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Prices, private brand, and powering up data: our retail trends for 2023

A new year is upon us, and with it, the opportunity to make some reasoned predictions about which issues could dominate discussion over the next 12 months.

With retail being a rather broad topic for one person to cover alone, for this post we polled both Dave Clements – dunnhumby’s Global Head of Retail – and Siro Descrovi – our Senior Customer Strategy Lead for EMEA. Below are their combined views about the overarching trends likely to shape the industry during 2023.

 

1. Value, value, value

 

What else could it be? Of all the predictions on this list, the one we can make with absolute, concrete confidence is that the majority of grocery shoppers will prioritise value above all in 2023.

At the heart of this trend, of course, is the global – and already well-documented – cost of living crisis. While the specific circumstances may vary, with food inflation rates ranging from 3.7% (UAE) to 33.1% (Hungary), the overall trajectory is the same. As seen in our Consumer Pulse studies, shoppers are becoming increasingly concerned about the price of groceries.

Value, of course, is not the same as price. While we do see some indications that discounters are gaining traction, the focus for most shoppers seems to be on spending flexibility rather than raw cost. Rock bottom prices may be enticing in some areas, but it’s the ability to be selective that seems to hold the broadest appeal – customers opting to save money where they feel it makes most sense to do so.

It's that thought that leads us to our second trend…

 

2. Private brand strength proves critical

 

dunnhumby’s RPI (Retailer Preference Index) Series is a global research programme that surveys consumers on their shopping behaviours. As well as revealing how much customers spend with their preferred retailers, and the emotional connection they have with each, the RPI also tells us why they shop where they do – and the issues that matter most when making that choice.

Top of that list in our latest Italian study, released just a few months ago, was private brand. In our similarly recent Spanish study, private brand came second, just after variety. What’s particularly telling about this is the fact that, in our 2021 studies, private brand was just seen as part of a “bigger” theme like quality or price. Today, it’s very much its own thing.

Naturally, it’s hard not to interpret this newfound fascination with private label as a response to inflation. Providing shoppers with the opportunity to get similar quality goods for less, private brand provides a ready-made solution to that selective downtrading trend referenced above. Choice is still key, though – and the priority for retailers should be on options that span the gap between quality and price.

 

 3. Monetisation provides a safety net

 

Shoppers aren’t the only ones feeling the sting of inflation. As costs continue to rise across the board, and shoppers become more discerning in their spending, retailers will find their own margins under greater pressure as well. The net result of that trend will be that efficiency becomes more important than ever, particularly around key operational processes like warehousing and distribution.

A more constricted financial environment means that many retailers will also look to broaden their revenue streams beyond pure grocery. While that might mean diversification of offerings and services, the monetisation of media and customer insights – both assets that they already own, no less – is also likely to gain further traction in the year ahead.

 

4. Online profitability requires continued attention

 

The world now moves so fast that we barely have time to contemplate one challenge before another one emerges. While it may have stabilised since the pandemic, online grocery continues to be a much bigger market than it was pre-Covid – meaning that the many profitability-related challenges around picking, packing, and delivery  persist as well.

Only 18 months ago, we were positing that retailers needed to find a long term solution to the challenges presented by growing demand for home delivery. Pandemic or not, that conundrum will continue in 2023.

 

5. The value of first-party data skyrockets

 

Consumer behaviours are changing incredibly quickly right now. Keeping track of those shifts can be hard enough for retailers, let alone consumer packaged goods brands which have an extra degree of separation from their end buyers. It’s in this kind of environment that first-party data – and the insights it offers – becomes a mission critical priority.

We’ve touched on the subject of insights monetisation above, but when you combine the current economic landscape with the thought that Google is promising to (finally) phase-out third party cookies come 2024, demand for retailer-owned data and insights is likely to soar over the coming 12 months.

 

6. Premium goods provide a route to treating

 

As the economic slowdown continues, most consumers will apply a growing level of scrutiny to their outgoings. That’s true for grocery, but it will also apply across the rest of their lives too – from holidays abroad to simple meals out. At the same time, and as we’ve seen in some of our recent research, people are still looking to treat themselves and their loved ones, no matter how tough the situation.

Much as a strong private brand offering gives shoppers choice about where they find value, grocery as a whole can act as a downtrading option from other industries too. If people are spending less on leisure and large purchases like TVs and furniture, grocery can provide them with the opportunity to reward themselves in smaller, more palatable ways like premium chocolates and ready meals for special occasions.

That makes for a demonstrable opportunity for retailers, particularly those who – again – have the depth and range of private brand to win with value-conscious customers.

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