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5 Retail Trends That Are Set To Shape The Remainder Of 2023

By Steve Wynne-Jones
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5 Retail Trends That Are Set To Shape The Remainder Of 2023

As we approach the halfway point of 2023, it's an opportune time to reflect on the current state of grocery retail and the trends that are set to shape the remainder of the year.

The State of Grocery Retail 2023 report by McKinsey & Company and EuroCommerce takes a comprehensive look at the key trends shaping the grocery retail sector, based on interviews with CEOs and grocery retail leaders, as well as a survey of consumers across nine European countries.

“Despite the challenges ahead, these difficult moments offer opportunities to those who act boldly," commented Daniel Läubli, global head of grocery retail at McKinsey. "If retailers provide cheaper alternatives for their customers and double down on efficiency, that will leave room for investments in growth and sustainability, which increases the chance of coming out of this crisis stronger.”

Here are five trends that are set to shape the remainder of 2023, according to the report.

1. Cautious Consumer Behaviour

Consumer behaviour in 2023 is expected to continue reflecting a cautious approach due to the knock-on effects of recent economic uncertainty. Retail volumes are likely to stay flat for the rest of 2023 due to the difficult economic climate. Among consumers, 53% plan to save more money on food, and polarisation between higher- and lower-income groups is decreasing as all segments become more price-sensitive due to increasing costs of living.

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"Shielding consumers from inflationary pressures and rising energy costs has been a huge challenge for retailers and wholesalers in Europe, adding further pressure on already very low margins," commented Christel Delberghe, director general of EuroCommerce.

Read More: Record Food Inflation Figures Putting Pressure on UK Households: McKinsey

2. Intensifying Margin Pressure

Continued margin pressure will likely intensify the race for economies of scale, according to the report. Producers’ prices, wage increases and growing interest rates will continue to have an impact on grocery retailers’ profitability.

Continued margin pressure is resulting in growth in private-label sales, increasingly tougher negotiations with suppliers and delays in developments in digitalisation, it added.

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3. Making Online Profitable

With only moderate future online growth predicted, making online retail more profitable will be a key objective, the report states.

Pure online players grew faster than inflation in 2022 and some reached profitability. In addition, meal delivery is growing faster than e-grocery in value and market penetration, meaning some players are poised to possibly break even in 2023.

4. Accelerating Technology And Automation

Investment in technology and automation is set to accelerate, with additional required investment in technology estimated at €45 billion to €55 billion to 2030.

Advanced analytics is becoming crucial for retailers, with the potential to improve bottom lines by up to one percentage point. Elsewhere, Generative AI is emerging as a new frontier for marketing and customer support.

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5. Decarbonisation Efforts Intensify

The grocery retail industry will continue to intensify efforts to accelerate decarbonisation. In 2022, the Science Based Targets initiative (SBTi) saw an increase in the number of large retailers in Europe committing to its cause, from 56 to 110.

This surge in participation is driving the pace of decarbonisation in the industry, as retailers play an essential role in collaborating with both suppliers and consumers to tackle Scope 3 emissions. These emissions, constituting around 90% of all emissions, are not directly generated by retailers or their energy suppliers.

Read More: Green Deal Industrial Plan An Opportunity For Retailers And Wholesalers: EuroCommerce

This is the third time that McKinsey and EuroCommerce have teamed up to launch The State of Grocery Retail report, which includes a survey of more than 12,000 consumers and almost 50 grocery executives and thought leaders in the sector.

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Read the full report, The State of Grocery Retail 2023, here.

© 2023 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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