The National Retail Federation (NRF) just unveiled its 2023 forecast, and there are good things in store for the nation's online and brick-and-mortar retailers. During its third annual State of Retail & the Consumer virtual conversation, the retail trade association expects retail sales to grow 4 to 6% this year, hitting between $5.13 trillion and $5.23 trillion. This positive sign for retailers follows 2022's 7% annual growth over 2021, with retail sales reaching $4.9 trillion. And while 2023's growth will be lower than 2022's, the forecast is above the pre-pandemic average annual retail sales growth rate of 3.6%.
E-commerce will also have a banner year in 2023, with sales projected to rise 10 to 12% increasing between $1.41 trillion and $1.43 trillion. (Online sales are factored into the overall growth noted above.)
But post-pandemic, e-commerce has shifted from a stand-alone sales phenomenon to being one part of consumers' shopping experiences. According to the NRF, "While many consumers continue to utilize the conveniences offered by online shopping, much of that growth is driven by multichannel sales, where the physical store still plays an important component in the fulfillment process. As the role of brick-and-mortar stores has evolved in recent years, they remain the primary point of purchase for consumers, accounting for approximately 70% of total retail sales."
So for consumers, their ideal retailers offer in-store and online shopping and provide a seamless experience, meaning they can buy online and return in-store and vice versa. This echoes the findings of a survey from Momentive, a market research platform, which says the future of retail is "hybrid." Key findings from a Momentive study show:
On a less optimistic note, NRF chief economist Jack Kleinhenz says the organization projects the nation's full-year GDP will grow around 1%, which is slower than 2022's 2.2% increase in GDP. Happily, though, the NRF expects inflation to continue to decline but likely remain between 3 and 3.5% for all goods and services this year.
Kleinhenz also reports that while the labor market "has remained resilient, the NRF anticipates job growth to decelerate in the coming months in lockstep with slower economic activity and the prospect of restrictive credit conditions. The unemployment rate is likely to exceed 4%" before the start of 2024
But Kleinhenz warns the economic outlook could get "complicated" due to recent developments in the financial markets and banking sector, as well as "some unresolved public policy issues."
Kleinhenz adds that consumer spending is looking "quite good" so far this year, and the NRF expects consumers to keep spending. That optimistic outlook is underscored by Easter spending this year, which is projected to reach a record-setting $24 billion, topping 2021's $21.7 billion and 2022's $20.8 billion. While that sounds like a lot of money spent for a one-day holiday, Americans are expected to spend over $3 billion on Easter candy alone.
Sales statistics from February, the latest available, show consumers are shopping in various types of stores. Year-over-year sales from February 2022 to February 2023 show:
NRF president and CEO Matthew Shay doesn't find February's sales growth surprising. He says it "reflects consumers' ability and willingness to spend thoughtfully on household priorities." Despite recent economic volatility, Shay says, "the underlying fundamentals in the consumer economy remain on solid footing as jobs and wages are growing, and inflation is trending down."
There's a lot of buzz throughout various business industry sectors about Artificial Intelligence (AI) replacing employees in the workforce. However, the NRF doesn't think that is imminent, saying, "Despite growth in automation over the past decades, we haven't seen much impact on the labor force. Self-checkout, for example, has not reduced the number [of employees] working in stores.
"What we do see is technology and AI replacing some of the more mundane, repetitive tasks allowing human associates to focus on high value, high touch roles. This is a highly competitive industry in a very tight labor market, so we don't see reasons to believe that there will be a displacement of workers."
NRF's calculation of retail sales focuses exclusively on core retail sales and outlets and excludes automobile dealers, gasoline stations, and restaurants. (But restaurants are also expected to have a banner year, with the National Restaurant Association projecting a sales increase of 6.4% to $997 billion in 2023.)
When the pandemic first sent millions of American home, temporarily shuttering many retail stores, there were concerns about it being a death knell for the industry. But, remarkably, the opposite happened. Shay says, "In just the last three years, the retail industry has experienced growth that would normally take almost a decade by pre-pandemic standards."
Indeed, between 2010 and 2019, the average annual retail sales growth was 3.6%. But from 2019 to now, retail sales have seen astounding growth of 30%.
And while Shay admits that kind of growth isn't sustainable, the more moderate growth projected this year is still far ahead of that 3.6% historical growth average. Shay attributes the positive trajectory to retailers "who are continuing to find innovative ways to meet consumers, offering the right products at the best prices, and delivering great experiences."
About the Author
Rieva Lesonsky is CEO of GrowBiz Media and SmallBusinessCurrents.com and has been covering small businesses and entrepreneurship for over 30 years. Get more insights about business trends by signing up for her free Currents newsletter.
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