Meeting the 6 Biggest Retail Challenges of 2023

Retailers in 2023 face various challenges that they didn't have to deal with in previous years. A retailer in 2023 has to have their ear to the ground with regards to changing consumer expectations, shifting conditions in the market, and above all, skyrocketing costs.

One of the major challenges that retailers had to deal with in the last couple of years, was the shift in customer embrace of online shopping. Since the Covid epidemic, customers have taken a large portion of their regular shopping online.

It is estimated that online sales numbers are set to reach $31 trillion in the next two years. Which means that more and more retail activity is going to take place through web stores and smartphones.

Which means that for a retailer to remain competitive in 2023 and in the years to come, they have to focus on creating a seamless shopping experience between their different sales channels.

What's more, retailers have had to learn how to market through social media and the use of online influencers not only to get new customers, but to retain the customers that have already used their products and services.

The result is that retailers have to evolve to become nimble players in an ever-changing marketplace if they want to continue to grow and gain market share.

In this article, we will look at the challenges and risks that the retail industry faces worldwide in 023—as well as means that you can overcome these obstacles and ensure the success of your business for years to come.

Challenge 1—Customer's rising expectations

These days, customers expect their shopping experience to be personalised to their particular needs and shopping behaviour. They also want their shopping experience to be effortless and seamless when they move between the various sales channels offered by a particular brand or retailer.

If that’s not difficult enough to achieve, customers have grown used to getting shipping that's not only dirt cheap (preferably free), but fast to boot.

When they place an order, they expect to be able to track their order at  all times. And when they contact customer service, they expect exemplary and responsive service without fail.

The challenge is for retailers to not only meet these expectations, but to do those in a profitable, cost-effective manner. Because if you let a customer down, the results can be dire. Customers are quick to leave scathing reviews on social media and other review platforms.

Because of the tremendous competition in the online retail space, it's a simple matter for customers to shift their loyalty to a competitor and take their sales elsewhere.

What's more, the explosion in online retail has also resulted in a massive increase in order volumes. Which means retailers have to process a high number of customer requests and queries with regards to product information, order tracking, as well as updates on delivery times or delays.

Fortunately, there are several solutions on the market for proactive retailers. Some retailers have started to use digital online assistants that are able to give automated responses to a customer's request to track their orders.

Complications arise when a customer requests the same order to be split up and shipped to different locations. Another problem is if they place several concurrent orders.

A solution is to implement order fulfilment systems that can recognize these types of events, and split and consolidate orders in a logical and cost-effective fashion.

These types of tools will definitely increase a retailer's customer satisfaction numbers and put them ahead of the competition.

Challenge 2—Optimising inventory control

As a retailer in 2023, it's crucial that you optimise your inventory control systems.

Order complexity inevitably leads to complicated inventory control management. One of the keys of meeting customers' expectations with regards to fulfilling their orders, is to have the right stock available at the right time.

This means that companies need to focus on the following aspects of inventory management:

1. Upgrading demand forecasting ability and technology.

If you're able to predict fluctuations in the market and future customer behaviour, you will be able to manage your inventory levels more efficiently.

The goal is to lower warehousing costs and reduce occurrences of dead stock. Which means you have to be prepared for any shifts in the market. This includes performing forecasting for each of your sales channels.

2. Improving the accuracy of your inventory management.

One of the most useful innovations in inventory management is the constantly updated inventory count. When you always know exactly how much stock you have available of each item, you will never be left in a situation where you processed an order for a product that's out of stock.

This means that you will be able to keep track of inventory levels in real time. You will be able to reorder stock well in advance of a stockout.

You will also be able to communicate to your vendors and suppliers well in advance when they have to get more supply of a product or boost their manufacturing output.

3. Managing multiple warehouse locations

One of the best ways that retailers have found to lower costs while improving shipping times, is to distribute warehouse space across a geographical area to ensure that goods don't have to travel that far to reach customers.

But monitoring multiple stock access points is a technical and logistical challenge—and one retailers have to master to get ahead in 2023.

Retailers must be able to seamlessly transfer stock between warehouse locations to meet expected shifts in consumer demand. A particular location must never be allowed to become stockless.

4. Optimising order management processes

Fulfilling orders is at the centre of running a profitable eCommerce business. One of the most difficult problems to overcome is effective communication and coordination between the different business units involved in processing orders.

Everyone in the delivery team should have access to the latest information with regards to each order. If they know the status of each order, they will be able to coordinate their efforts to avoid shipping delays.

The result is that products will move through the different stages of fulfilment in record time. Order accuracy will also be improved, so that you will always be able to deliver exactly the products and services that your customers ordered.

5. Training staff to handle peak periods

Staff have to specifically be trained to handle peak sales periods and seasonal fluctuations in demand.

One way to equip staff is to give them touchscreen devices to keep track of the status of orders, inventory levels, as well as to communicate directly with other members of the team.

Most workers will be used to handling touch-based devices since they’re functionally equivalent to smartphones. So training team members to use these devices should be a simple matter.

But you have to get your team members familiar with new systems before the crunch time arrives. Otherwise, they will fumble around with the new technology under the watchful gaze of impatient customers—causing delays and customer frustration.

6.  Optimising their supply chain management

In 2023, retailers have to negotiate vast, globe-spanning supply chains to get their goods to customers.

A particular challenge is to get visibility in all the different stages of the supply chain. Without good supply chain visibility, it becomes impossible to identify problems upstream in the chain that could cause delays or even order cancellations downstream.

