With the threat of a recession looming, the new year brings about a slew of challenges for retailers recovering from a year of supply chain bottlenecks and inventory surplus.

But not all of 2023 is expected to be gloomy. 

The expansion of the metaverse is likely to continue its growth trend as more retailers find new opportunities to connect its virtual base with real-life experiences. 

Despite their struggles, the resilience of malls persists with foot traffic recovering post pandemic, along with an additional emphasis on shopper experience for brick and mortar in general. 

And circular fashion, which started as a shopper-conscious movement to help save the environment, is becoming big business.  

These trends and more are expected to impact retail moving into 2023.

1. Bankruptcies on the horizon

Bankruptcy filings increased in 2019 and then surged in 2020 as the pandemic hammered retailers.

But headed into 2023, the markets have shifted. Federal stimulus payments have ended. Inflation and economic uncertainty have affected consumer spending.

Taken together, these changes could translate into fewer deals or no deals at all next year. The result could be a resurgence of retail bankruptcies. Retail Dive reported 17 bankruptcy filings in 2019. That nearly doubled to 30 in 2020. The trend eased in 2021, with just eight major retailers filing for bankruptcy that year.

And the number of retail bankruptcies continued its slide in 2022. Notable among them are Sears Hometown, an offshoot of the former retail giant. Bed Bath & Beyond also ended 2022 on shaky ground and within days of the new year warned it could file for bankruptcy. 

But the decline in filings doesn’t mean all was well in 2022. Instead of bankruptcies, many companies and lenders turned to layoffs, mergers or other methods to ease debt loads and get access to cash. 

At the start of Q4, nearly 20 other retailers were also at risk of bankruptcy, according to analysts. They include companies with national footprints like Party City and online home goods retailer Wayfair.

2. The metaverse grows (and continues to confuse) 

The onslaught of metaverse activations in retail is unlikely to subside in 2023. Last year, the industry saw a variety of brands enter virtual spaces to promote their brand and connect with younger audiences. Gucci, H&M, Puma and Gap are just a few companies that dipped their feet into the increasingly hard-to-define metaverse. 

With real-world revenue becoming a possibility in spaces like Roblox, the trend is likely to only grow. Despite 48% of teenagers in a Piper Sandler survey from April saying they aren’t sure of or aren’t interested in the metaverse, some analysts have a positive outlook on the concept. McKinsey & Company estimated that the metaverse could make $5 trillion in value by 2030, with an estimated $2 trillion to $2.6 trillion impact specifically on e-commerce. 

Whether that estimate will become reality is yet to be determined, but retailers are investing in the space nonetheless. With around 58.8 million daily active users on the virtual world Roblox, the risk might be worth it to some.

3. A recession? Maybe. Uncertainty? Definitely. 

Inflation appears to be settling down, but macroeconomic forces remain a threat to discretionary spending. Some economists argue a recession is inevitable, a consequence of efforts to slow demand and cool down prices. National Retail Federation Chief Economist Jack Kleinhenz isn’t one of them, saying early in the new year that “it’s too soon to say whether the Federal Reserve’s efforts to reduce inflation will lead to a recession.”

As retailers know all too well, however, it doesn’t take a full-blown recession to spook consumers whose household budgets have been squeezed for over a year. Still, in December, consumer sentiment bounced back “sharply” month over month, according to analysis from The Conference Board. People’s feelings about the present and the near future improved, though expectations “are still lingering around 80 — a level associated with recession,” according to that report.


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