Retail outlook survey: How retailers in the US, UK, and India are getting ahead of the 2023 shopping season

For many, the first month of the year means the holiday season is behind us. We’ve packed up the decorations, tossed the holiday meal leftovers, and apart from a few gift returns, we won’t think about holiday shopping again for months. But for retailers, the 2023 shopping season is already underway. Avalara commissioned Censuswide to survey retailers from the U.S., U.K., and India about what lessons they learned in 2022 and what they’re doing to get ahead for 2023. 

Economic concerns
Rising inflation and recession conditions have many of the retailers surveyed across the U.S., U.K., and India preparing for headwinds in 2023. Nearly half (46%) of retailers across all regions believe the economic downturn will be the biggest challenge for their business in 2023.

Cross-border commerce
As shoppers look beyond their borders for unique items or the best deal, global commerce is becoming more of a priority for many retailers. Of U.S. retailers polled, 88% said international sales growth for their business was either in line with or ahead of expectations for the 2022 holiday season. International sales were up in the U.K. with 73% of respondents saying growth was in line or ahead of expectations, and in India, 78% reporting the same. 

While growth of any kind is exciting for businesses, new international customers and sales come with international tax complexities. The effort and cost of staying compliant with U.S. sales tax, VAT, GST, and customs duties can all add up, especially if you’re calculating rates manually or using outdated tech. Retailers are preparing for a global tax strategy; more than 56% of U.S., 46% of India, and 31% of U.K. respondents plan on investing to better understand their tax and customs obligations.

As a result, retail decision-makers across each region are investing in tools that will help them better navigate possibly turbulent times.

Customer retention
Attracting and retaining customers has always been a priority for retailers, and many are focusing on innovative strategies to keep customers coming back. Retailers surveyed reported that attracting and retaining repeat customers was their main customer experience challenge (45% across the U.S., U.K., and India collectively).

In fact, 63% of U.S. retailers polled plan on investing in technology to improve the customer experience. They’re focusing on key areas of the experience, including:

• Optimizing how they communicate with the customer directly (57%)
• Optimizing the product line to reach new customers (50%)
• Creating content to improve how they engage with customers across channels (49%)
• Personalizing the customer experience across channels (48%)

Retailers across the U.K. and India reported similar concerns and methods for retaining customers. Of the retailers surveyed, 36% in the U.K. and 42% in India are planning to optimize how they communicate with customers, and 35% in the U.K. and 43% in India are aiming to create content to improve how they engage with customers across channels.

Omnichannel expansion
One of the ways retailers are attracting new customers is by going where customers are — everywhere. Customers learn about new products, contact customer service, even buy directly on platforms like Facebook and Instagram.

Of retailers polled, 87% across all regions said their omnichannel strategy impacts how they think about the future of their business, and 45% plan on investing to expand sales channels in 2023. This includes channels like direct-to-consumer ecommerce sites (61% U.S., 44% U.K., 50% India), marketplaces (45% U.S., 33% U.K., 50% India), social media (59% Facebook and 56% Instagram in the U.S., 35% Facebook and 38% Instagram in the U.K., and 55% Facebook and 56% Instagram in India), and good old-fashioned in-store shopping (47% U.S., 31% U.K., 29% India).

As technology changes, retailers are changing their strategies to keep up. Research firm Gartner predicts that by 2026, 25% of people will spend an hour a day in the metaverse, playing games, interacting with friends, and more. The Censuswide survey finds that 86% of retail businesses across the U.K., U.S., and India now thinks the metaverse is important, and close to one-third (31%) of meta-aware companies are proactively prioritizing this new technology. Learn more about the real-life tax implications of virtual purchases.

Labor investments

It’s said good help is hard to find, and U.S. retailers are adjusting their practices to keep the good help they already have. Of the U.S. retailers polled, 67% are increasing incentives and benefits to retain existing employees, 55% are increasing wages of hourly employees, and 52% are hiring seasonal employees earlier in the year. And, 36% of U.S. retailers also plan to grow their team in 2023.

Companies worldwide are taking similar approaches to retaining their current employees, with 55% of retailers surveyed in India and 50% in the U.K. planning on increasing incentives and benefits offered to existing employees. Additionally, 47% of retailers in India and 31% in the U.K. plan on increasing wages for all hourly employees.

Automation adoption
Of the U.S. retailers surveyed, 87% wish they would have invested more in automation technology before the 2022 holiday season. Specifically, they wish they would have used tech and tools to help forecast demand (64%), streamline shipping and logistics (62%), and manage inventory (55%).

The sentiment was similar in the U.K. and India with 71% and 88% of respondents wishing they would have invested in automation for the holidays, respectively. Likewise, most respondents in the U.K. and India wish they would have adopted technology to forecast demand (43% and 55%, respectively).

Small business shifts
Small business respondents felt similar to their larger peers when it came to concerns over the economy, a focus on customer experience, omnichannel expansion, and the need for automation.

Across all three regions, 51% of small businesses consider the economic downturn to be the biggest challenge they’ll face in 2023. And, 44% of small businesses plan to invest in how they communicate directly with customers to improve the experience.

When it comes to omnichannel, 75% of small businesses view the metaverse as a priority channel for expansion in 2023. Likewise, 73% of small businesses have regrets about not investing more in automation during the 2022 holiday season — a decision many plan to reverse this year.

It’s not too early to think about the 2023 holiday season

An automated solution could be a big help for staying compliant during busy shopping seasons. Across all regions, 47% of respondents wish they had invested in automation tools for tax compliance last year. If you’re among them, now is the perfect time to start for holiday 2023.

• Technology and automation tools can take around nine months to fully implement. Now is the time to implement the tools and technology to help forecast demand and automate customer communications.
• It’s not always easy to hire the staff you need, but automation can help you use the team you do have more efficiently. If you implement automation solutions today, you can have a labor strategy in place well before the busiest shopping season of the year. 
• Customers expect a high level of communication throughout the purchase and shipping process. You can automate communication and keep your customers informed every step of the way. Automation can also help with product returns — American consumers are expected to return $171 billion of merchandise bought in the 2022 holiday season, costing retailers in labor and restocking costs.
  

Avalara can help
As you make plans for the 2023 retail year, Avalara tax automation solutions for retailers can help. Track changing tax rates (including U.S. sales tax, VAT, and customs duties), monitor sales to know when you’re approaching economic nexus thresholds, and improve the customer experience by providing more correct calculations right at checkout.

Survey methodology
This research was conducted by Censuswide with 1,005 decision-makers (senior managers and above) within retail across the U.S., U.K., and India (excluding sole traders) between December 15 and December 22, 2022.

For the purposes of this study, small businesses are defined as those surveyed with 0–249 employees.

Censuswide abides by and employs members of the Market Research Society, which is based on the ESOMAR principles and is a member of The British Polling Council.