My Bold Predictions For Retail In 2023 (Part 2)

Earlier this week I shared the first six of my dozen annual retail predictions. Now I’m back with the remaining half dozen, plus three longer-shot prognostications.

1. The hybridization of retail steals the crown from omni-channel. As I often say, I only have two problems with the term “omni-channel”: the omni part and the channel part. It’s not about being everywhere or worrying about channels. It’s about being remarkable in the moments that matter and moving away from siloed ideas of online and in-store to see the customer as the channel. As digital and physical shopping converge, brands must embrace the blur of modern retail and invest in the increasingly hybrid role of stores—as fulfillment hubs, services centers, advertising nodes, and more. One-size-fits-all supply chains and single store prototype go-to-market strategies are also giving way to models that are more diverse, agile, and hybrid at their core.
2. “Trading down” will define the year. While luxury is likely to do okay, the best performing sector this year will be value retailers (dollar stores, off-price, discount mass merchants, resale, and the like) as economically challenged consumers continue to flee higher priced options. Moreover, within particular formats, private brands will steal share from established national brands, benefitting from their “more bang for the buck” value proposition.
3. Troubles emerge in the consumer credit market. Buy Now Pay Later (BNPL) may not turn completely into buy now pay never, but at least one of the leading players will encounter serious trouble. At the same time, traditional consumer finance players will materially raise their loss provisions and tighten the reins on credit lines as consumer debt balances grow considerably as we move into the second half of the year.
4. Strong corporate balance sheets reign supreme. For better or worse, the strong are continuing to grow more powerful, while the weak fight to keep their heads above water. Retailers with remarkable business models and strong balance sheets will double down on their advantages by opening new locations, investing in the stores they already have, testing new growth initiatives, and deploying high leverage technology to steal market share from mediocre players overly focused on cost cutting, store closings, and defending the status quo. I also expect several industry leaders to take advantage of fire sale prices to consolidate their competitive positions via acquisitions.
5. The Metaverse: Still not ready for its closeup. While experimentation will (and should) continue, consumer awareness and engagement will remain at low levels outside of already established beachheads like Roblox. Apple’sAAPL
   rumored “Reality Pro” headset release could provide the jump start that Meta’s cash incineration machine has failed to ignite thus far. But it won’t meaningfully change the adoption trajectory until next year, at the earliest.
6. Artificial Intelligence on the other hand… While the Metaverse is still in search of compelling and large scale use cases—outside of the usual suspects of gaming, porn, and gambling—the promise of artificial intelligence (with ChatGPT as just one technology that is grabbing folk’s attention) seems clear. The ability to automate mundane or dangerous tasks can create major cost savings. The ability to enhance the effectiveness of numerous activities also has great unlock potential. While huge dividends from AI aren’t likely to be realized within the next twelve months, the traction and investment I expect to see—particularly given on-going talent shortages—should prove significant.

3 Bonus (Longer-shot) Predictions

1. Nike buys Peloton. Nike continues to expand into new fitness categories, direct-to-consumer distribution, and membership-centric programs. Peloton has a solid brand, but overshot the runway on expansion, resulting in a huge drop in its valuation. The worst of the right-sizing and pull forward of demand should soon be in their rear view mirror, giving Nike a chance to pick Peloton up at a reasonable price and then drive substantial synergies.
2. Wholesale changes at Whole Foods. Something big needs to happen here and it might just be that Amazon is dressing up the struggling brand for sale as its overall physical store growth plans seem to be fizzling. A new CEO suggests bold things are afoot and that a turn around is possible. Color me skeptical that the necessary changes will occur under Amazon’s ownership.
3. Kohl’s and JC Penney merge. To be clear, combining, at best, a very average retailer with a lousy one does not make for a strong brand (see Sears and Kmart). But things continue to be quite bad at both companies and they look to only get worse. Desperation can breed strange bedfellows.

For more color commentary on this second batch of predictions and my three long-shots, check out my and Michael Leblanc’s recent Remarkable Retail podcast episode