Strong YTD Performance Buoys Sustained Optimism for the Remainder of 2023
Three quarters (75.1%) of retail store managers responding to Levin Management Corporation (LMC)’s annual Mid-Year Retail Sentiment Survey reported their sales levels match or are exceeding last year at this time. Reflecting sustained optimism, an identical percentage anticipates volume to remain steady or pick up pace through the remainder of 2023.
“Retail has enjoyed a couple of stellar years, and it’s positive news that the first half of 2023 has carried this momentum forward for our tenants,” said Matthew K. Harding, LMC’s chief executive officer, who added the matching/exceeding sales metric is among the highest in the survey’s 12-year history. “Our poll reflects the industry’s successful and ongoing expansion in a post-pandemic era.”
The National Retail Federation holds a similar view: It predicts retail sales will grow between 4% and 6% in 2023, and notes that the industry’s growth over the past three years would have taken almost a decade by pre-pandemic standards. And while the first half of 2023 saw its share of store closures and Chapter 11 filings – notably by Bed, Bath & Beyond, Christmas Tree Shops, David’s Bridal and Party City – Harding noted that brands running their course is an age-old reality of an industry where change is a constant.
“There is inevitable fluidity in retail tenancies; as some reach their end, others are actively rethinking their footprints and seeking expansion opportunities,” he said. “The broader retail landscape shows a healthy balance of established retailers adapting to meet changing consumer preferences and a new generation of brands coming online. Those who are doing well are focused on customer service and convenience, and have embraced a modern approach.”
Growth Strategies and Technology
LMC’s Mid-Year Retail Sentiment Survey checks in on technology trending, gauging tools that are being leveraged to enhance the customer experience and marketing.
This year’s poll reflected the continued, widespread availability of an online option for purchasing goods, scheduling appointments for services or placing orders (offered by about 70% of respondents). “There’s been no looking back for omnichannel,” said LMC’s Melissa Sievwright, vice president of marketing.
In-store, the “top three” tools retailers have in place to augment customer service this year include digital coupons, discounts and/or loyalty points (offered by 66.2% of respondents); electronic receipts (offered by 53.1%); and in-store, online ordering with free shipping for out-of-stock items (offered by 49.0%).
“We love seeing the prevalence of loyalty programs – a long-time concept that has come into the digital age,” Sievwright said, noting that the benefits are well established. A recent Nielsen Survey indicated 84% of consumers are more likely to remain with a brand that offers such a program.
E-mail, Social Media and SMS Marketing
Tech-centric marketing is also an important part of the equation, with e-mail and social media remaining the two most popular tools, employed by 74.4% and 71.9% of survey respondents, respectively. “Email and social media have been neck-in-neck as the go-to digital marketing channels throughout our survey’s history, and both offer deep analytics that provide insight on customers’ preferences and mindsets,” Sievwright said. “With the explosion of influencer marketing, social media – especially – is becoming even more dynamic.”
Of note, SMS (text messaging) is now being used by 58.1% of LMC survey participants. “The use of text messaging has grown significantly over the past six years; this data point is up from 27.7% in 2015, with incremental growth each year in between,” Sievwright said. “This is a logical progression; Pew Research Center reports 85% of Americans own a smartphone – up from just 35% in 2011.”
Inflation, the Economy and Labor Check-in
In-store, the “top three” tools retailers have in place to augment customer service this year include digital coupons, discounts and/or loyalty points (offered by 66.2% of respondents); electronic receipts (offered by 53.1%); and in-store, online ordering with free shipping for out-of-stock items (offered by 49.0%).
Three of the retail industry’s well-documented pain points – inflation, economic uncertainty and labor shortages – seem to be causing less concern as compared to last year for LMC survey respondents.
- 51.5% of participants have raised – or anticipate raising – prices in response to inflation in 2023, down from 60.8% in the mid-year 2022 survey.
- 40.7% say year-to-date economic shifts have impacted their performance outlook for the balance of the year, down from 57.8% in the mid-year 2022 survey.
- 47.4% of those actively hiring are having a harder time finding qualified job candidates year over year, down from 58.5% at mid-year 2022 and 79.1% at mid-year 2021.
“While these negative-leaning drivers are still part of retailers’ day-to-day challenges, our tenants seem to be feeling less volatility than last year – which is substantiated by slowing inflation and encouraging mid-year economic reports,” Harding said. “The labor shortage appears to be improving, with our findings tracking alongside data from the Bureau of Labor Statistics. Further, the percentage of our survey respondents who are actively hiring – 50.9% compared to 71.1% last year – likely means retailers are successfully staffing up their stores.”
For seven decades, LMC has served as a trusted single-source commercial real estate services provider for institutional and private owners. The firm’s next Retail Sentiment surveys, which poll retail store managers in the firm’s 125-property, 16 million-square-foot leasing and management portfolio, will be conducted in October/November, gauging expectations and plans for the holiday season, and in January, exploring outlooks for the coming year. The award-winning survey program reflects the firm’s commitment to understanding issues and trends impacting retailers from a street-level perspective.
