4 Ways Retailers Can Succeed in 2023

In Charles Dickens’ treasured story, "A Christmas Carol," Ebenezer Scrooge peers into his past, present and future, learning valuable lessons from his mistakes and emerging a better man.

Thankfully, retailers don’t need a visit from three ghosts to make wiser choices in the new year. As retailers face down a looming recession, here’s what they should be thinking about for 2023 — and how they can begin the new year stronger than ever.

1. Solid Inventory Management Will Be a Differentiator

Retailers are facing confusing indicators when it comes to consumer behavior. As we entered Q4 2022, economic conditions made consumers cautious, leaving many retailers with excess supply. However, Black Friday data shows that consumers are still more than willing to spend. According to the National Retail Federation, 196.7 million Americans shopped in stores and online during the five-day holiday shopping period from Thanksgiving Day through Cyber Monday, up nearly 17 million from 2021, due in part to record-high discounts.

These mixed signals mean that retailers need to be strategic and flexible when it comes to inventory management. This is always important during and immediately after the holiday season — e.g., ensuring seasonal merchandise is cleared out with as little price slashing as possible.

This year, retailers should also ensure they have a logistics strategy in place for the large number of returns expected in Q1. Yes, the continued dominance of online shopping means retailers should expect quite a few returns in January. To retain as much margin as possible, it's critical to know where and when you can get returned merchandise back on the shelves.

Furthermore, retailers should pause before joining the unfortunate trend of charging fees for returns. Irritating consumers while deterring returns is not a long-term solution. A better idea? Retailers can capitalize on the customers making returns. Many retailers have begun accepting returns from online giants like Amazon.com, thereby drawing extra shoppers into their stores. And every retailer can subtly attract customers to new merchandise during their visit, whether in-store or online.

2. Labor Challenges Will Continue

The labor market has been a consistent challenge since the beginning of the pandemic. A recent report found that around 7 million men between the ages of 25 and 54 have reportedly “punched out” from the job market, with no plans to return. This is unwelcome information for employers within the supply chain, from ports to warehouses to the storefront.

But thankfully, retailers are no stranger to labor hurdles, especially around the holidays. For two months, our stores are filled with kids home from college and other hastily hired seasonal workers gift-wrapping holiday cheer for hordes of impatient shoppers.

This year, retailers that are lucky enough to get in-store foot traffic should make every effort to retain an adequate number of workers long term. We should expect to see a big uptick in automation trials and pilots as retailers catch their breath coming out of the holidays. Using automation measures ranging from micro-fulfillment to warehouse robots, retailers can refocus scarce staff time toward higher-value, customer-facing activity that will boost loyalty and satisfaction for employees and customers alike.

3. Order Lifecycle Management Will Become Increasingly Important

Additionally, retailers should arm their employees with the information and technology they need to deliver excellent customer service. With today’s technology, customer-facing employees can (and should) know, with just a few taps on a screen, when the next shipment will arrive and whether that medium polka-dot sweater will be on the truck.

The key here is visibility into orders right down to the SKU level. This level of detail allows retailers to know exactly where their shipments are and what's on them without wasting precious time and resources. Retailers that haven’t yet implemented real-time transportation visibility — the foundation for end-to-end supply chain intelligence — should consider doing so now.

4. Customers Will Expect Impressive Experiences

With the right mix of staffing and technology, retailers can continue to deliver quality customer experiences that keep customers coming back.

Labor and tech considerations aside, retailers that want to thrive in 2023 and beyond must embrace the movement toward more experiential shopping. Today’s consumer yearns for a warm, tailored, Instagram-worthy experience. This store of the future is exemplified by H&M’s new concept space in Brooklyn, where customers can touch and feel sparsely displayed merchandise in luxurious surroundings, with more colors and sizes available with a few taps on a screen. However, retailers don’t need to go to great lengths to make a difference; simple changes like soft music or lighting that adjusts to the time of day or between different departments will go a long way in improving the customer experience.

At a more logistical level, the stores of tomorrow also need to serve as distribution centers to facilitate in-store pickup of online orders and returns. Retailers hoping to strike the right balance should fulfill these transactions in the most efficient way possible — which may involve some level of automation — while preserving the customer experience as well as attracting them to additional merchandise.

Long gone are the days when customers had patience for sterile, poorly lit stores crammed with teetering piles of merchandise. Retailers that can’t adapt to these new expectations are at a real risk of falling off the map.

New Year, New Opportunities to Get it Right

As we collectively continue to recover from years of pandemic shocks and uncertainty — all while the clouds of a recession continue to gather overhead — retailers and consumers alike are feeling wary about the future. But as Dickens wrote, we should reflect upon our present blessings, not our past misfortunes. Although these times are uncertain, they're also ripe with opportunity. With some careful consideration around labor, technology and the customer experience, retailers can ring in the new year confident in their future success.

Mark Delaney is vice president of industry strategy, retail and CPG at FourKites, a real-time supply chain visibility platform.