2023 reviewed from a retail technology POV: Looking back at another year in a decade of disruption
2023 would usually be remembered as a year of disruption, Jon Copestake, EY Global Consumer Senior Analyst, observes. Rising prices and interest rate hikes have combined to accelerate a cost-of-living crisis that began in 2022. The conflict in Ukraine has continued unabated, while a new tragedy has unfolded in Israel and Gaza.
Concerns over climate change have continued to grow as the frequency, cost and impact of extreme weather events become more tangible.
We’re now seeing a growing recognition of the need to not just mitigate the impact we have on the environment but also to adapt our lifestyles, and consumption, to the changes that are happening around us.
But progress is being undermined by the economic constraints that policymakers, consumers, and companies find themselves in and delivering change is difficult when a cost-of-living crisis forms a backdrop to everyday life.
The latest findings of our Future Consumer Index, which surveys over 20,000 consumers in 28 countries, found that 89% of consumers are concerned about climate change, but 86% are also worried about their finances. Balancing these priorities will be a defining challenge in the coming year.
But in the context of what came before, 2023 reflects the cumulative disruption we’ve faced since the start of the decade, which has seen a global pandemic, a supply chain crisis, escalating conflicts and many other factors impact the lives of consumers and the operations of companies.
The remarkable takeaway from this is the resilience people and businesses have shown in the face of adversity, with disruption becoming the norm.
Similarly in technology we saw excitement around the metaverse in 2022 shift to an explosion in interest in generative artificial intelligence (Gen AI) in 2023.
Unlike the metaverse, which comprises a range of longer-term technology trends, the impact of Gen AI is immediate and palpable, with businesses seeing the transformative effect that large language models can have on generating content, improving engagement, providing business intelligence and speeding up innovation processes.
As we look to 2024, many of the things we saw in 2023 will play out further. Inflation may moderate but spending will be pressured by stubbornly high prices and interest rates with little respite from lagging wage growth.
This could be exacerbated by mounting regulation and taxes that push towards sustainability goals as 2030 deadlines loom.
The inflation reduction act in the US and the Green Deal in Europe will continue to drive up standards on reporting and reducing carbon emissions, waste and plastic pollution.
But economic realities may see some areas of sustainability pushed down the agenda.
In this climate we should expect retailers and brands to look for new ways to drive down prices and cost to maintain or recover their sales volumes, while also seeking to balance growing consumer, and regulatory concerns over sustainability.
For those looking at how technology develops for businesses, there are five things that retailers can watch out for:
1. Will caution dampen Gen AI adoption? After the initial frenzy from companies in using Gen AI to power anything from marketing campaigns to chatbots many large consumer companies have pulled back to assess what risk and governance issues might arise.
With policymakers pushing for greater regulation, concerns over hallucinations, copyright infringement or intellectual property leakage have tempered enthusiasm.
This doesn’t mean interest will wane, as use cases and adoption continue to grow, but companies will exert greater control and ownership of the Gen AI tools that they integrate and scale.
2. Will crypto come of age? The world’s attention has been fixed on development in Gen AI developments carefully, but in the background several breakthroughs have taken place in quantum including improvements in light-based and self-correcting processes.
While 2024 won’t see quantum scale as a mainstream technology it’s likely that there will be enough progress to generate excitement, and investment, as companies start to consider the exponentially faster processing speeds that it can bring.
3. Do we need to talk about cyber? Cyber attacks have been quietly growing at an alarming pace as a shift towards digital drives greater exposure to risk and allows for the development of more tools for hackers to use.
August and September saw the largest ever distributed-denial-of-service (DDoS) attack the world has ever seen while ransomware attacks are accelerating, leading to industry wide losses that amount to tens of billions of dollars.
Despite this most conversations on cyber-risk have taken place in the back office – as losses mount and scrutiny grows so will the attention and investments made to counter it.
4. Where now for the metaverse? The rapid rise of Gen AI saw a switch in investments away from metaverse related programs towards AI initiatives causing some to pronounce the death of the metaverse.
The reality is that the metaverse is a broad church and many of the technologies and principles it uses have continued to develop and grow, aided by investments in Gen AI.
We’re unlikely to hear the term being bandied about in the same way that it was in 2022, but we will see metaverse led technologies become more embedded in business and consumer-facing applications.
5. Will sustainable technology start to deliver scale? The biggest problem with sustainable technology solutions has been in the relatively high cost of implementation, which has often meant that scaling them is not viable.
However, incentives, targets and climate pledges as well as the rapid iteration of other technologies could drive down costs in key areas such as renewable energy, measurement and reporting, and alternative materials.
The views reflected in this article are those of the author and do not necessarily reflect the views of the global EY organisation or its member firms.
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