RETAIL

EVOLUTION2023

AUSTRALIA

dentsu

ABOUTTHISPIECE

ThisreportisanevolutionoftheFutureofRetail,reviewingtheeventsof2022andthefutureimplicationsforretail

successandinnovationin2023andbeyond.

Inthisclimateofgeopoliticaland

financialuncertainty,wealsowantedtoexplorehowAustralianconsumersare

feelingabouttheirfinancialsituationandtheAustralianeconomyandwhattheyarebuyingandcuttingbackon.

OuranalysiswasbasedonourDISCUSsurvey–conductedasanonlinesurveywithfieldworkrunningeachweekfromMondaytoFriday.Werecruitn=400

randomlyselectedAustralians16+fromanonlinepaneleachweek.Thesampleisrecruitedwithspecificnationally

representativequotasinmind;based

uponage,genderandlocation–aswellasextensivesecondaryresearchfrom

varioussources.

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KEYCHALLENGES

REMAINBUTSAVVYRETAILERSARE

TURNINGTHEMINTOOPPORTUNITIES

Afteraverystrongyearforretail,thelastquarterof2022,andparticularlyDecembershowedthebeginningofa

slowdowninconsumerspend.Mostexpertspredictamore

difficult2023,asconsumersentimentstartstobereflectedinconsumerbehaviour.Therisingcostofliving,higher

housingcostsandmortgagepaymentswithinaglobalbackdropofuncertaintywillhaveanegativeimpacton

consumers’sentimentandspendingin2023.Accordingto

theABS1retailsalesvolumesfell0.6%intheMarchquarterof2023.

Inaddition,theindustrycontinuestofaceotherongoing

challenges,inAustralia,butalsoglobally.Businessesface

staff-shortagesanddifficultiesfinding,training,andretaining‘human’talent,butatthesametimea‘newretailworkforce’isshaping;theuseofdigitalhumanscontinuestoadvanceatafastpace,someretailersarealreadyusingthemaschat

botsandinfluencers,ortomodelfashiononlineandhelpwithcustomerfittings2likeJapanesefashionbrand

ZOZOtown,andAIcompaniessuchasSoulMachines,arenowofferingGPT-3integrateddigitalinfluencerslikeSuki.Otherretailersareoptingfor100%automationsolutions:Buddy’sbar,anewbarinSydney’sNewtownhasnobartendersandinDecember2022,McDonaldsopeneditsfirstfullyautomatedrestaurantinTexas.

Supplychainissuesarelikelytocontinueatleastuntilmid-2023accordingtoARA.Managementofsupplychainsand

inventoryvisibilityandoptimisationshouldbeakeyareaoffocusforretailersin2023andmovingforward,consideringthat65%ofAUcustomersexperiencestockouts,withnearly40%ofthosegoingtoadifferentretailerforthesameorasimilarproduct3buttechnologyishelping;andRFID,smart

shelves,robots,cloudcomputingandmachinelearningkeepgainingmomentumforstockmanagementand

inventoryoptimisation.

3

dentsu/RetailEvolution2023

InJuly2022,HugoBossrolledoutRFIDtechnology

globallyinallitsstoresandInteliscurrentlyworkingonAIpoweredsmartshelvestodetermineoutofstock

productsandtodeliverpersonalisedexperiencesatpointofsale.

Lastmilecontinuestobeachallengeforallretailers,asitisprobablythemostcomplexandexpensivepartofthe

supplychain,butakeypartoftheshoppingexperienceforcustomers.Ourownresearchshowsthatonlinedelivery

delays(36%)wasthebiggestsourceoffrustrationwhenshoppingonlineduringthe2020COVID-19outbreakandcurrent2023DISCUSdatashowsthatcostofdelivery

(35%)andnotwantingtowaitfordelivery(29%)aretwoofthemainreasonsstoppingAustralianconsumersfromshoppingonlineafterthedesireforaphysicalexperience.

