The retail industry has faced numerous challenges over the last year, including recovering from the enduring effect of the COVID-19 pandemic (including the recent re-opening of Chinese borders), responding and adapting to inflation, and weathering supply and distribution issues as a result of the war in Ukraine. With these disruptions (and others) at play, retail players – including well-known names in luxury – have, nonetheless, benefited from the growth of digitalization and technology, thereby, shedding light on an array of opportunities, threats, and trends that will continue to emerge in 2023 and that are worthy of attention.
Given that 2023 will be a year that is heavily impacted by the cost-of-living crisis, pricing will be crucial for retailers. No shortage of consumers will be searching for the best price on almost every product to make ends meet. Retailers need to weigh their profit margin against making goods affordable to decide on whether to focus on becoming a luxury or a commodity.
Sustainability & ESG
While consumers have been showing increasing concerned about the environment and calling on brands to put sustainability and environmental, social, and governance factors at the forefront of their businesses, most have been relatively reluctant to pay more for sustainable goods. Watch out in 2023 for the growth in secondhand sales as consumers view the rising resale market as an alternative way to be sustainable (including in connection with the purchase of luxury goods) while saving money given the economic uncertainty.
Technology, Data & Consumers
Consumers will grow and maintain their loyalty with retailers that they feel are accessible and have an attractive user interface. There are further opportunities this year for retailers to leverage data on consumer preferences, attributes, interests, and their purchase history, to create customized product recommendations and advertisements directed at the specific customer/user. These features are also useful to adapt manufacturing, control inventory and reduce waste.
At the same time, consumer protection law is being prioritized by regulators and legislators. In the United Kingdom, for example, the government is accelerating the implementation of the Digital Markets, Competition and Consumer Bill, which establishes new competition rules for digital markets and the largest digital firms, and which is considered to be the most significant reform of UK competition and consumer protection laws in years. This means that companies will need to familiarize themselves with the key consumer reforms (and take note of the GPDR style fines). The Bill could be published early this year, enacted by May 2023, and come into force as early as this October 2023.
By the end of this year the UK’s Competition and Markets Authority (“CMA”) will gain significant new powers to determine (without court involvement) if consumer protection law has been breached and directly enforce consumer law. Their new powers include the ability to fine companies up to 10 percent of their global annual turnover for breaches of consumer law. (In one retail-specific example so far this year, the CMA is seeking comment on whether Richemont’s deal to sell of a sizable percentage of YOOX Net-A-Porter to fellow e-commerce retail group Farfetch will negatively impact competition in the United Kingdom in violation of UK competition and consumer law.)
Loyalty & Logistics
With most retailers supercharging their digital platforms during the pandemic, there was a big focus on making as many sales as possible, with customer acquisition at the top of the agenda. In 2023, retailers will be looking at how to keep and maintain customers once they have been acquired, as it is more cost efficient to market to an existing customer base than to try and acquire new customers.
And with the pandemic, U.S. sanctions, the Ukrainian war, and Brexit all having an effect on logistics, retailers will be also be accelerating the move closer to home for manufacturing and supply of raw materials in order to exercise greater control over their distribution. Retailers are looking to remove the complexities of cross-border trading and benefit from a more cost-effective storage solution for goods to be located closer to consumers and quicker delivery times.
Subscriptions & Reviews
From online streaming services to fitness applications, many of us have been allocating cash to subscriptions and in furtherance of a larger trend of cutting back, are looking to cancel at least some of these services, often without much ease. This year will see new laws that are expected to target contracts that have the potential to lock-in consumers indefinitely, and those where information is buried in lengthy terms and conditions.
Finally, amendments to current law are being made this year to protect consumers from fake reviews. There is concern that too many of us are being misled into buying the latest gimmicky gadget or signing-up to the latest online fad on the back of dodgy reviews that don’t reflect an actual consumer’s genuine experience of a good or service.
Gary Assim is the senior partner in Shoosmiths LLP’s national Retail and Intellectual Property and Creative Industry Group.
Felicity Forward is a principal associate at Shoosmith LLP, where she leads a team specializing in consumer protection law, working with some of the most leading and iconic brands on high profile, business critical matters.