What’s in store for the retail sales channel in 2023? We looked back at the Leap team’s experience opening nearly 100 retail stores to predict where the space is headed. You can find our vision for 2023 below.
In the face of rising digital advertising costs, customer acquisition is becoming more volatile and less predictable. Brands will increasingly view physical retail stores as cost-effective “billboards” that both raise brand awareness and generate revenue.
Imagine reaching shoppers with timely messaging right at the point of purchase. Retail media networks, a staple of the digital world, can make this a reality—and will become an even more important part of the brick-and-mortar environment. Digital displays within stores and shopping centers, like the built-in Light Box displays in Leap stores, are ready-made to evolve this retail experience.
Brands will rediscover the financial impact of driving in-store shopping as ecommerce costs continue to rise. Online returns can cost retailers up to 21% of order value, but brick-and-mortar retail return rates are 50-60% lower than ecommerce. Physical stores will offset these costs and drive the kind of profitable, sustainable scale that ecommerce has not.
Rising in prominence throughout the pandemic, buy online, pick up in-store (BOPIS); buy online, pick up at curbside (BOPAC); and buy online, return in-store (BORIS) have become integral to the retail experience. Retailers will need to double down on these omnichannel strategies so they remain convenient for shoppers without becoming a logistical challenge for the business.
Modern retail is flexible. We see that short-term activations, pop-ups, sample sales, or shop-in-shops can deliver the kind of diverse and nuanced experiences that resonate, and only expect this trend to continue. Currently Leap is running six sample-sale pop-ups, and sees an increase in demand for these shorter-term sales channels.
Brands with highly seasonal products often find themselves waiting out the off-season until demand returns with the summer sun or winter chill. In 2023, we expect more brands to collaborate and share a single retail location for six months out of the year. This way a cold-weather outerwear brand and a swimsuit brand will both be able to benefit without the usual burden of risk.
In some regions of the country, foot traffic and sales at malls and lifestyle centers outperformed street retail on Leap’s platform during the Black Friday period, and in 2023 we predict malls will continue to innovate to attract shoppers. That includes diversifying tenancy by adding D2C brands and investing in experiential retail. After all, retailers opened more than 4,200 stores in the U.S in the first five months of the year for a reason, making 2022 the first year with more store openings than closings since 2016.
Immersive, engaging retail experiences continue to be one of the key differentiators that attract shoppers to retail stores. Research by the commercial real estate firm Westfield found that 81% of shoppers will spend more in retail stores that offer rich shopping experiences. Leap is seeing this dynamic play out firsthand: brands that took advantage of Leap’s data-driven best practices around Marketing, Merchandising, Store Communication, and Store Signage to create this more impactful experience outperformed those who did not by 20% this year, and we expect this to hold true during the regular shopping season as well.
More brands will come to understand the value of offering a career path for retail workers. Brands that treat retail positions as long-term, skilled careers rather than short term gigs will be rewarded with higher employee retention and engagement. The skill required to understand a brand, communicate its offerings, and build customer loyalty is rare, and more employers will realize it needs to be fostered. Leap has added 250 retail associates within a shrinking labor market by keeping this in mind.
While people help differentiate the retail experience, brands will seek even more sophisticated insights for brick-and-mortar locations in 2023. This kind of granular data on demographics, foot traffic, and purchase behavior will allow them to make informed decisions about where to open stores so they can make smarter bets and reach new and engaged shoppers. Leap believes the future of retail lies in platforms, given the inherent data-driven advantages.
While we don’t have a crystal ball, we do have a great deal of experience with opening stores and talking to brands. Want to get a monthly update on Leap and the state of retail? Subscribe below.
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