Brandsaretappingintoinnovationandexceptional

deliverycustomerservicetosatisfyconsumersdemand

forfasterandbetterlastmileexperiences.InNovember,ColestestedapilotdronedeliveryserviceintheGold

Coastandsomepremiumfashionbrandsarepartnering

withluxurycourierservicessuchasBritish’ToshiorHarperConcierge4tohandleathomeadjustmentsandreturns;

withthelaunchinAugust2022ofAmazonfreeone-daydeliveryforPrimemembersinSydneyandMelbourne,

Amazonisagainsettingnewexpectationsforconsumersandanewbenchmarkforretailersinthisspace.

DespiteresearchshowingthatmostAustralians(53%)

willbemoreloyaltoretailersthatofferseamlesscross

channelexperiences5,retailersarestillplayingcatchupandonly?ofAustralianretailersletconsumersstart

transactionsononechannelandcompletetheminthe

other6.SavvyretailerssuchasWalmart,NikeorZaraareleadingtheway,evolvingomnichannelexperiencesto

reduceconsumerfrictionandimplementingmoreflexibleoptionssuchasBOPIS,ROPIS,‘fulfilmentstores’and

othernew‘omniservices.’Theaimistogetclosertothecustomerandsatisfytheirexpectationswhilsttryingtoreducethemassivecostsofdeliveryandreturns.

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WHATCONSUMERSARETELLINGUS

RIGHTNOW

AsAustralianconsumersareincreasingly

impactedbytherisingcostoflivingand

inflationarypressures,wehaveaskedthem

howtheyfeel.Wehavealsoaskedabouttheirmainconcernsandwhethertheyare

cuttingdownonexpensesorplanningto

cutdownonexpensesinthenext6months.

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HIGHLEVELSOFCONCERN

ConsumersmainfearsatpresentaretheAustralia’s

economy(30%),Climatechange(15%)andtheHousingmarket(14%).

56%aremoderatelytoextremelyconcernedabout

theircurrentfinancialsituation(14%arenotconcernedatall.23%BabyBoomersarenotconcernedatall).71%aremoderatelytoextremelyconcernedaboutthe

strengthoftheAustralianeconomyatthispoint.

WomenareshowinghigherlevelsofconcernabouttheAustralianEconomy-73%ofwomenare‘moderatelytoextremelyconcerned’vs.68%ofmen.Whenaskedto

ratetheirlevelofconfidenceintheAustralianhousingmarket,theaverageAustraliangavearatingof41/100;men45/100andwomen36/100.

Consumersarefocusingontheessentials;theaverageAustralianisallocating37%oftheirincometohousingandessentials(e.g.mortgage,rent,utilities,essentialbills)and26%oftheirincometogroceries.

56%

OverhalfofAustraliansare

moderatelytoextremelyconcerned

abouttheircurrentfinancialsituation.

BUTTRYINGTOSTAYCALMANDINCONTROL

Whenweaskedthemabouttheirmostdominant

emotions,somewerenegative;‘Anxious’(19%),

‘Depressed’(11%),‘Sad’(6%),‘Bored’(6%)andAngry(4%)butalsopositive;‘Calm’(16%),‘Grateful’(11%),‘In-control’(10%),‘Hopeful’(9%)and‘Joy’(8%).OurDISCUSsurveyisshowingthatoverallAustraliansarestillfeelingslightlymorepositivethannegative

emotions.Whenweaskedthemwhattheyneednow,theyrespondedthatSecurity(19%),Stability(13%),Positivity(11%),Freedom(10%)andNormalcy(9%).

dentsu/RetailEvolution2023

THE‘GREATCUTBACK’

Consumersaretryingtostayincontroloftheir

finances,andtheyarecuttingdownonexpenses.

WhenweaskedAustraliansaboutthemethodstheyarecurrentlyusingtocutdownonexpenses,60%

respondedthattheyarecookingmoremealsat

home,54%arediningoutlessfrequently,54%arepurchasingcheapergroceries,49%aredelaying

majorpurchases(i.e.,car,homeappliances),48%

arecuttingbackonotherentertainmentoutsideofhome(i.e.,movies,concerts),47%arecuttingbackonfooddelivery,45%arediningoutatcheaper

establishments,44%arecuttingbackon

internationalordomestictravel,43%areswitching

tohome/whitelabelbrands,40%arecuttingbackonpaidgym/sportsfeesand35%arepurchasing

moreorstartedtopurchasemoresecond-hand

items.22%respondentshavenoplanstocutdownonexpenses.

