By Mohammad A. Baker, Deputy Chairman and CEO of GMG

For retailers, 2022 was one of consolidation after a tumultuous two years. As 2023 dawns, Middle Eastern merchants can lean on the technological gains and supply chain evolution of the recent past to deliver on customer service, even amid lingering uncertainties. 

Online surged in the pandemic era, but brick-and-mortar remain relevant in a region where malls continue to be a part of the social fabric. A hybrid retail environment, referred to as phygital, has emerged that is set to define the regional retail landscape for years to come. 

There's a growing realization within our ranks that online and offline are no longer substitutes or competitors but increasingly complementary. Then, the challenge is making the eCommerce store feel like a brick-and-mortar store where staff reacts to customers' needs in real-time. 

We will then need to bridge the gap between physical and virtual retail experiences because customers no longer distinguish between online and offline shopping; they often start shopping in one and check out in either. Therefore, retailers shouldn't differentiate between online and offline because their customers won't. 

The post-pandemic retail evolution should include revisiting our relationship with Gen Z. This generation overtook millennials last year and now account for 32% of the global population. With almost$100 billion in spending power, understanding this demographic is essential to thriving in 2023 and beyond. 

Gen Z is value-driven and compares prices online to find the best offer. This makes it more difficult for brands to compete on price and highlights the need to consider other ways to attract their attention. These young shoppers are also driving one of the most exciting shopping trends today, social commerce or sCommerce, where customers buy products and services directly through social media platforms. 

Social media is near-ubiquitous in the region, with 98 percent of young Saudis surveyed by the Arab Youth Survey country saying they use Snapchat daily. Social media's interactive nature also leads to higher sales conversions than traditional eCommerce. Snap Inc. research shows that the so-called Snapchat Generation possessed $425B in spending power in MENA last year.

There is increased environmental and health consciousness among consumers. Retailers, therefore, need to align with social causes that resonate with their customers. Sustainability will take new impetus in 2023, particularly with COP27 and COP28 taking place in the region. Efforts such as greening the supply chain and choosing sustainable products can motivate suppliers to develop eco-friendly products. Retailers should also demand accurate information on products' sustainability credentials from suppliers through track and trace procedures.

Retailers should also be proactive by encouraging consumers to purchase eco-friendly products and providing advice on the proper waste disposal and available recycling opportunities.  

The pandemic strained global supply chains to their limit. Some of those disruptions remain, driven by a tense global geopolitical environment. The ensuing inflation will keeppressureon consumer spending across the region in 2023. 

More than ever, it's crucial to build resilient supply chains. These measures should include implementing decentralized supply chains and having an in-country presence. Modern fleet management software can automate back-end and other administrative processes to optimize delivery.Research shows that AI-enabled supply-chain management enables retailers to improve logistic costs by 15 percent, inventory levels by 35 percent, and service levels by 65 percent, compared with slower-moving competitors.

After proving its worth during the pandemic, we expect to see further investment in digital transformation in 2023 to lower costs, streamline supply chains and improve customer service. Data is our biggest currency as retailers, aided by surging online shopping. Improved access to advanced AI tools, even for smaller retailers, allows firms to mine rich insights from consumer data to transform the consumer experience. Retailers can use these insights to anticipate what consumers want, improve customer service at the individual level, and herald a new hyper-personalization era. 

Mobile has also lowered the barrier to entry for cutting-edge technologies such as augmented reality (AR) and virtual reality (VR). AR/VR is the next evolution in online shopping, where customers can do virtual fashion try-ons fashion at home. Customers love these interactive, immersive experiences that turn shopping into a fun, shared experience. Moreover, virtual try-ons help reduce the burden of returns, which costs $761 billion annually to US retailers alone