From Party City’s bankruptcy to ongoing layoffs, the early part of 2023 hasn’t been without major events affecting retailers and manufacturers of all stripes. Inflation and the threat of a recession caused consumers to take a more cautious approach to spending, and some retailers are feeling that pain more than others.
While e-commerce sales are still on the rise — they hit $1 trillion for the first time in 2022 — digital-native brands are suffering through reductions in workforce and other cost-cutting as venture capital firms retreat and take a harder stance on profitability. Dollar stores and mass merchants like Walmart and Target, however, stand to benefit from the wave of value-conscious shoppers.
In 2023, default rates in retail are expected to stay relatively low, according to Fitch Ratings, but it’s likely to be another year where retail’s strong get stronger and the weak suffer. Some sectors could be better off than others. The pandemic’s winners — home goods and home improvement, for example — could face tough times ahead as demand has cooled. One need only look at Bed Bath & Beyond’s collapse to see the impact shifting consumer interest can wreak.
As consumers navigate a difficult financial landscape, they are turning to private labels and seeking out cheaper alternatives for their go-to products. That could also mean a boost to resale, which has gained steam in recent years. In 2023 already, Canada Goose and Francesca’s have joined the ranks of retailers looking to cash in on used goods and capture a consumer interested in value, sustainability or both.
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