Theglobalsubscriptione-commercemarketsizeisexpectedtoreach$904.2billionby20267butmanysmallDTCsubscriptionservicesmaynotsurvivethe‘GreatCancellation’alreadyfeltintheUKandtheUS.Australianconsumersarecertainlycuttingbackonentertainmentsubscriptions.Australians

cancelledmorethan1.3millionvideostreaming

accountsintheDecemberquarteranddatashowthattheycontinuetodosoin20238.Ourresearchshowsthat29%arecurrentlycancelling

entertainmentsubscriptions(i.e.,Netflix,Stan)tocutdownonexpenses.

Luxuryfashion,jewellery&accessoriesand

electronics&whitegoodsarethecategoriesmostimpactedbycutsinspending.

WhenweaskedAustraliansaboutthemethodstheyareusingtocutdownonexpenses

46%

Areswitchingtocheaperbrands

Whenweaskedconsumersaboutthemethodtheywouldconsidertocutdownonexpensesinthe

next6months,theoutlooklooksmorepositive.Lessrespondentsareplanningoncuttingbackacrossallcategoriesandthenumberofpeoplethathavenoplanstocutdownonexpenses

increasedto39%(from22%).Itwillbeinteresting

toseeifthis‘Greatcutback’isshort-livedandwhetherthesemorepositiveintentionswill

translateintoactionsinthenext6months.

QUESTIONSFORBRANDSANDRETAILERS

1.Howcanwebestalignourmarketingstrategywithconsumers’needsandconcernsfor2023?

2.Howcanwedesignnewcommercestrategiestohelpconsumersfeelincontroloftheirbudgets?

3.Areweprovidingthemwiththesecurity,stabilityandpositivitytheyneedrightnow?

4.Areweclearlyandtransparentlycommunicatinghowwearesupportingthemviapricediscounts,loyaltyandre-commerceschemes?Arewetransparentlycommunicatingpriceincreasesandwhythisishappening?

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WHATWEEXPECTFORRETAILIN2023

In2023weexpect4subtrendsthatstemfromthemainretailtrendsidentifiedinthe

dentsuShopperDNA:TheFutureofRetail

?Pragmaticsustainability:In2023sustainableactionswillbealifestylechoicebutalsoaneconomicnecessity.

?SubtleTech:Retailersareturningtotechnologytofutureprooftheirbusiness,cut

costs,anddeliverbetterCX.However,movingforwarditisimportanttofindtherightbalancebetweenhumanandautomatedexperiences.Technologyshouldbeuseful,

convenient,andunobtrusive.

?BattleofTitans(forthecustomer,theirdata&themedia)Titanbrandscontinuetheirbattleforconsumers,theirdataandthemediaintheirnever-endingquestforgrowthanddiversification.

?Seekingahumantouch:ConsumersarereturningtoIRLretailpostpandemic.Savvyretailersareofferingthemsensorialexperiencesandapreviewofthestoreofthefuture.

8dentsu/RetailEvolution2023

PRAGMATIC

SUSTAINABILITY

Sustainableproductshaveseensalesgrow5.6timesfasterthan

thosenotmarketedassustainable.

HarvardBusinessReview

In2023wewillseethatsustainablevalues&habitsandthecost-of-livingcrisiswillencouragemany

consumerstoreducetheirconsumption.Sustainableactionswillbealifestylechoicebutalsoan

economicnecessity.Actionslikebuyingsecondhand

items,repairingproductsinsteadofthrowingthemaway,drivinglesstocontrolpetrolspendingor

cuttingbackonheating,electricityorwater

consumptiontomanageutilitybillswillbepervasivein2023.

