A Real Economy publication

2023 retail and restaurant industry outlook

Aug 29, 2023

Retail and restaurant industry outlook: Key takeaways

Retailers should make investments to ensure sustained growth and safeguard inventory and profits.

Harmonious collaboration between automation and workforce can enable scalability.

growth chart

Middle market retailers and restaurants can enhance profitability by expanding into new markets, categories, cuisines and formats.

Retail and restaurants sector trend #1: Offsetting shortages with automation

Automation is the name of the game

While optimistic, consumers remain wary of inflation, seeking discounts. Excess supply and competition boost demand for value stores. Retailers use discounts to manage excess inventory, and the consumer price index suggests better shopping value. To cater to value-conscious shoppers, retailers should enhance brand awareness, convenience, loyalty programs, and margin analysis.

However, inventory shrinkage from theft is a concern, impacting profits and supply chains. Organized retail crime and digital theft are rising, demanding cybersecurity. Labor shortage and inflation push retail and restaurant sectors to adopt labor automation like self-checkout and AI-driven suggestions. Upskilling and data use optimize labor alongside automation for efficiency and growth. The aim is a symbiotic relation between automation and humans to navigate the economy effectively.

Retail and restaurant sector trend #2: Expansion into new markets, products

Managing inventory and labor challenges in retail

In 2023, retailers face dual challenges of managing inventory amid price hikes. Despite a strong supply chain recovery, inventory management shifts focus to turnover ratios and cost-effective strategies. Labor shortages persist, with increased 'quits' affecting the retail industry. Though job openings rise, retention remains a concern, pushing automation adoption.

Consumers demand online shopping, sustainability, and personalization, prompting retailers to adapt multichannel approaches. Amid inflationary pressures, customer spending fluctuates, driving businesses to prioritize SKU profitability. Middle market retailers can leverage unique strengths to differentiate in a competitive landscape.

Retail and restaurant sector trend #3: Continued cost pressure for all

Pursuing profitability in 2023

In the challenging landscape of 2023, retailers must navigate increased costs, evolving consumer behavior, and ongoing labor constraints while focusing on profitability. Despite stabilized foot traffic and supply chains, selling products profitably remains paramount. The persistent pressure of rising costs affects both consumers and retailers, prompting adjustments in spending patterns.

As the Federal Reserve raises rates, retailers seek technological and customer-focused solutions. Restaurants, facing changes in consumer preferences, emphasize digital engagement and data utilization to enhance value and customer retention.

RSM contributors

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