Gloomy Retail Forecast Ahead
Recent quarterly earnings reports from major retailers have been stronger than expected, buoyed by shoppers who continued to spend despite high inflation. But, that’s about as optimistic as it gets. It seems that they are all in agreement that conditions are about to get much worse.
The New York Times reports that several U.S. retail executives recently gave investors and analysts downbeat outlooks for the first quarter and the year to come, forecasting sales growth could be much lower than in previous years.
In calls with analysts, several retail executives said that they expected “softness” and “headwinds” and were planning “prudently” and “conservatively.”
The report noted that many of these assessments are influenced by the spending patterns of low-income shoppers who, squeezed by inflation, are being selective about what they buy and where they buy it.
According to an executive at retail consultancy GlobalData, investors are spooked because outlooks are soft, and people are really talking down prospects:
They’re talking about sales declines, further crunch in profits, and that really sets the tone that 2023 is going to be a very muted year for retail.
That sentiment was also echoed by retailers that cater to lower-income shoppers.
Amazon Dominates Retail Ad Spend
As retailers brace themselves for a gloomy year in terms of consumer spending, it looks like they also have some stiff competition when it comes to fighting for ad dollars.
A MediaRadar analysis found that Amazon held a larger share of retail media ad spend than major retailers combined last year.
While major retailers like Walmart and Kroger ramped up their network investments in 2022, no competitor could come close to capturing Amazon's share of retail media dollars.
According to the report, the e-commerce giant captured nearly 40% of the ad spend market share. The report found more than 14,000 companies advertised 17,000 plus brands on the e-commerce giant’s site.
Among general mass retailers, Walmart and Target accounted for the second largest share of retail media dollars.
Therefore, combined, Amazon and mass retailers captured nearly three-quarters of spending, pointing to power consolidation. However, MediaRadar emphasized that Amazon operates in a category all its own, so rivals will need to differentiate themselves.
