A Quarterly Review: Q1 2023

In the first few months of the new year, the retail industry faced a landscape of highly prudent consumers, environmental and economic obstacles, and innovations in the AI space.

The physical store continues to play a significant role in the shopping journey as consumers steadily return to pre-pandemic behavior – however, the NRF predicts full-year GDP growth of 1%, reflecting a slower economic pace and half of the 2.1% increase from 2022.

In the current economic environment, 38% of marketers are putting a bigger focus on building loyalty with existing customers over acquiring new ones. (Source: Marketing Dive)​

Q1 Statistics

Foot traffic data from Placer.ai shows that monthly retail visits in Q1 2023 were consistently below the January 2022 baseline​. This could potentially be due to higher interest rates – rather than the ongoing inflation – impacting consumer spending.​ (Source: Placer.ai)

For the first time, we are also seeing high household income consumers driving softness in apparel this spring​, as depicted in this chart from Earnest Research. (Source: Earnest Research)

Q1 Ecommerce Results by Month – Belardi Wong Clients​

The Q1 season was flat to last year; across our clients, we saw mild growth in January and February, up 2% each month, but March was soft, down -4%​.

Q1 YOY Change in Ecommerce KPIs by Category – Belardi Wong Clients​

Home Décor has seen 15-months of tough YOY comps and declines in conversion, which continued into Q1. Apparel, Shoes & Accessories saw some mild growth to start the year, largely due to increases in sessions. Conversion was a challenge for all industries​.

In Summary

Economic Data

  • The physical store is playing an increasingly significant role as consumers become more price-conscious and return to pre-pandemic behaviors​
  • Funding activity dropped YOY, but is still above 2020 levels – investors are more conservative​
  • Credit is climbing as consumers are stressed by inflationary pressures and a decrease in disposable income​

Key Trends

  • Conversion was a challenge across all industries – apparel, shoes and accessories saw some mild growth while home décor continued to struggle in Q1​
  • Consumers are looking for creative ways to stretch their buying power – some are trading down while others are turning to special offers​
  • High household income consumers are driving softness in apparel this spring​
  • Advancements in AI are expected to improve content creation, personalization, and product design​

What’s Ahead

  • It is imperative for brands to strike a balance between brick-and-mortar, online, and wholesale​
  • Consumers aren’t necessarily looking for cheaper options –brands will need to prioritize improving customer loyalty and establishing their value proposition​
  • Despite economic headwinds, the retail industry continues to display resilience as new technology matures and consumer behavior normalizes​

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