Ourresearchshowsthat35%respondentsare

currentlypurchasingmoreorstarttopurchasemoresecond-handitemstocutdownonexpenses.

Whilstresearchshowsthat80%ofconsumersnowprefertobuybrandsthatalignwiththeirvalues9

recentAPACdentsuKantarresearchshowsthatthereisstilladisconnectbetweenconsumer

intentionandactionwhenitcomestosustainable

consumption,andoneofthemostcommon

challengesformarketers(56%)isconvincing

consumerstowalkthetalk,asfewpeoplewhoreportpositiveattitudestowardecofriendly

productsandservicesfollowthroughwiththeirwallets10.Thereareobviouslyawiderangeof

reasonsbehindthisconsumerbehaviourbutthereisnodoubtthatthereisstillabiggapinthemarketforbrandstomakecost-effectiveproductsthatalign

withconsumers’environmentalvalues.

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SUBTLETECH

60%oforganisationsin

Australiawillscaleuptheirroboticprocessautomation(RPA)orachievean

enterprise-wideRPAby2025.UiPath

Theretailsectorcontinuestoincreasetheadoptionofautomation.Itisestimatedthat40%ofthesector

isnowautomated,butthiscouldjumpto60-65%

overthenextthreetofouryears11.In2022,wehaveseenanexpansionofautomatedstoresandan

increaseinthenumberofself-checkoutsand

automatedinterfacesorrobotsinstoresaswellasAIandindustrialrobotsinsupplychains.AIand

machinelearningarealsoincreasinglyusedtopersonaliseshoppingexperiencesortoforecastdemand.

Australianretailershavefacedmanychallenges

duringthepastfewyears.FromCOVIDlockdownsandrapidchangesinconsumerbehaviour,tosupplychainissues,labourshortagesandinflationary

pressures.Retailersarerelyingontechnologyto

futureprooftheirbusinesses12,improvetheirbottomlineanddelivertheomnichannel,convenientand

hyper-personalisedCXthatconsumersincreasinglydemand.

However,technologyshouldbeuseful,convenientandunobtrusiveandmovingforwarditisimportanttofindtherightbalancebetweenhumanand

automatedexperiences,anexampleofthisisthe

movebysomeretailersfromonlineAIbotstomoretraditional‘human’SMScustomerserviceas

consumersseekahumantouchindigitalchannels.13

dentsu/RetailEvolution2023

BATTLEOFTITANS

(FORTHECUSTOMER,

THEIRDATA&THEMEDIA)

RMNswillbethethirdbigwaveindigitaladvertisingfollowingsearchandsocial.

eMarketer

Titanbrandscontinuetheirbattleforconsumers,

theirdata,andthemediaintheirnever-endingquestforgrowthanddiversification.TheGrowthofRMN’s(RetailMediaNetworks)acceleratedin2022and

accordingtoForbesisnowthefastestgrowingad-

supporteddigitalmediachannel.eMarketer

estimatesthatAmazon’snetadrevenuesin2023willbemorethanGoogleandMetacombined14.

Consumers’dataistheforcebehindtherapidgrowthofretailmedianetworks,anditisalsoatthecoreofotherTitanBrandssuchasGoogleandMeta.The

meteoricgrowthofAmazonasaretailmedia

networkshowsthatTitanBrandscandiversifyand

scaleveryquickly,gainingcompetitiveadvantageinnewverticalsastheysitonanextremelyvaluable

poolofdataandpredictiveinsightsintotheir

customers.Moreimportantly,consumersrespondtothis‘serendipity’andconsistentCXwithloyalty.OurConsumerVisionshowsthatby2030TitanBrands

willbeaone-stop-shopformostconsumers’needs.ForesightFactoryresearchdemonstratesthatthemorepeopleuseonebrand(suchasAmazon)for

servicestoday,themoreopentheyaretoofferingsfromthesamebrandinthefuture.

