Combination of Economic, Social and Cultural Influences Shaping Consumer Mindset and Purchase Decisions
Acosta, a trusted national sales and marketing services provider recognized for its rich shopper insights, has announced its 2023 predictions, identifying several opportunities and challenges for brands and retailers as they navigate a dynamic and uncertain consumer marketplace.
“The economic challenges of the past year will continue to impact consumer behavior in 2023, providing overarching context for what shoppers most care about and how they want to shop,” says Kathy Risch, SVP, Consumer Insights and Trends at Acosta. “We foresee continued impact from economic challenges as consumers are heightening their expectations for personalized, hybrid and omnichannel shopping, and their redefined focus on wellness for themselves, others and the planet.”
Acosta’s Six 2023 Predictions:
- Recession or Not, Perception is Reality
- Retail Experiences that Surprise and Delight
- Personalization Rapidly Evolving
- Committing to Collective Wellness
- Transforming into a Hybrid World
- Dining Out: It’s Complicated
Recession or Not, Perception is Reality
The ongoing state of inflation, combined with other economic challenges, has resulted in nearly half of all shoppers believing that we are in a recession, despite a lack of consensus among economic experts.
“When shoppers believe we are in a recession, they will behave as though we’re in a recession,” says Risch. “They are doing less, trading down, practicing smart, conservative and creative behaviors that are likely to last,” she continues. Acosta proprietary shopper insights reflect that:
- 67% are spending less on discretionary items like clothing
- 63% are eating up as much food as they have on hand before buying more
- 61% are eating out less
- 52% are spending less on entertainment
- 46% are saving less
To cope, consumers are sometimes seeking affordable indulgences, like snacks and beauty products. 25% of shoppers say they’re snacking more than usual, seeking comfort foods. In fact, chocolate sales are stronger than ever with Hershey, Hostess and Mondelez seeing profits. For beauty products, this is known as the “lipstick effect” – a behavior in recessionary times when shoppers splurge on makeup, including lipstick.
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Retail Experiences That Surprise and Delight, In-Store and Online
Shoppers have three key expectations in 2023 for their in-store shopping experiences: enjoyment, convenience and value. Seamless omnichannel shopper experiences are table stakes and retailers will want to bring in-store experiences online and digital experiences into the store.
- Shopper experience matters – both digital and physical – it isn’t just about price and assortment
- New retail formats are being tested to keep customers coming back, building loyalty based on experience as well as product selection
- Tech-enabled in-store design will encourage discovery, browsing and purchasing – from QR codes throughout the store to smart screens that share product reviews when an item is selected from the shelf
- Connectivity increases, with 5G adoption expected to triple in retail stores by 2024
- Smaller format big box stores are opening to support convenience, offering specialized services, tech-enabled stylists and restaurants
Personalization Rapidly Evolving
First-party retail data is becoming more targeted to the individual shopper. Value, discovery, and trial can be provided on a personalized basis to the shopper based on new technology, including AI, and the retail media explosion.
- By 2024, U.S. retail media ad spending will exceed $60B – Instacart, Walmart and Amazon are in the lead, with others quickly following
- Retail media will employ technology for in-the-moment deals in aisles
- 90% of grocery sales still happen in stores; there is a $1T opportunity for advertisers to target more accurately with the right data
- In-store AI technology like electronic shelf labels provide nearly limitless ad inventory and inform shoppers of proximity value offerings
- Online content can be customized and personalized for the shopper
Committing to Collective Wellness
In 2023, wellness assumes a holistic, comprehensive position for shoppers – extending from personal wellness (health and happiness) to the family’s health and wellbeing, and to the earth and animals.
- The global “self-wellness” economy today is a $4.5T market and it is expected to generate $7.7T by 2030, according to the Global Wellness Institute
- Personal care, beauty and anti-aging products today represent a quarter of those sales, at $1.083B
- Key shifts guiding the future of wellness include:
- Balancing physical and virtual connections
- Mental wellbeing
- The ongoing global “value reset” with people seeking more economic, environment and social justice, and more meaning in their lives
- Retailers will provide more in-store clinics and other health services – currently a $4.4B business
- On a global level, consumers are concerned about sustainability and the concern will escalate in the U.S.
- 69% of U.S. consumers rate sustainability as important, regardless of age/gender
- Plant-based products continue to grow
- Global retail sales predicted to be $162B by 2030 – up from $29B in 2020
- 57% of shoppers say they will continue to purchase plant-based products for the rest of their lives, stating that it’s good for them, good for the earth, good for animals
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Transforming into a Hybrid World
While the hybrid evolution was underway in some channels, COVID moved the needle further, faster and deeper, resulting in a new hybrid world. Shoppers will expect brands and retailers to reflect this “new normal.”
Shopping
- Hybrid shopping is here to stay. Today, nearly half of all shoppers buy many types of products both in-store and online, such as:
- Apparel – 57%
- Beauty care – 48%
- Electronics – 44%
- Home & kitchen – 50%
Vehicle sales
- CNBC reports that electric vehicle sales will represent 30% of new car sales this decade
- Retail will be impacted with concept changes in C-stores and more EV charging stations across channels
- Medicine
- Hybrid medicine is on track to become the future of primary care, potentially reducing healthcare spending by 15-20% – Amazon has joined the category with Amazon Clinic
- The market is expected to grow to $396.76B in 2027 from $79.79B in 2020
Dining Out: It’s Complicated
Ongoing challenges from inflation, supply chain, labor and customer patterns of “staying home,” are balanced by exciting innovation and a pent-up demand for dining in.
- Continued high prices for groceries blur the gap between food at home and food away from home
- Supply chain shortages continue to impact menus and 46% of foodservice providers believe it will be at least a year before these challenges are resolved
- Ongoing labor shortages are driving new solutions – from a 21% increase in hourly wages for non-supervisory foodservice to robotic automation and proposed legislation to welcome nonresident job seekers into the U.S. – while at the same time, the industry is seeing unionization among some of the biggest brands
- Insights show that on-premise dining continues to increase but may not recover to pre-pandemic levels for some time, providing opportunities for freshly prepared meals at grocery to provide that dining out experience at home
Risch concludes that brands and retailers will need to continue to make significant shifts in how they provide value, quality, entertainment, service and convenience to shoppers in 2023: “The most successful organizations will expediate the seamless shopping and branding experience, also understanding that consumers want to make informed, smart, values-driven choices for themselves and their families.”