Editor’s note: A version of this article appeared on Forbes in January 2023.
Economic shocks, record-high inflation and supply shortages continue to drive up the cost of living. At the same time, Gen Z is coming of age, forcing retailers and brands to rethink marketing strategies. Plus, tech advances continue to influence purchase habits. These are some of the forces that will shape our lives this year.
Every January, Euromonitor considers how these wider forces will change consumer behaviour in the year ahead. At NRF 2023: Retail’s Big Show last month, I spoke about the consumer trends that will have the biggest impact on retailers and brands. Let’s break down three big ones you should watch in 2023.
Shoppers gravitate towards quick, convenient options to save time and money. Companies are turning to automation to replace certain manual tasks to meet these demands. Take autonomous robots, for example, which are used for last mile delivery and restaurant operations, among other applications.
The challenge is finding the right balance between human versus machine. The level of comfort with tech-driven experiences is closely correlated to the perceived level of intrusiveness. Consumers are nearly twice as comfortable with robots assisting in the discovery phase compared to executing purchases on their behalf, according to Euromonitor’s 2022 Voice of the Consumer: Digital Survey.Clockwork sought this balance with the first manicure robot that paints nails in 10 minutes. An attendant is always on hand to help get a customer’s nails just right. The company reached a deal with Target to include their robots in six US locations. Clockwork is not likely to replace the full nail salon experience but automates the quick colour touch up that a shopper might not otherwise have time to complete.
Business leaders are investing in these technologies to reduce costs and maximise efficiencies. Planned investment is down slightly from its peak in 2020 when digital transformation was put into overdrive.
About 40% of professionals surveyed in November 2022 plan to invest in robotics within the next year
Source: Euromonitor International Voice of the Industry: Digital Survey 2022
You should assess all touchpoints in the customer journey to distinguish between moments that could be automated versus ones that require human interaction. Relying too much on tech can jeopardise brand engagement.
Finally, the application needs to be purposeful and indistinguishable. Kroger CEO Rodney McMullen noted at NRF: Retail’s Big Show that “if you know you are using technology, it is not good enough.”
Inflation and high prices undermine purchasing power. In today’s economy, people often have to decide between paying more for everyday essentials, trading down to lower-cost alternatives or forgoing purchases entirely.
Euromonitor projects a significant downturn in the global economy this year with real GDP expected to slow to 2.6% and inflation hitting 6.4%
Source: Euromonitor International
When consumers become thriftier, they typically opt for affordability over brand loyalty. Given that consumers want to get the most for their money, you should implement or develop solutions that help them navigate economic uncertainty to garner their long-term loyalty.
The UK-based baby clothes subscription service Bundlee partnered with Stella McCartney to make luxury items more accessible for parents on a budget. Bundlee offers kids clothing on a rental subscription basis with prices starting at £24 per month for curated essentials and £39 per month for 15 pieces from premium clothing brands. Another example: IKEA. The retailer expanded its Family loyalty program benefits, providing a 5% savings on eligible in-store purchases and exclusive pricing on certain delivery options.
You need to revisit your value propositions. For retailers, this may mean launching or expanding a private label portfolio. Likewise, brands should revisit their product portfolio to ensure value is considered in pricing, product assortment and pack sizes. Launching a rewards programme, expanding perks for loyalists or exploring new product bundles also could help drive customer loyalty in light of economic headwinds.
Young and Disrupted
All eyes are on Gen Z. These consumers stand up for their beliefs, put themselves out there and expect brands to do the same.
30% of Gen Z consumers made purchase decisions based on a brands’ social and political beliefs, up five percent from 2020
Source: Euromonitor International Voice of the Consumer: Lifestyles Survey 2022
As their financial freedom ramps up, brands need a crash course on these trendsetters and emerging professionals to be in tune with their expectations and capture their expanding purchasing power. Because Gen Z will transform business as usual.
Chinese beauty brand Florasis created a virtual influencer that personifies the brand and embodies traditional Chinese culture to appeal to these consumers. Virtual influencers are becoming quite common around the world; however, most operate independently, not by brands. Gen Z is already inspiring grocery stores to reinvent their social presence. Walmart added TikTok to its Connect advertising network, and Misfits Market shifted to more short-form video content.
How can you win over Gen Z? For starters, social media. Gen Z shoppers scroll their feeds for inspiration, education and reviews. TikTok is their platform of choice with 60% of Gen Z using the short-form video platform globally – the most of any age group.
Real, raw and relevant content draws their attention. Instead of typical ads, use endorsements to let your product speak for itself. Loyal customers are your best advocates.
The Power of a Genuine Connection
Authenticity is a common thread across these three 2023 consumer trends. For Gen Z, it’s the most important quality of any brand messaging. This plays a big role for retailers and brands that want to help consumers navigate the cost-of-living crisis. And it’s also needed as companies balance the role of humans versus bots. All consumers want to feel that genuine connection with a brand.
As you begin to execute your 2023 strategy, use these insights to guide your campaigns, decisions and growth plans.