Levin: Retail industry continues strong momentum; volume expected to remain steady through end of 2023

Abstract blur and defocused shopping mall of department store interior for background

Levin Management Corp. released its annual midyear retail sentiment survey findings on Monday, which showed approximately three-quarters (75.1%) of retail store managers reporting sales levels matching or exceeding their levels when compared with 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,” Matthew Harding, LMC’s CEO, said. Harding added that 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 including New Jersey-based Bed, Bath & Beyond 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,” Harding 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.”

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,” LMC’s Melissa Sievwright, vice president of marketing, stated.

In-store, the “Top 3” 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%).

“We love seeing the prevalence of loyalty programs — a longtime 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.

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.”

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.

More details:

  • 51.5% of participants have raised — or anticipate raising — prices in response to inflation in 2023, down from 60.8% in the midyear 2022 survey.
  • 40.7% said year-to-date economic shifts have impacted their performance outlook for the balance of the year, down from 57.8% in the midyear 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 midyear 2022 and 79.1% at midyear 2021.

Harding said that its tenants seem to be feeling less volatility than last year in regard to negative-leaning drivers of inflation, the economy and labor check-in.

“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,” Harding said.

North Plainfield-based LMC has served as a trusted single-source commercial real estate services provider for institutional and private owners for seven decades. 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.