Online-only brands are in for a reckoning in 2023: Develop a physical presence of some kind or stumble.
The importance of having an omnichannel presence is one of five trends detailed in Forrester’s “Predictions 2023: Retail” report. The report forecasts that in 2023, total U.S. retail sales will hit $4.7 trillion, of which online sales will top $1.1 trillion.
“To succeed, retailers must focus on becoming “future fit” as they position their business model, marketing, stores, and operations to weather and grow through economic issues — not least of which is global inflation — and into the post-pandemic world,” the report states.
In 2023, Forrester predicts the following.
• Retail’s “e-pocalypse” will bankrupt U.S. online-only brands that lack a physical strategy. As consumers revert to pre-pandemic behaviors, the year-over-year change in online retail penetration in 2023 will settle back at 1.5% (down from 3.5% in 2020), meaning that 76% of total US retail sales will still occur offline.
In 2023, midmarket to enterprise-level pure-play retailers will need to choose one of three options: open physical stores (in the vein of Casper and Warby Parker), develop shop-in-shop locations (e.g., Macy’s/Toys "R" Us) or wholesale partnerships (e.g., Allbirds with Nordstrom and Zalando) — or close their (virtual) doors.
• Retailers will choose one of two supply chain paths: own it or outsource it. Firms such as American Eagle Outfitters and Gap Inc. now offer supply chain as a service, orchestrating execution of contract manufacturing, transportation, or storage to share capacity with other brands. But some retailers will opt to outsource outright — moving resources, talent, and capital into more customer-facing functions that include marketing, commerce, tech, and CX.
• Automation will be the savior for continued retail labor shortages. Ripple effects from the Great Resignation will force retailers and brands to invest more heavily — and more strategically — in automation in 2023. Investmentswill automate functions required to run the business both in corporate areas (e.g., marketing, HR, analytics) — and in the store.
• Paid membership programs will boom — but most will be so-so programs that fizzle fast. Taking a page from programs such as Amazon Prime, Costco and Walmart+, we predict that many retailers will channel marketing dollars into a glut of paid membership programs to cultivate recurring customer relationships and more predictable revenue streams. But unless a retailer can clearly articulate to customers why they should sign up for — and then (crucially) stick with — their program, the ROI on that spend will tank.
• Retail media strategies will yield far more conversation for most than actual revenue. The bottom-line impact of retail media dollars will be notable for only a few massive retailers — and remain negligible for most others.
We expect the U.S. market alone to double to $62 billion by 2024, up from $29 billion in 2021. Be clear-eyed about the potential: Amazon alone will account for 69% of the market in 2024 (down only somewhat from 74% in 2021). Retailers should compete for retail media dollars with advertising in their stores that will reach far more customers than their digital properties.