In 2022, retailers will be more proactive in gaining customers’ confidence and business.
Proving sustainability will be a top priority, as will finding ways to solve supply chain issues. Plus, there will be new competition from manufacturers will seek to learn from retailers as they muscle in with more direct-to-consumer models.
Here are my predictions:
- Retailers will have to prove sustainability creds
In 2022, retailers will need to prove sustainability efforts and environmental, social and governance (ESG) credentials, or lose business.
Investors, partners and customers alike are putting pressure on retailers to be more sustainable – and will abandon them if they do not prove it. These market forces are more powerful than any government or environmental protest group could ever be: In fact, 73% of global consumers say they would change buying habits to reduce environmental impact.
It is a double-edged sword for retailers, involving a precarious balancing act:
- Tradeoffs: For example, reducing plastic use can result in higher food wastage, because wrapping some produce in plastic doubles its shelf life.
- Time wars: As consumers demand faster delivery, one might assume CO2 emissions will go up. However this is not always the case as more distributed fulfillment centers closer to customers mean final leg routes are shorter with a lower CO2 footprint.
Expect retailers to demonstrate their credentials by:
- Expanding local fulfillment centers, such as Amazon has, reducing both CO2 and waste.
- Promoting re-commerce – the selling of used products. Patagonia and Levi’s® has initiatives in this area and UK supermarket Asda has also trialed clothing ranges. This new business model will require flexible technology to support it.
- In-store energy use monitoring and control. Some large retailers are already moving in this direction, where IoT has a major part to play. Sainsburys have even highlighted it as a key area to investors.
- Providing consumers with some visibility of environmental impact in delivery choices as well as potentially evaluating distribution choices based on environmental impact as well as cost and speed.
- The supply chain crisis is not going away
In 2022, retailers will focus more on real-time inventory and supply chain visibility. This will help them get to grips with current delays and bottlenecks across the whole value chain, which began after pent-up demand for consumer products jumped, due to government stimulus and the re-opening of economies. As lead times grew, creating shortages globally, supply chains broke under the pressure.
Real-time inventory and supply chain visibility were highlighted by IDC as the biggest challenge facing retailers right now. Both are the result of data silos which IDC noted as the single biggest technology barrier to retail business objectives over the next 12-24 months.
Expect retailers to respond by:
- Working to eliminate data silos. The much-needed concepts of real-time inventory visibility and a single view of the customer will be key business outcomes.
- Scalable and flexible APIs, integration and microservices technologies will be essential to addressing what’s needed. Those looking to move quickly will look for pre-built libraries of connectors and accelerators to deliver rapid results.
- Experimenting with innovative approaches to enhance visibility may result in new uses of AI and IoT in logistics and supply chain.
- New competition will expand
COVID-19 shuttered many stores around the world – some temporarily, but others permanently. This resulted in the need for consumer brands to examine direct-to-consumer (DTC) models more closely. M&M’s™, Coca-Cola and Nike all expanded operations in an attempt to replicate success of “native” DTCs like Gymshark, Hotel Chocolat and Casper.
By having a transactional relationship with the consumer, these companies are becoming retailers. For consumers there are advantages, like easy access to customized products – for example, SunGod lets you select different choices of frame, lens and strap for your new ski goggles.
Having a direct relationship with the consumer allows the DTC brand to understand the end customer better and market specifically to them – but it is not without its challenges.
Thirty percent of consumers who have a bad experience with a brand don’t return, and that rises to over 70% if consumers have three bad experiences – as McKinsey observed: “Merely selling online is very different from building a sustainable e-commerce business.”
Expect some interesting moves in this arena:
- More brands will expand their DTC operations. In some cases, this will create uneasy relationships with retailers who also sell their products.
- Not all DTC operations will be successful – the ability to deliver on the brand promise and fulfil after the sale will be a crunch moment for customer experience.
- The smartest brands moving into DTC will look at successful retail operations to learn. This will be from the perspectives of the customer journey but will also ensure they have the process and technical infrastructure to support ever-rising customer expectations.
The COVID-19 pandemic has set the scene for some exciting changes as we move into 2022. One thing is clear, being truly connected is more critical than ever.