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2023SEEKINGAHUMANTOUCH

1in10Australiansadmittedtocallingcustomerservicejusttohearahumanvoice.Genesys

WhileeCommerceremainsverystronginAustraliaandwillcontinuetogrowand

potentiallydominateretailinthefuture,it

onlyrepresents18%ofthemarketatpresent15.Consumershavebeenreturningtobrick-

and-mortar-storestoenjoythetactile/humanexperienceandtodiscovernewproductspostCOVID-19.

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IT’SNOTPHYSICALVSDIGITAL.IT’SBOTH.

AustraliaPostshowsthatretailerswithphysicalstoresandonlinepresenceshowacollective7%increasein

shareofonlinespendcomparedto2019andtheAydenAustraliaRetailReport202216highlightsthat51%

ofAussieconsumersaremoreloyaltoretailerswho

havebrick-and-mortarstoresandonlinestores,48%ofcustomerssaidpersonalisedcustomerservicewas

anotherreasonforin-storepopularity.

OurownDISCUSresearchshowsthatmostAustraliansshopinstoreorprimarilyinstore;

38%

saytheyshopprimarilyinstorebutwillpurchasesomeitemsonline.

onlyshopinstore.

shopinstoreandonlineequally.

shopprimarilyonlinebutwillpurchasesomeitemsinstore.

30%

18%

12%

Themainbarrierstoshoppingonlinearethat

48%

liketophysicallyseeortouchtheitemstheypurchase.

35%

35%

enjoyshoppingandbrowsinginstore.thecostofdeliveryistoohigh.

29%

don’tlikewaitingfordelivery.

Oneoftheprimarybenefitsofin-personshoppingisimmediacy,29%don’tlikewaitingfordelivery

whichmeansthatsame-dayonlinedeliverycould

potentiallybecomemoreappealingthanphysically

goingtothestoreforasignificantsegmentofconsumers.

Women(51%)aremorelikelythanmen(44%)

tosaythatliketophysicallyseeortouchthe

itemstheypurchase;theyarealsomorelikelytosaythatthecostofdeliveryistoohigh(41%)orthattheynevermeettheminimumamountfordelivery(16%).

Menaremorelikelytosaythattheyliketogetexpertadvicefromstaffmembers(14%).

Boomersarethegenerationmostlikelytosay

theyliketophysicallyseeortouchtheitems

theypurchase(61%)theyarealsomorelikelytoenjoyshoppingorbrowsinginstore(40%)andtogetexpertadvicefromstaffmembers(15%).Theyarealsomorelikelytosaythattheydon’tliketosharepersonal

detailsonline(creditcarddetails,address)22%.

Themainbarrierstoshoppinginstoreare

crowds

betterdealsonlinebetterpricesonline

enjoyshopping&browsingonline.

27%

27%

24%

24%

Womenaremorelikelythanmentosaytheydon’tlikecrowds(31%vs23%)andtheyare

theyarealsomorelikelytosaythattheyenjoyshoppingandbrowsingonline(28%vs19%).

Millennialsaremorelikelytosaythattheyliketohavetheirshoppingdelivered,comparedwith

theothergenerations(18%),theyarealsomorelikelytosaythatitishardtofindwhattheywantinstore

(23%),andthattheydon’tliketalkingtostaffmembers(18%).GenZaremorelikelytosaythatthereisbetteravailabilityofproductonline(31%),thatshopsaretoofaraway/it’sdifficultformetogototheshop(27%).

Theyarealsomorelikelytosaythattheydon’tlike

talkingtostaffmembers(18%)andthattheirfavouritebrandsdon’thaveaphysicalstore(18%).

ResearchfromGenesys17showsthatAustralian

consumersfeelmoststrongly(69%)thatacompanyisonlyasgoodasitscustomerservice,comparedtotherestofAPAC.Anempatheticexperiencewasrankedasthehighestimportance,and58%agreedtheywill

chooseanempatheticexperienceoveraspeedyresolution.Australianswantcustomerservice

employeestolistentothem(84%),understandtheir

needs(82%)andprovideconsistentanswers(81%).Asretailautomationincreases,‘real’humanserviceand

skillswillbeincreasinglypositionedandsoldasa

premiumproductorservicepropositiontoconsumers.

