Over the last three years, retailers have battled economic uncertainty. Record-high inflation, global conflicts and the impact of the pandemic have dampened consumer confidence.
And consumer sentiment is unlikely to improve in 2023. According to the latest edition of EY’s Future Consumer Index, 63% of consumers do not believe the economy will recover in the next twelve months. And 60% expect their living expenses to increase.
For retailers, navigating a recession is always challenging. But it can also be a valuable opportunity to drive innovation and ensure future growth. By investing in technology, retailers enhance the customer experience, maximize efficiency and drive revenue.
Retailers and the Great Recession
Often, businesses tend to focus only on cutting costs during an economic downturn. But history shows that investing in technology can reduce costs and improve profitability for years to come.
The Great Recession put many retailers under financial stress. Over 50 retailers filed for bankruptcy from 2007 to 2009. Forty-two percent of companies did not deliver returns to shareholders between 2007 and 2011.
But some retailers did more than survive. LEGO achieved record profitability. Domino’s Pizza delivered over 16% of total returns to shareholders. And the aftermath of the recession saw the rise of direct-to-consumer brands (DTC)—including Warby Parker, Everlane and Bonobos—who succeeded by taking a fresh approach to their industries.
McKinsey found that retailers who thrived during The Great Recession anticipated the downturn and invested in new technologies. These companies increased their marketing and operating costs, expanded staff training and avoided cutting frontline costs.
Why Retailers Should Invest in Technology During a Recession.
Today, customers want speed, convenience and personalization. By investing in new technology, retailers can better meet these consumer demands and future-proof their businesses.
Here are three reasons why retailers should invest in technology despite economic uncertainty.
1. Enhance the customer experience
During a recession, retailers often face increased competition. With tighter wallets, shoppers conduct more research and compare prices. A study by Bluecore found that shoppers looked at six different products at least twelve times before making a final purchase during the 2022 Black Friday and Cyber Monday weekend.
For retailers, investing in tools that create a seamless customer experience will help retailers generate more value and increase customer loyalty.
2. Optimize efficiency
Investing in technology helps to reduce costs by maximizing efficiency. These initiatives lessen the workload of employees. As a result, employees can focus on innovation and customer service.
- Rethink store operations: Despite wage increases, staffing continues to challenge retailers. By using technology to transform operations, retailers can boost employee productivity and reduce turnover. This includes tools for inventory management, simplified fitting room procedures and self-checkout services.
- Build a more agile supply chain: Since 2020, retailers have faced a volatile supply chain. By investing in supply chain innovation, retailers can reduce waste, improve demand forecasting and shorten time-to-market.
- Access to more data: With the help of technology, retailers also access more data. Data analysis tools allow retailers to track consumer trends, anticipate stock levels and improve pricing.
3. Uncover new opportunities for revenue
Finally, technology enables retailers to reach new markets, including
Although the United States has had a slower adoption rate than the rest of the world, social shopping continues to grow. Last year, the channel generated over $724 billion. For retailers, livestreaming and social platforms will continue to unlock new sources of revenue.
Web 3 and the metaverse
As retailers continue experimenting with the metaverse, Citi estimates that the market could reach $8 trillion to $13 trillion by 2030.
Susan Red, VP of Education at the National Retail Federation, expects the metaverse to change how brands and consumers interact. The metaverse “allows brand exposure... allows you to engage differently with the customers... and gives you a level of personalization that we don’t have in other areas of our business,” she explained on Retail Gets Real.
As consumers become more eco-friendly and fight inflation, the resale market is booming. A study by thredUP predicts the secondhand market will reach $218 billion by 2026.
In the past, consumers drove the growth of resale. Now, brands are taking advantage. thredUP also found that brands with their own resale channels increased by 275% from 2020 to 2021.
For retailers, resale is an opportunity to increase customer acquisition and generate revenue from existing products.
New store formats
As technology redefines the store experience, retailers are also exploring new store formats. These include smaller stores, shop-in-shops and specialized subsidiaries.
In 2020, Staples introduced Staples Connect, a coworking and community event space to meet the needs of modern workers. At the start of 2022, the office supply chain operated eight Staples Connect stores across the country.
Transform the Customer Experience with Salesfloor
Salesfloor is an all-in-one customer experience platform. With virtual shopping, clienteling and AI-assisted selling tools, retailers connect the online and offline experience.
Customer insights and smart tasks simplify customer relationship management. Through virtual and in-store appointments, customers can connect with local associates anytime. And conversational AI ensures that the customer receives the most personalized experience possible.
Request a demo today to see how retailers use the Salesfloor platform to revolutionize the customer experience.