The biggest tech trends, innovations and challenges in the retail industry for 2023

The biggest tech trends, innovations and challenges in the retail industry for 2023

Diya Bag
Senior Content Writer, commercetools
Published 31 March 2023
Estimated reading time minutes

Welcome to the future of retail, where shopping is no longer just a transactional experience but a journey full of surprises and wow-worthy moments. As we get further into 2023, the retail industry faces a new set of challenges and opportunities. This is what you need to know.

The biggest tech trends, innovations and challenges in the retail industry for 2023

The COVID-19 pandemic has accelerated the shift towards eCommerce and digital-first shopping experiences, leading to a more competitive landscape and an increased need for retailers to adapt, innovate and push boundaries. This is because consumer behavior has also shifted, with a growing emphasis on personalized, convenient and delightful experiences. In this rapidly evolving retail environment, it's more important than ever for retailers to stay up-to-date on the latest trends, technologies and challenges to find new ways to engage with customers and meet their ongoing needs.

Top tech trends in retail for 2023

Retailers must leverage technology, whether through automation, artificial intelligence (AI) and/or new social channels, to keep up with changing consumer demands and stay ahead of the competition. Therefore, it's essential to be aware of the most significant technological trends for this year and assess whether your infrastructure is prepared to adopt them.

Automation: The retail industry has been utilizing automation for several decades, but the advancements in technology have led to the emergence of new and innovative automation tools, including robotic process automation (RPA) for repetitive tasks, delivery drones for package delivery, smart shelves for inventory tracking and targeted advertising and autonomous robots for inventory accuracy and customer experience. These technologies not only simplify the workload of employees but also enhance the customer experience by reducing errors, optimizing inventory and improving efficiency.

B2Cs adding B2B channels: To broaden their revenue streams and reach, many B2C brands are increasingly launching B2B channels. By utilizing their existing customer base and technology, they can provide customized solutions to businesses and venture into new markets.

ChatGPT: By now, everyone and their grandma have heard of ChatGPT and retailers are already planning to incorporate this AI tool into their websites and mobile apps. With ChatGPT and other generative AI, customers can obtain quick, personalized and interactive answers to their inquiries. Retailers can further leverage this new development to provide product recommendations, promotions and discounts, as well as assist with order tracking and returns. Finally, retailers can also use ChatGPT to gather feedback and analyze customer preferences and behavior, enabling them to improve their offerings, plus target their marketing efforts more effectively.

Live-streaming commerce: The practice of using live video streaming to sell products and services directly to consumers over eCommerce platforms or social media blew up in popularity in China during the pandemic lockdowns; Western retailers are just now beginning to get in on the action. While livestream commerce has yet to reach critical adoption stateside, the results globally are impressive and will inevitably gain traction among other consumers around the world. 

Self-checkout: Although self-checkout has been around for a while, new features and integrations such as mobile payments, loyalty program integration and contactless payments are regularly being introduced to this point of sale (POS) system. Fashion brands are also now implementing self-checkout to reduce in-store wait times, a trend previously limited to grocers and large retail stores.

TikTok: TikTok is expanding beyond a mere social media platform for awkward dances. Retail brands are realizing the platform’s potential to exhibit their products and appeal to younger audiences with creator-led content and storytelling on this prevalent short-form video app.

Digital experiences in physical spaces are a must-have

Although there has been a surge in eCommerce over the past few years, brick-and-mortar stores remain a vital part of the retail industry. Shopping in person offers a social aspect that cannot be replicated online, such as spending time with friends or family and getting their opinion on a purchase. However, retailers are trying to provide digital experiences that simulate the social element that shoppers desire. They can achieve this by using interactive displays or kiosks that allow customers to view reviews and access digital content. 

Tech-enabled brands are merging physical and digital into one experience. For example, the retailer Ulta Beauty uses augmented reality to enable customers to see how different makeup looks would appear on their faces. At the same time, forward-thinking retailers like H&M use digital mirrors to show customers how an outfit would look on them while suggesting other matching products to purchase for cross-selling opportunities. 

Additionally, brands can host pop-up shops with immersive displays, exclusive merchandise or themed events that offer hands-on experiences and workshops — the sky's the limit. But one thing is for sure: By providing digital experiences in stores, brands can enhance customer engagement and create a more memorable shopping experience that fosters loyalty and drives sales.

Challenges for retailers in the upcoming year

The retail industry is a highly dynamic sector that is often influenced by various factors, ranging from economic conditions to geopolitical events. As the retail industry moves into 2023, retailers are expected to continue to face a range of challenges. As such, retailers must remain vigilant and adaptable, developing strategies to mitigate the impact of these challenges and remain competitive in the market.

Retaining staff: The retail industry faces challenges in attracting and retaining employees due to high turnover rates, low wages, limited benefits, physically demanding work and long hours. The pandemic exacerbated the situation, as employees were concerned about their safety and sought more stable and flexible job opportunities. As a result, there are more job openings than available workers, causing retailers to struggle to fill positions and forcing them to offer competitive wages and benefits to attract and retain employees. This shortage of workers affects stores, distribution centers and online operations.

Supply chain issues: Brexit, the Ukraine war and other factors beyond the pandemic have caused significant supply chain issues. These challenges include increased customs and border controls, delays at ports and uncertainty around tariffs and trade agreements. This has led to higher costs, longer lead times and difficulties keeping up with customer demand for retailers. Additionally, natural disasters, trade disputes and labor shortages have contributed to disruptions, forcing retailers to diversify suppliers, increase inventory levels and invest in technology to better manage their supply chains.

Possible global recession: A potential worldwide economic downturn has several impacts on the retail industry. Consumers tend to cut back on spending, leading to excess inventory and decreased sales. A recession can also result in increased competition and price wars, eroding profit margins. Retailers may face higher costs for importing goods due to fluctuations in exchange rates. Many retailers are struggling, leading to store closures and job losses, with luxury goods retailers feeling the pinch. Consumers are turning to eCommerce to save money, further impacting brick-and-mortar retailers. Overall, the retail industry faces big challenges as the global economy navigates the uncertainty of a potential recession.

The tech you need to meet these opportunities & challenges

In the year 2023, monolithic, one-size-fits-all platforms need a complete overhaul (and actually, should've been kicked to the curb many years ago). To easily and seamlessly accommodate the many new trends, technologies and challenges that are always arising, retailers need to adopt a composable commerce architecture into their digital commerce. 

With a composable architecture, retailers can easily swap, add or remove components, giving them the agility they need to future-proof the commerce stack. This approach enables them to experiment with new features and capabilities without disrupting their entire commerce stack, allowing them to innovate and improve their offerings continuously. It also gives retailers the flexibility and agility needed to adapt to changing market conditions. Plus, composable commerce is perfect for omnichannel retailing, as it enables retailers to integrate online and offline channels seamlessly, providing a unified customer experience across all touchpoints. 

In essence, composable commerce empowers retailers to be proactive rather than reactive, enabling them to meet evolving customer demands and deliver exceptional shopping experiences.

Interested in exploring in detail what trends and challenges are waiting for retailers in 2023? Download our white paper Reimagining Retail Commerce in 2023

Diya Bag
Senior Content Writer, commercetools

Diya Bag is a Senior Content Writer at commercetools. Previously, she has worked as a Copywriter in advertising for a wide range of brands, as well as an Editorial Manager in publishing for magazines and both fiction and nonfiction books.

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