andgovernance)andDEI(diversity,equity,andinclusion)initiatives.10Ina2021study,three-quartersofGenZsaidsustainabilitywasmoreimportantthanbrandwhenmakingapurchasedecision.11Astheconsumertransformsintoacomplexmosaicofuniqueneeds,wants,andpreferences,itmaybeanimportantmomentofadaptationforanindustrybuiltformassproduction,distribution,andmarketing.Nearlyallexecutivessurveyedfeltthechangingconsumerwouldbeakeychallengefortheforeseeablefuture.Middleclassholdslesswealththantop1%affluentAmericans12

Amillennialatage40has~20%lessnetworththanaboomerdidatthesameage13

Non-whiteAmericans’buyingpowerincreasedfrom13%to19%from2000–202014

30%ofthenation’swealthisheldby0.25%ofUShouseholds15Risingobesity4in10USadultswereobesein2020,comparedto3in10inthelate‘90s16

FallingbirthratesUSbirthrateshavedeclined19%since2007;2020witnessedthelowestnumberofbirthssince197917

PopulationIncreasingdiversityThepopulationofage65+Asof2018,48%of6-togrewbymorethanone-third21-year-oldswerenon-white,inthepastdecade18versus39%in20021952023retailindustryoutlookSimplyput,retailersaregettingsqueezedfrombothsidesofthevaluechain—fromdemanding,price-consciousconsumerstoincreasingoperationalandsupplychaincosts.Astheindustrydealswiththeseimmediateconstraints,italsofeelsadditionalpressuresfromthreehot-buttonissues:Organizedretailtheft:Retailtheftgrew22%from2018to2019,accountingfor$61.7billioninlosses.20Someretailershavenotedtheproblemhasworsenedduringthe2022holidayseasonandhasgottensodirethatcoststocoverlostproductsandsecuritymayrequireclosingdoorsorraisingprices.21Asmanyexpertsanticipateaneconomicslowdownin2023,itwouldnotbesurprisingtoseeanevenfurtherincreaseinorganizedtheft.Citingthe2008–2009downturn,expertsnotedthatretailtheftseesanuptickintimesofeconomicstress.22ESG:Sixin10executivessurveyedsaidtheindustrywillfaceincreasedscrutinyoverESGdecisionsin2023.However,whenpushcomestoshove,manyretailerssaytheywillchoosetofocusonmarginenhancementopportunities.MorethanhalfareplanningminimaltonoESGinvestments,andthetopicdidnotmakethetopfivelistofexecutivepriorities.Withonly26%of250leadingglobalretailersmakingcommitmentstocarbonreductionbasedonScienceBasedTargets,23they(andtheworld)maynotbeabletoaffordtheseinitiativesbeingonthebackburnerforlong.

Laborissues:Sevenin10executivessurveyedsaidlaborwasthenumberonechallengeheadinginto2023.AsofNovember30,2022,879,000retailjobsremainedunfilled.24Hiringandretainingemployeeshasbeenalingeringissue,andcompetitionforhourlyworkersremainsfierce,withretailersforcedtoofferhigherwagesandmoreflexibility.The12-monthmovingaverageofmedianwagegrowthforlow-skilledworkersincreasedby6.7%inNovember2022,upfrom3.8%theyearprior.2562023retailindustryoutlookLessonsfromleadersRetailersdon’texpectaone-size-fits-allsolutiontouncoveringprofitablegrowthinthisenvironment,butwewantedtoinvestigatewhethertop-performingretailersexhibitanycommonbehaviors.Afinancialanalysisof100retailersduringthepastthreeyearsfoundseveralkeyenablersforsolidgrowthduringthepandemicthatputtheminpreferredpositions.26Pre-pandemicinvestmentsine-commerce,expandingomnichannelcapabilities,andoptimizingportfoliostomanagecostswereallcommontraitsofoutperformers.Whilemostalsobenefitedfromthepandemic-induceddemand,manyarenowfacingtoughyear-over-yearcomparisonsandaconsumerbaseshiftingfromgoodstoservices.Forexample,oneretailerrecentlyannounceditwasexperiencingaslowdownwithbig-ticketdiscretionaryitemsasitlappeddifficultyear-over-yearcomparisonsbutbenefitedfromsalesofconsumablesandtravelservices.27Giventhesemacroconsumershifts,sell-sideWallStreetanalystsarepaintingableakpicturefortheindustry.Ofthetop10performingcompaniesweexamined,onlythreewerepredictedtohaveEPSgrowthoverthenextthreeyears.

