What’s ahead for retail in 2022

Forecasting this year’s retail trends, from reimagining the customer experience to virtual commerce

While talk of predictions typically brings a crystal ball to mind, a snow globe might be more appropriate as thoughts turn to what lies ahead in 2022.

Questions are still swirling around everything from supply chain snarls to pandemic anxiety and the volatility of non-fungible tokens, better known as NFTs.

Inflation spikes didn’t crush holiday spending. But with the Federal Reserve setting the stage for a series of interest rate increases beginning in the spring, concerns seem genuine about the potential for inflation to stay high and take some wind out of the industry’s sails. It’s likely that pricing and promotion will be under renewed scrutiny if inflation takes root.

Things can change quickly, but retailers are keeping a wary eye on some macroeconomic headwinds. Topping the list is the labor shortage: The challenge of staffing stores, warehouses and restaurants is considerable, and ripple effects are proving to be complex. Fewer associates in stores are resulting in longer checkout lines and dwindling customer service.

Farther upstream, labor shortages are affecting the supply chain as ships jammed with retail merchandise are stuck offshore. Even when container ships make it into the ports, there aren’t enough dockworkers, trucks or drivers waiting in the wings to keep the supply chain cranking. There are new concerns on the horizon as dockworkers and marine terminals get set for negotiations in the quest to hammer out a new labor contract; the current contract expires in July 2022.

Nonetheless, the retail industry’s resilience has been on full display for the last two years and shows no signs of abating. Retailers developed technologies that took contactless shopping and payment from seed to substantial. Physical retail, often predicted to falter in the face of the ecommerce boom, is flexing its muscle as we head into 2022 and will continue to attract shoppers for the foreseeable future: 72 percent of U.S. retail sales will still occur in bricks-and-mortar stores in 2024, according to new research from Forrester.

Amazon, which many predicted would destroy traditional retail stores, is now investing in a portfolio of stores with roughly 90 units currently operating under different Amazon banners (not counting the 500-plus Whole Foods Markets).

Speaking of Amazon stores — how about a prediction for 2032? It’s not outside the realm of possibility that Jeff Bezos, the driving force behind Blue Origin, could spearhead the opening of the first store on the moon — or even another planet. It’s not clear how one would buy property in outer space. Is like the Wild West frontier where they would stake a claim? Or is it more likely that investments in “prime” real estate would be in the form of cryptocurrency in the metaverse?

In the meantime, let’s focus our attention on the 12 months that lie ahead and make a few educated guesses about where the industry might be headed in the near term.

Consumers returning to physical stores are in for an elevated experience. Engaging technologies, including touches of virtual reality, hands-on encounters and in-store app functionality, are just part of the remake.

Can physical stores deliver a competitive edge? Retailers believe so, and they’re investing heavily to capture shoppers’ interest and provide experiences that promise less friction and a more integrated experience.

House of Sport
House of Sport in Dick's Sporting Goods

Case in point: Dick’s House of Sport. The store features a rock-climbing wall, a batting cage and a putting green. Weather permitting, shoppers can even head out to the 25,000-square-foot field connected to the store to give a new piece of equipment a try.

Several brands that cut their teeth online will open physical locations in 2022 including home goods seller Wayfair; executives have announced plans to open three new bricks-and-mortar locations in Massachusetts next year. Other brands that seemed to be on life support are making a comeback: Toys “R” Us debuted its new flagship store at American Dream mall and is teaming up with Macy’s to open 400 toy shops inside Macy’s stores. Even brands that seemed locked in one approach are branching out; Dollar General will have about 1,000 Popshelf locations by the end of fiscal 2025.

And expect stores to look a lot greener as the year unfolds. It’s an acknowledgement of consumers’ growing interest in sustainability, for sure, but research shows that shoppers in retail settings filled with greenery and nods to the outdoors will pay up to 25 percent more for products than in non-green environments. No wonder RH, Apple and Amazon are among retailers incorporating biophilic design into stores and offices.

Online will continue to eat up a larger portion of grocery sales, but rapid delivery services might lose some steam as grocery retailers look to build out their own delivery options.

Supermarket soothsayers are forecasting that online sales will represent more than 20 percent of grocery business within five years. Food-at-home spending is primed to rise, too.

Expect supermarket operators to continue paying close attention to shifting tastes and dietary desires. If they can really get their arms around the prepared meals game, they stand to become even more formidable operators, particularly in a climate that has reduced the footprint of restaurants.

Retail technology

Take a deeper dive into the latest retail tech innovations among the retail industry.

One thing many grocers regret is handing over so much delivery business to third-party operators. In the quest to rebuild loyalty, look for retailers to continue to invest in micro-fulfillment centers that bring them closer to their shoppers, and watch for them to reclaim at least some portion of home delivery.

In the high stakes game of speed and loyalty, supermarkets need to quickly jump on scan-and-go solutions and frictionless payment technologies. Amazon’s Just Walk Out is a game-changing experience. Once shoppers skip the checkout line, they won’t want to stand there again.

With nothing but cookie crumbs left in the wake of the phase out of online identifiers, marketers are playing the creativity card with aplomb and pulling out all the stops in their quest to deliver messaging that connects with shoppers.

