Retailers are gearing up for robust sales, driven by value-conscious shoppers. The National Retail Federation predicts a record-breaking summer spending season, with positive economic indicators fueling consumer confidence. Low unemployment, at 3.6% as of June, and a 1.2% increase in real wages contribute to optimistic consumer sentiment. The University of Michigan Consumer Confidence Index echoes this positivity, reaching its highest point in the July 2023 report since September 2021.

Despite growing confidence, consumers remain mindful of inflationary pressures and sustained real wage adjustments. As such, they are keen on maximizing the value of their purchases and seeking the best possible deals. Excess supply in the market and intensified competition lead shoppers to look for discounts and value-driven retail options. Gone are the days of understocked shelves and full-priced items as consumers become more adept at navigating the current retail landscape.

In response to changing consumer behavior, value stores are witnessing a surge in demand. Bloomberg reported a 7% increase in North America off-price retail valuations in June, indicating a shift toward value-oriented shopping experiences. 

Amid excess inventory, companies are leveraging discount strategies to entice consumers. The consumer goods consumer price index decreased to 1.3% (below the 2% target), signaling that consumers can expect better value while shopping. In the second half of this year (2H), retailers must be prepared to cater to the growing number of value-conscious shoppers eager to capitalize on discounts and make the most of their purchases.

With consumer confidence on the rise and positive economic indicators shaping the market, retailers are poised for robust 2H sales. However, amid the challenges of inflation and wage adjustments, companies must embrace the value-focused shift and implement strategies to meet the demands of cautious consumers. To address this shift, middle market retailers should:

Build brand awareness and highlight value through custom marketing campaigns to attract discerning customers and justify pricing.

Enhance convenience with technology, offering seamless online shopping and efficient payment methods, to improve customer experience and perceived value.

Implement effective loyalty programs to foster customer retention, encouraging repeat purchases and supporting sustained pricing.

Conduct margin analysis to navigate pricing pressures and make informed decisions, ensuring sustainable profitability amid market challenges. In response to the analysis, businesses might find it necessary to streamline their product offerings, engage in price negotiations with suppliers, or even revise their sales channel strategies, all to address the challenges posed by low-margin products.

Incorporating self-checkout alternatives and touchless pickup technologies is crucial for restaurants to minimize labor expenses and enhance the customer's per-ticket value

Confronting inventory losses from rising theft

In the ever-evolving retail landscape, inventory shrinkage remains a pressing challenge that retailers of all sizes face. This persistent issue, primarily from theft by organized crime, continues to have a profound impact on retailers' profitability and operational efficiency—and it demands immediate attention and collaborative efforts across the entire retail sector.

Inventory shrinkage has far-reaching implications for retailers' financial health. It directly affects their bottom line and profitability, necessitating urgent action to curb losses, which large retailers have recently projected will total $300 million to $500 million by year end.

Retailers face theft of goods by individuals for personal use, as well more complex and hard-hitting losses orchestrated by organized crime syndicates. These sophisticated criminals systematically target retailers, causing financial losses, disrupting supply chains and compromising consumer trust. E-commerce marketplaces that resell stolen goods have accelerated this trend in the last few years. 

The scope of organized retail crime extends beyond traditional retail theft, reaching into the transportation and logistics spheres. Recent studies from CargoNet showed a concerning 41% increase in cargo-related theft during the first 20 weeks of 2023 compared to the previous year. This expansion of criminal activities into the supply chain further amplifies the challenges faced by the retail industry.

As technology advances, so do the tactics of criminals. Retailers now face the rising risk of digital theft, with consumers reporting more than 48,000 cases of gift card fraud in 2022, resulting in losses exceeding $228 million, according to the Federal Trade Commission. This form of cybercrime underscores the need for robust cybersecurity measures to safeguard consumers and retailers alike.

The consequences of inventory shrinkage go beyond immediate financial losses. Retailers face compromised profit margins, decreased operational efficiency, and potential reputational damage. To confront these challenges head-on, retailers are recognizing the need to invest in security resources and cutting-edge technology to combat criminal activities effectively.

Middle market businesses find themselves at a disadvantage compared to larger organizations, as most lack dedicated resources and experience in combating sophisticated criminal networks. Additionally, they may lack the visibility and reporting mechanisms to accurately gauge the scale of the issue within their operations.

To address this disparity, middle market retailers must pool resources and knowledge by actively collaborating with peers and industry associations such as the National Retail Federation. By joining forces, retailers can advocate for policy changes at both local and national levels to strengthen the legal framework against retail crime. Such collective efforts can lead to increased support from governmental authorities in tackling criminal activities.  

Scaling through labor automation amid workforce and inflation challenges

Today's retail and restaurant sectors are grappling with a continued labor shortage in a low unemployment environment (3.6% as of June) with inflationary wage pressures. To maintain efficiency amid rising costs, businesses are strategically embracing labor automation—not as a workforce replacement, but as a tool to enhance output and enable scaling.

Key automation technologies include self-checkout systems, AI-powered custom order suggestions, loyalty programs, and buy online, pick up in store (BOPIS) or to-go systems. These tools streamline processes, improve productivity and enhance the customer experience.

Self-checkout systems provide customers with a quick, independent transaction experience, freeing up staff for complex tasks. AI-powered suggestions personalize customer experiences by offering custom order suggestions in restaurants or product recommendations in retail, based on past purchases and popular trends.

Digital loyalty programs automate rewards tracking and personalized offers, fostering customer retention and satisfaction across both the retail and restaurant sectors. The BOPIS or to-go systems address the growing consumer demand for convenience, boosting operational efficiency and customer service.