Forthoseretailersthatanalystsexpecttobetopperformersgoingforward,exposuretorelativelyresilientsegmentsandstrongbalancesheetshavebolsteredtheirsentiment.Inaddition,meaningfulprogressonkeylong-termstrategicinitiativestocreateefficienciesisseeninafavorablelight:Supplychain–InvestingheavilyinfulfillmentcapabilitiesOmnichannel–HeightenedfocusonthecustomerexperienceandtappingintoloyaltyprogramsDigital–Improvingthemarginprofileoftheire-commercecapabilitiesLeadershaveprioritizedareasformoderatetomajorinvestmentsUnlikelaggards,whichareplanningforminimaltomoderateinvestmentsacrossareas,leaderstendtoprioritizeinvestmentinareassuchasmarketingandmerchandising,omnichannelcapabilities,digitaltransformation,andsupplychain.72023retailindustryoutlookLeadersvs.laggardsWeseethesethemesechoedwhenweexamineleaderswithself-reportedtop-lineandoperatingmargingrowthexpectationsinoursurvey.Leaderstendtobedata-drivenandcanswiftlyrespondtothechangingconsumer.Theyprioritizeinvestmentsinmarketingandmerchandising,omnichannelcapabilities,digitaltransformation,andsupplychain.Giventhatmanyleadersareconfidentintheircompany’sabilitytosuccessfullyexecutebusinessstrategyandmaintainorgrowmarginseveninturbulenttimes,theirmethodsmayactasaroadmaptoamoreprofitablefuture.

ExecutiveSurvey:IdentifyingleadersandlaggardsForeveryrespondent,weassignedscoresfortheirresponsesbelow.Confidenceintheirorganization’sabilitytoexecuteitsbusinessstrategysuccessfullyin2023Confidenceintheirorganization’sabilitytomaintainorimproveprofitmarginsinturbulenttimesExpectationsabouttheircompany’syear-over-yearrevenuegrowthin2023Expectationsabouttheircompany’syear-over-yearchangeinoperatingprofitmarginin2023Basedontheiraggregatescores,wesplitthesampleof50respondentsintothreegroups:Leaders(n=21)havethetopone-thirdofscores,Laggards(n=18)havethebottomone-thirdofscores,whiletheremainingcomprisethemiddle(n=11).Figure4.Strategy?vs.investment?PositiononchartindicatesaverageacrossexecutivesAdvancedLeadersAdvancedLaggardsothersWorkforceOmnichannelCompetitiveCompetitiveSupplychainMarketingAlternativerev.DigitaltransformationMarketingOmnichannelESGtoM&ASupplychainAlternativerev.DigitaltransformationrelatedFunctionalFunctionalWorkforceESGM&AStrategyLimitedLimitedNoneNoneNoneMinimalModerateMajorNoneMinimalModerateMajorPlannedinvestmentsin2023Source:2023Deloitteretailoutlookexecutivesurvey.Question:Forthefollowingstrategies,pleaseassesshowadvancedyourcompany’sstrategyisrelativetoothersinyourindustry. Pleasechoosetheanswerthatbestdescribesthesizeofthefinancialinvestmentyourcompanywillmakeinthefollowingstrategiesintheupcomingyear(2023).Note:N=50.Averagesarebasedonscoresassigned;Strategy=None(0)toAdvanced(4);andInvestments=None(0)toMajor(3).82023retailindustryoutlookImperativesforprofitabilityTheconfluenceofobstaclesretailersfacecanmakethenextstepsdaunting.Assuch,webelievetherearethreekeyareasthatretailerscan—andshould—considernowtohelpcreateefficiencieswhileaddressingthechangingconsumer:last-milecapabilities,reverselogistics,andsocialcommerce.Supplychain:Last-milecapabilitiesThenewshitinNovemberthatthepandemic-inducedbacklogatCaliforniaportshadfinallycleared,morethantwoyearsafterithadbegun.28Butsupplychainproblemspersist.Severalretailersannouncedthatinventorieswereheavyheadingintotheholidayseason29astheyworkedthroughdelayedshipments.Incontrast,otherswarnedofholidayshortagescausedbyzero-COVIDpoliciesthatclosedfactoriesinChina.30Giventhecontinuingstruggles,sevenin10executivessurveyedsaidsupplychaindisruptionwillimpactretailers’growthduring2023.Thatleavesonlythreein10veryconfidentinnavigatingsupplychaindisruptionsintheyearahead.Attheotherendofthechain,retailersstrugglewithashiftinconsumerexpectationsanddigitalpreferencesthatmaycreateaneedformultiplelast-milesolutions.Asretailerslooktosolveinefficiencies,eightin10executivessaidtheyplantomakemoderatetomajorinvestmentstomodernizetheirsupplychainin2023.Last-mileguzzlesprofitsDuringthepandemic,demandforfastlast-miledeliveriessoared,andretailersobliged,oftenofferingfreeservicesandshippingtooffsetalackofin-storesales.Forexample,curbsidepickupduringtheholidayshoppingperiodmorethandoubledfrom2019to2020andheldsteadyinsubsequentyears.31Freeshippingwasubiquitous,butclawingbackofferingsnowisprovingdifficult;morethanhalfofconsumerswillbailontheirbasketwhennotifiedthattheyareresponsibleforshippingfees.32Asthesepreferencesforconveniencesremain,retailersareleftgrapplingwithhigh-touch(e.g.,picking,packing,andprocessing)transactionsthatareoftenunprofitable.Compoundingtheproblemisthatretailersmayowefeestothird-partyvendorsthatsupporttheshoppingjourneywithservices,suchasfit-predictingtools,productviewingtechnology,andfinancing.Companiespaymoretogrowtheirrevenueinthesechannels,which,inturn,shrinkstheirprofits,allatatimewhenconsumerspendingwilllikelycontract.