dentsu/RetailEvolution2023

QUESTIONSFORBRANDSANDRETAILERS

2023willkeepbrandsandretailersontheirtoes,actingasareminderthatagilitymustgohandinhandwithuncertaintimes.However,agility

doesn’tmeaninconsistency.Inacontextof

decliningloyaltyandfleetlyconsumers,brandsandretailersneedtobeconsistent.Ourresearchshowsthat‘Reliability’and‘CustomerFirst’are

thetwomostimportant‘trust’attributesfor

consumerswhenitcomestotheretailindustry.Somequestionsthatbrandsandmarketersneedtoaskthemselvesinthisclimateofdeclining

loyaltyare:

Doourcustomerstrustus?

Arewetrulyreliableandcustomerfirst?

Dowereallyunderstandtheirvalues?Are

weprovidingconsumerswithcost-effectiveproductsthatalignwiththesevalues?

Howcanwekeepourcustomerstrulysatisfiedsotheywanttoreturntous?

2023willbeayearthatwillchallenge

consumersandretailersreadinessandresiliencebutalsoayearthatwillofferusasmallpreviewoftheretailoutlookofthefuture.Ayearof

growthandtransformationforthoseretailers

thatkeepevolvingwithconsumers’needsand

responsiblyembracethemanyopportunities

thatgame-changingtechnologieshavetooffer.Somequestionsthatbrandsandmarketersneed

toaskthemselvesinthiscontextoftechnologicalchangeare:

4

6

Areweresponsiblyadoptingthesenewtechnologies?

Areweprotectingconsumersdataand

onlyusingittodeliverbetterexperiencesforthem?

Arewedeployingtherightbalancebetweentechnologyandthehumanexperiencesthatourcustomersstilldemand?

dentsu/RetailEvolution2023

RETAILEVOLUTIONROADMAP

2019(PRE-COVID)

“HEMA”pioneersblendedshoppingexperiences.

‘Spectacular’retail.DTCtrend.

2020/21

eCommercegrowth.‘Quick’commerce-

direct/functionalconsumers.TitanBrandsstarttodiversify.

2022

Retail‘everywhere’.Metaverseretail.

GrowthofDTCandD2A(Direct-to-avatar)

2023

“Buyitanywherefromanyone.”

eCommerce(18%ofmarketin2023*)andMCommercecontinuemomentum.

IRLstoresfocusedonprovidingimmersive

experiences,exceptionalcustomerserviceandahumantouch.

AIRetail:AIandmachinelearningforpersonalisation.

Re-commerce.

15Source:*AustraliaPost

2030

Omniscientretail.

Consumerscoring.Brandswillbeabletorankconsumersofferingspecial

products/servicesto‘5starconsumers’andrefusingtoselltoothers.

Firstglobaldronedeliverysystem.

2040

Mosttransactionswillhappenonline,VRandARwillprovidemoreimmersive

experiences.

Physicalstoreswillbesmaller,morecuratedshowrooms.

Customproductsondemand.Drone/robotdelivery.

2050

eCommercedomination.

‘Self-stores’:Hyper-personalisedphysicalstoresorlocalcommunitystores.

‘Instantaneous’delivery.Greenretailornoretail.

Customproductsondemandi.e.3Dprinting.

dentsu

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THANKYOU

CatalinaBurge

BusinessIntelligenceDirectorCatalina.Burge@

REFERENCES

1.ABSMay2023.‘Retailvolumesfallforsecondstraightquarter’Availableat

.au/media-

centre/media-releases/retail-volumes-fall-second-straight-quarter

Accessed9thMay2023

2.HarvardBusinessReview2023.SeymourMike,LovalloDan,RiemerKai,DennisAlan,YuanLingyao2023.‘AIwithahumanface.’Availableat

/2023/03/ai-with-a-human-face

Accessed28thMarch2023

3.McKinsey&Company2022.‘Emergingcautiously:Australianconsumersin2022’.Availableat

/au/our-insights/emerging-cautiously-australian-consumers-in-2022

Accessed7thMarch