Retail trade 2023: rationalising consumers, technological development

In-store experience is key

With the revitalisation of shopping in physical stores, retailers have made an attempt to transform these establishments into attractive places where customers can have fun, eat something and discover new products. Industry experts predict retailers will expand their fresh produce selections and introduce new in-store technologies this year. Grocers of all sizes have begun testing and introducing smart shopping carts across the US. Similar experiments have also begun in Europe, e.g. at Colruyt and Rewe. Private label products remained popular in 2023, and the downtiering trend has contributed to consumers specifically seeking out private labels. According to PLMA data, private label sales revenues grew by 4.7% year-on-year in 2023, outpacing the 3.4% sales growth of manufacturer brands. A consumer survey by McKinsey has found that 83% of respondents believe private labels are at least as good as manufacturer brands, with nearly 90% saying they offer similar or better value for money.

In Europe, 70% of those surveyed by Amcor regularly buy PL products. 50% of those who prefer these brands because of their quality will continue to stick to shoping PL in the future

Retail media is taking off, but there is still work to be done

Over the past few years many retailers have discovered the revenue potential of e-commerce platforms as advertising vehicles. Advertising revenues from retail media can alleviate the pressure on the financial results of companies generated by inflation and decreasing consumer spending. While digital retail media in Europe is still in its infancy – McKinsey estimates the market represented a value of EUR 11bn in 2023, growing at 15% annually – in the US the digital advertising industry is already a well-established sector. 2023 was a turbulent year for online food retailers. Although shoppers continued to show more interest in buying food online than before and at the start of the pandemic, last year industry growth fell short of the levels predicted a year earlier. According to McKinsey, the sector has also lost market share in Europe.

Building stronger foundations for selling online

There has been investment in online sales by retailers in 2023, but these efforts have been more about consolidating the foundations than improving the shopping experience. Focusing on promotions and programmes to retain and build loyalty among less well-off shoppers was key. According to a 2023 Dunnhumby study, 53% of leading retailers have seen a growing acceptance of loyalty programmes in recent years. 75% of the programmes retailer offer are exclusive members-only discounts – one of the most typical examples of this is Tesco’s “Clubcard Prices” initiative. While 2023 brought numerous mergers and acquisitions in the grocery sector, the extent of consolidation ultimately fell short of what many had predicted earlier, following Kroger’s announcement of acquiring Albertsons. In Europe Carrefour strengthened its positions in Northern France and Eastern Europe, with the acquisition of the Cora and Match chains.

Shoppers expect retailers to use AI in an effort to help them save money

Sustainability: the journey has just begun

None of the top ten European grocery retailers has reported progress on Scope 3 emissions, according to a McKinsey summary. This is partly because it is difficult to measure these emissions accurately. There was also much talk last year about regenerative agriculture. Most of the greenhouse gas emissions of food retailers come from agriculture – around 50% from the dairy and meat sectors alone. Regenerative practices are critical to meeting net-zero targets. Ten years from now we may look back on 2023 as a defining year in the history of retail trade: retailers took their first steps to adopt generative AI and other technologies on a large scale. Shoppers expect retailers to use AI to help them save money, Dunnhumby reported in November. //