Retailersareinatoughspotasnearlyallexecutivessurveyedsayconsumerswillexpectfasterfulfillmentin2023,butrollingbackservicesthathavebecometablestakescouldhurtloyalty.Giventheseverityoftheproblem,itmaybetimetoconsiderenticingnonprofitablecustomerstoshopin-storewhilereservingthebestservicesforloyalshopperswithlargecartvalues.Thiscouldentailretailersofferingin-storecouponsorpaidmembershipsthatincludelast-mileperks.Forexample,onelargeretailerwithasame-daymembershipserviceisseeingsalesgrowthwiththeservice,despiteaminimumorderthreshold.33Sevenin10leaderssaytheyareveryconfidentthattheywillbeabletodeliveraseamlessexperiencetoconsumersacrosschannels,comparedwithonlytwoof10laggards.Todoso,retailersshouldconsidercreatingmoreprofitablelast-miledeliverysolutionsbyinvestinginautomatedmicro-fulfillmentcenters(MFCs).MFCscanincreasestoragecapacityandthroughputrates,fillordersformultiplestores,andcreateefficienciesbyfreeingupemployeeswhootherwisewouldbepickingorders.Inaddition,MFCscanexpandtherangeofsame-dayandnext-dayservicesretailerscanpotentiallyreach.34Omnichannel:ReverselogisticsChangingconsumerpreferencesforomnichannelservicesfueledbye-commercehavecreatedheadachesforreverselogistics.Consumers’inabilitytosee,feel,andtryonmerchandisecausesmuchhigherreturnlevelsthanin-storepurchases(30%vs.10%).35Compoundingtheproblem,nearlyhalfofconsumerssaytheymake“bracket”purchases,orderingmultiplesizesandcolorstofindoneitemthatworks.36Thebusinessofmerchandisereturnsismassive.Itaccountedfor$761billioninannuallostsalesforUSretailersalonein2021.37Nearlyeightin10executiveleadersfromoursurveyforeseeenhancingtheomnichannelexperienceasatopgrowthopportunityin2023,comparedtohalfofthelaggards.Executivesshouldlookattheirreverselogisticssystemstocreatefrictionlesstransactionstoreducelossandsavesales.Asreinforcedabove,thisalsoshouldbemanagedinthecontextofmarginprotection.92023retailindustryoutlookUnderstandingwhyreturnshappeninthefirstplacecanbeacriticalfirststep.Betteranalyticscanhelpretailersunderstandtheproducts,reasons,andprocessesthatdrivereturnsonlineandin-store.Inturn,retailerscangaintheabilitytoprovideaccurateproductinformationonline(e.g.,sizes,images,anddescriptions)whileintegratingtoolstoallowformorepreciseproductrepresentation(e.g.,augmentedreality).Suchcapabilitieswilllikelybecriticalwiththechangingconsumer.Forexample,whenproductsarevisualizedin3D,thereisa40%reductioninreturns.38AndAI(artificialintelligence),aspartofanimprovedanalyticssystem,canalsohelpwithfraudulentreturnsbyidentifyingtrustworthycustomersandspeedinguprepaymenttimes.39Thesetoolstogethernotonlysavecostsbutalsosignificantlyimpactthecustomerexperience.MakereturnsfrictionlessRetailersshouldembracereturnsandexchanges,makingthemamarketablecapabilitybysimplifyingthemforallcustomers.Agoodreturnpolicycoupledwitheasyandquickprocessescanbeessential,asshoppersaremorelikelytobeloyaltoaretailerwitheasyreturns.40Asconsumerconveniencesbecometablestakes,thetimeallowedforreturnsshouldmeetcustomerexpectationsandbecompetitivebutalsoencouragespeedtopreventseasonalexpiration.Retailersshouldcreateprocessesbywhichcustomerscanself-serveandreceivepromptrefunds,suchasconditionalcredit,toavoidcostlycustomerservicecallsthatcostupwardof$5each.41Figure5.Reverselogisticsrecommendations