Retailers in 2023 have to improve supply chain visibility. This will make it possible to optimise the whole chain to ensure its smooth operation. The result is improved customer service, reduced cost, faster delivery times, and ultimately higher customer satisfaction numbers.

Challenge 3—Managing Rising Inflation

One of the biggest challenges facing the retail industry in 2023 is rising global inflation. This causes a lot of uncertainty in the market.

When prices rise on a continual basis, consumers lose spending power. What's more, it becomes more difficult for retailers to maintain stock levels due to rising warehousing and stocking costs.

This puts tremendous pressure on retailers. Higher prices inevitably lead to lower sales figures. Which means it becomes more and more difficult to remain profitable. The challenge for retailers is to find ways to reduce costs while simultaneously boosting sales.

One of the major problems caused by rising inflation is rising fuel prices. This has a direct impact on the cost of goods, because goods have to be transported to warehouses and retail locations before they can be sold. What's more, courier and shipping fees on online orders will also increase—depressing sales.

When the cost of transporting goods goes up, the rising costs ultimately have to be passed on to consumers. This can lead to customer frustration and dissatisfaction. When there's a perception that goods are too expensive, they will buy fewer goods.

There are various ways that retailers are seeking to counter the effects of inflation.

Firstly, there is tremendous pressure on reducing the cost of goods. This can be achieved by more efficient sourcing of goods. Optimising the supply chain with digital technologies is another answer. There is also the option of diversifying product lines with more budget-friendly options.

Challenge 4—Managing Supply Chain Disruptions

If there's one lesson that retailers learned from the Covid pandemic, it is that global supply chains are not as stable as was previously thought.

Supply chains can be disrupted at any time for anyone for a number of different reasons. It becomes increasingly difficult to maintain sustainable supply chains. For example, there have been major supply issues caused by the Ukraine-Russia conflict.

All of these problems have made it extremely difficult for retailers to maintain a stable flow of goods to customers. The result of these disruptions have been product shortages of various kinds and empty shelves. There was an inevitable rise of prices as certain goods became more difficult to source. And then of course, there were countless order fulfilment delays.

But there are various means that retailers are trying to mitigate these supply chain issues.

One is to source stock from a wider selection of suppliers. Another is to increase inventory levels across the board to cushion any fluctuations in supply. Better management of the supply chain through digitization has also proved to be highly effective.

Challenge 5—Becoming environmentally and socially conscious

The relationship that retailers have with their customers have seen tremendous change in the last two decades. For one, customers spend a large portion of their day online. Which means they have become more socially and environmentally conscious.

Social media and online news has caused consumers to be much more aware of the environmental and social status of the manufacturers, brands, and products that they patronise.

With the rise of these online communications systems, consumers have the means and incentives to discuss their shopping behaviour with friends and other consumers.  Which means that consumers are much more aware of which retailers offer quality goods, and which don't.

What's more, the demand for sustainable, environmentally friendly goods are on the rise. Many  customers regard these types of factors to be as important as price when they make their purchasing decisions.

There are also other socially conscious and ethical concerns that consumers are starting to take into account when they shop online. For example, a large portion of the modern consumer base looks at companies involved in fighting climate change, lowering pollution, or offering workplace safety, before buying something from a retailer.

Some brands are meeting these demands with aplomb. Others aren't faring that well and face a constant barrage of negative online feedback from consumers, scrutiny from their shareholders, and pressure from nonprofits to improve their social and environmental status.

Keeping these socially and environmentally friendly customers and pressure groups happy while maintaining profits is quite the challenge indeed.

Challenge 6—Navigating an ever-changing regulatory environment

Finally, retailers have to contend with a regulatory climate that's often hostile to the needs and requirements of the retail industry.

The result is that retailers have to comply with an ever increasing number of regulations and industry standards. This would include new laws introduced in the last couple of years with regards to consumer data protection, various consumer protection laws, as well as complicated taxation systems.

Managing all of these compliance issues is even more difficult for retailers operating in multiple jurisdictions—which is often the case for online retailers.

Non-compliance is never an option. If a retailer fails to meet their compliance obligations, they face legal action that include paying fines, being dragged into court, or suffering damage to their public image.

This is an area that is a constant battle for large retailers. Every retailer has a particular set of challenges when it comes to compliance—and they have to engage expert legal advice in each jurisdiction they operate to solve this important problem. This is something that's impossible for any multichannel retailer to avoid.

Conclusion

The last couple of years have been particularly challenging for retailers. They’ve had to deal with various shifts in consumer behaviour. From the Covid pandemic onwards, various factors contributed to a feeling of unease in the market and fear of economic instability.

What's more, customers are expecting more and more from retailers. For example, the new standard is omnichannel retail, which means offering a seamless shopping experience to consumers across sales channels.

Customers expect convenience, fast delivery times, and an overall pleasant shopping experience—and many retailers have not really managed to meet that challenge. And if something goes wrong and a customer feels slighted, they have the option to make their displeasure known on social media and other review sites.

It is quite a challenge for retailers to maintain the balance between meeting their customers' rising expectations and maintaining profitability.

Furthermore, retailers have to juggle rising order volumes, complex ecommerce-businesses">order fulfilment workflows, difficult inventory prediction forecasting, and unsympathetic regulators and local governments.

To succeed in this challenging retail environment, businesses have to adopt effective technology tools. These include order management systems with integrated inventory management technology.

With the right tools and processes, retailers will be able to keep their customers happy, stay abreast of their compliance requirements, and maintain profitability.