What it means: This year is the first true year of post-pandemic consumer behavioral trends, and it’s clear that what worked for the retail industry during the past three years is no longer acceptable to shoppers who have evolved.
Three years after the beginning of stay-at-home orders and pandemic-related closures, the retail industry and consumers appear to have put the pandemic period in their rearview mirror. It has certainly been a slow return to form, but visit any grocery store, restaurant, airport or stadium and see consumers back to “normalcy” in many ways both in routines and recreation. As reported last week, spending on discretionary retail categories, the pandemic high fliers, has slowed as consumers shift their focus. Many players across the retail industry are now tasked with redefining their value proposition to consumers or reverting back to their pre-pandemic offerings.
As consumers look toward their new normal, retailers and brands are shifting future strategies to meet these new demands. Peloton’s exponential growth in both sales and popularity during the pandemic proved to be fleeting, and the company recently announced a shift to digital content offerings instead of hardware sales in order to provide offerings for on-the-go consumers. Consumers today are focused on both value and wellness as a part of their daily routines instead of siloed categories, which forces brands like Peloton to transform away from physical products. Similarly, The New York Times reported that restaurants have phased out QR codes for menus, as consumers want dining experiences to be elevated as they were prior to the pandemic. Some of these changes reflect the need for the broader industry to alter strategies in regards to products, but for others it's about recalibrating the retail experience. Then, there’s the decline in discretionary general merchandise categories, and tepid earnings from home improvement and other general merchandise retailers, sectors that flourished during the pandemic.
It’s clear that 2023 represents a shift for the retail industry, and in some ways the industry has to look to the past in order to move forward. The pandemic period brought elastic and inelastic changes to consumer behavior, and it appears that many consumers are reverting back to old habits and spending patterns. Retailers and brands must adapt to these changes at a blistering pace to stay competitive in the marketplace, and that means combining elements that used to work with the new demands of today’s consumers.
What’s next: Retailers and brands need to think strategically about how to blend successful pre-pandemic operations with evolving consumer needs to create a healthy retail industry during the next few years.