SaveasaleEveryreturncanbeanopportunityforretailerstosaveasale,whetherit’sbysuggestingcomparableproductsonlineorusingin-storereturnsasanopportunitytoengagethecustomer.Itseemslikeasimpleoffering,yetprovidingexchangesonlineisanadvancedcapabilitynotofferedbymanyretailers.Allowinggueststoexchangeonlinepurchaseswithouthavingtoreturnitemsfirstandthenplaceaneworderreducescostlytouchpointsthatcansurpassproductvalue.Forexample,aretailer’snetprofitistypicallyupto5centsforeverydollarinsales.However,areturncancostaretailer15–30centsforeverydollarinhandling.42Usingdataanalyticstosuggestareplacementsize,color,orevenanewstylefurthersupportsafrictionlessexperienceandmayhelpsavesalestransactions.Retailersshouldalsolooktotakeadvantageofin-storereverselogisticscapabilities.In-personreturnssatisfycustomers’desireforimmediatecreditwhilereducingexpensesformailedreturndelivery.Theyhavetheaddedbenefitofallowingforstaffengagement,creatingopportunitiestoshowsimilarstylesorsuggesthigh-marginitems.Andwiththegrowingpopularityofreturnbars—storesthatpackandshipreturnsforpartneringretailers—thereisanopportunitytodriveadditionalstoretrafficandexpandthefootprintoftheirclientbase,anidealsituationduringinflationarytimes.Recentdatasuggeststhatretailersparticipatinginreturnbarssavemorethan20%inprocessingcosts.43OfferexchangesIssueconditionalcredituponforonlinepurchasescarrierpickupSellreturnedUseblockchainitemsatmarkdownstotracktransactioninsteadofincurringandreturnhistorycoststomovethemtodistributioncenters

Providein-personreturnoptionsConsiderbecomingareturnbartodriveadditionalstoretraffic

UseelectronicsolutionstosimplifyreturnprocessesforstoresandfulfillmentcentersHedgeagainstshippingvolatilitybyusingmultiplevendors102023retailindustryoutlookDigital:SocialcommerceAsretailerstakestockofthechangingconsumer,sixin10executivesforeseestrengtheningdigitalcommerceofferingsasatopgrowthopportunity.Specifically,manyseeopportunitiesaroundsocialcommerce,withsixin10expectingconsumerstopurchaseproductsdirectlyonsocialmediaplatformsin2023.Executivesseesocialinfluencersasanopportunitytoacquiremicro-segmentedconsumersasdemographicchangesleadtonewneeds,desires,andpreferences.Anotherappealingfactoristhatdigitallynativegenerationsaregainingmorepurchasingpowerandshowingupinsignificantwayswithsocialcommerce.Forexample,60%ofGenZand56%ofmillennialsplannedtousesocialmediaaspartoftheirholidayshoppingjourneyin2022.44CreatingbrandloyaltyandprofitabilityInvestinginthischannelnowisparticularlyattractiveassocialcommercemayhavecostefficienciesforretailersincustomeracquisitionandretention,amongotherways.Forexample,paidsocialmediasearchadvertisingcanreduceacquisitioncosts,giventhetargetednatureoftheadvertising.45Collaboratingwithinfluencerscanproduceefficienciesaswell.Theaverageconsumerismorewillingtotrustabrandiftheyseeitadvertisedbyacreatortheyalreadyknowwithintherealworld.Thetrust,interest,andlovetowardtheirfavoritecreatorstransfertothebrand.46Whenbrandspartnerwiththerightcreators,theycangainaccesstopotentialconsumerswhocanbeacquired,sidesteppingasignificantelementofthebrands’marketingwork.Figure6.Socialcommercetrendsontherise

Inaddition,insteadoftryingtobeomnipresentonallsocialchannels,retailerscanleveragethesetbaseandcommunitythatcreatorshavedevelopedacrossmultiplesocialplatforms.Giventheperksoftheplatform,sevenin10executivessurveyedexpectretailerstocollaboratewithsocialmedianetworksandinfluencerstobenefitfromgrowthinsocialcommerce.It’ssuchapromisingchannelthatmorethanhalfofleadersandlaggardsagreethatconsumerswillincreasinglypurchaseproductsdirectlyonsocialmediaplatformsandacknowledgethestronggrowthprospectsofsocialcommerceinthenextfiveyears.SocialstrategiesforsuccessThecostofacquiringanewcustomercanbeuptosixtoseventimesmorethanretainingoldcustomers,47andsocialcommercecanhelpreinforceexistingcustomerloyalty.Retailersshouldinvestintechnologiestoprovideaseamlesspurchasingexperiencewithinsocialchannelsandshoppablemediatonudgeuserstowardpurchasesandcreateloyalty.Enablingshoppabletagswithproductinformation,embeddingthebrandwebsiteintothesocialmediaapp,andenablingin-apptransactions