So This Is Christmas, And What Have You Done?

‘23 Is a Wrap - How’d It Go, Retail?

Estimated Read Time: 5 Minutes

Thanks, John Lennon, for reminding us mere mortals that reflection is a good idea, especially at this time of year. Let's show him some respect and look back at '23 (macro to micro style) and talk a little bit about what happened.

The Consumer

The biggest round of applause should go to the consumer. Despite daily media feeds about inflation, a looming recession, and all-around global malaise, the consumer remained undaunted by all the negativity and continued to spend like the champions they are. According to the US Government, consumer spending increased 3.4 percent over the past twelve months, on top of what was a solid 2022. Because of that spending, none of the malaise ever took hold. Even inflation, although a definite driver of angst, didn't slow down the mighty US spender. So congrats, people, you have proved the experts wrong. Again.

Retailers

The reflection on '23 for retailers is also quite impressive. Similar to consumer resilience (and directly related to it) many retailers flat out kicked some tail this year. NRF forecasts that total retail sales during 2023 will have grown between 4% and 6% over 2022, totaling between $5.13 trillion and $5.23 trillion. Last year's annual retail sales grew 7% over 2021 and totaled $4.9 trillion. This growth rate is above the pre-pandemic average annual retail sales growth of 3.6%. Nice.

Going a little more micro, according to Statista, Walmart alone will come in at $605 billion (that's 605,000 million if you're British), which is a +7% over last year. Congrats, y'all, and go Hogs. Also, a macro belle weather retailer, Starbucks, doled out $36 billion worth of high-energy goods, which was +12% to the 2022 fiscal year. That's certainly impressive, but the online behemoth Amazon takes the cake in terms of growth with $525 billion in sales, +10% from last year. That's a big number on a big number. They're the relative new guy on the block, but a retail neighborhood bully by all counts. Amazon is the biggest disruptor to hit retail since department stores proliferated over 100 years ago, and this year's numbers indicate that it isn't over by any means.

However, as usual this century, retail was still a winner-take-all game in 2023, and some did not fare so well. Like Target. They're reporting a "mid-single-digit decline" (-5%?) this year and claiming that theft and the lack of foot traffic are the culprits. But if you look at the difference between Tarjay and Walmart, it's really about having a robust grocery offering vs the lackluster version they offer, isn't it? Because in inflationary times such as these, well priced groceries will bring foot traffic in droves, as proven during the '08 recession. But at the end of the day, -5% is not a death knell, and we expect them to rebound any day now. Target may have some real estate assessing to do as well, but they're not in Bed Bath & Beyond or Kohl's territory for sure.

Not to be left out, a new FTI Consulting report predicts that U.S. online retail sales will reach $1.14 trillion this year, up 10% year over year. This turned out to be a spot-on number for Black Friday. FTI Consulting's 2023 U.S. Online Retail Report projects that nearly half (42%) of retail sales growth this year will be from e-commerce. The reason we bring the skyrocketing online sales up is because those numbers mitigated the 2,800 store closings that Business Insider predicted for this year, to say nothing of what would've happened if we didn't have e-com during the last 4 years. So thanks for the plus-side, disruptor.com., and some fine add-on sales for '23.

And to throw a little e-com frosting on top, a recent study we performed showed that people would love to shop in the Metaverse. No joke. Of course, it doesn't really exist full-on yet, but Apple's latest headset is definitely going to get us closer. So don't count this type of experience out because when the consumer speaks, it's foolish to ignore them. Just ask the retailers who were slow to e-com, or better yet, check the .5 trillion bucks Amazon is ringing up partially because of retail slow pokes at the turn of the century. Les Wexner once said, "I'm afraid to stop and smell the roses…I might get hit by a truck." And man, does that ever apply to modern retail. Stay frosty out there because online innovation is NOT going to slow down.

To top the spectrum of shopping choices off, there's social media. Forecasts from Statista say that the value of social media commerce sales (i.e. retail) will reach around 2.9 trillion U.S. dollars by 2026. As difficult as it is to read the hockey-stick graph of social sales at this point, there's no doubt that $3 trillion dollars, or even half that, is nothing to sneeze at. In any case, it seems that the tech bros have also added to the strength of retail sales in 2023. Thanks, Silicon Valley, adding to retail sales is the least scary thing you've done in a while.

All in All, Retail…

Despite all the headwinds, including organized theft (who's total numbers NRF disputes are in line), retail has proven more resilient than the crisis-seeking media is letting on. There will always be challenges, for sure, as played out in store closures, labor crises, theft, and return dilemmas, but the American consumer is in good shape (saving money by working from home?) and proving it with their wallets. Onward to '24.

Now for the micro-micro side of things.

WD Partners 2023

Enough text! For a not-so-humble brag done graphic-style, check this out: WD had a good year as well thanks to our global super-team. And don't forget, we do it for the people!! Again, looking forward to '24, macro to micro.