Retailers have lots of customer data and it’s very valuable to advertisers. Look for consumer product goods companies, brands and retailers to up their investments in retail media, i.e., the collection of ad placements that companies have across multiple platforms including websites, apps and other digital platforms. InsiderIntelligence.com forecasts that U.S. digital retail media advertising will reach $41.37 billion in 2022, growing nearly $10 billion from last year.

One challenge will be figuring out how much is enough and how much is too much in terms of shopper outreach. Email remains the dominant channel for connecting during the buying journey but there was a huge bump in text messaging over the past year. Nonetheless, the jury is still out on whether shoppers consider these texts beneficial or bothersome.

Ultimately it comes down to relevance. Personalization matters. Customer expectations for an experience that is relevant across physical and digital channels is the 2022 iteration of loyalty. Show them you know them, and they’ll stick with you; mess up and they’re out. Finally, look for retailers to keep pushing the envelope on creative ways to connect — even if creativity takes the form of reengineering something that would have been perceived as outdated five years ago. Hello, print toy catalogs and QR codes.

Livestreaming is all the rage now but sustaining interest across generations — in a world that (hopefully) won’t be clenching smartphones 18 hours a day — is likely to result in it losing some steam.

Livestreaming, the art of selling products via real-time, interactive video streams, started in China a few years ago and has spread across the globe. Over the last year, retailers and brands leaned into shoppable video across social platforms and consumers embraced the opportunity to buy at the point of discovery. The connection has proven to be strongest with younger shoppers who are more inclined to connect and embrace social influencers. Millennials and boomers are less likely to have the time to keep track of “drops” or the patience for demos that drag.

Livestream shopping

Learn more about TV shopping and how it's evolved over time with social media influencers.

McKinsey reports the value of China’s live-commerce market grew at a compound annual growth rate of more than 280 percent between 2017 and 2020, to reach an estimated $171 billion in 2020. Sales there are anticipated to reach $423 billion by 2022. Juxtapose that against U.S. figures showing the live-commerce industry is expected to exceed $50 billion in annual U.S. sales by 2023, according to eMarketer.

What remains to be seen is how those that have dabbled in shoppable videos will modify initial efforts based on lessons learned. Can the element of personal service somehow be amped up? Is it best to create a true “event” around livestreaming, rather than teasing what’s to come? We know shoppers love ecommerce and with more than two decades of “storytelling to sell” working for brands like Qurate, the burden is on new entrants to find traction with today’s shoppers.

Metaverse and Web3 became buzzwords du jour in late 2021. Whether or not they gain real traction in 2022 is predicated on a select few that truly grasp what the concepts are all about. Regardless, neither promises to overhaul retail in the next 12 months.

If you’re still wondering what the heck the metaverse is, you’re far from alone. USA Today defined it as a combination of multiple elements of technology, including virtual reality, augmented reality and video, where users “live” within a digital universe.

metaverse

Mark Zuckerberg of Meta (an obvious backer) and Microsoft are supporters of the metaverse vision and foresee users working, playing and staying connected with friends through everything from concerts and conferences to virtual trips around to the world.

Early examples include events inside Fortnite and Roblox. Meta’s Zuckerberg envisions a virtual world where digital avatars connect through work, travel or entertainment using VR headsets. Microsoft’s tech experts are already using holograms and are now developing mixed and extended reality applications with its Microsoft Mesh platform, which combine the real world with augmented reality and virtual reality. Still confused? So are most retail decision-makers.

Web3 is billed as a collection of the 21st century’s most impactful technologies, combined to offer humanity the chance for a “more fair and people-centric future” according to G20 Ventures. It seems like something retailers could get behind — a global network, digital money, own-able creativity and ownerless apps. But is that possible? Skepticism dwarfs conviction here.

NFTs will continue to be worthy of exploration in 2022, but tread cautiously. While some brands view NFTs as new ways to connect with and engage loyal fan bases, others preach prudence.

NFTs have emerged to record blockchain “ownership” of a particular piece of digital art or memorabilia. Each NFT token is unique, and the industry has seen the greatest traction in digital art. While backers like musicians and artists believe the ability to own digital art will allow them to create additional creative work from the NFTs they own, cynics contend that was possible before NFTs via intellectual property rights.

NFTs

The facts are indisputable: The popularity of NFTs has skyrocketed and the global market value of the digital investments hit $23 billion, according to blockchain analytics firm DappRadar. But Forrester reported back in October that 45 percent of U.S. online adults had never heard of NFTs, suggesting the hype cycle is in full force.

Nonetheless, some major brands are getting behind the trend. Just last month, Nike, Adidas and Pepsi collectively secured more than $220 million in NFT trading volume, according to DappRadar. Also making news in December, AMC Theatres offered 86,000 limited-edition NFTs in conjunction with the recent release of “Spider-Man: No Way Home.”

Because NFTs are intrinsically linked to blockchain, there is a bias that exists. While traditional investors remain cautious, young people and creative thinkers see NFTs as their shot at wealth. Ignore it at your own peril.

Consumers will expect more of retailers in 2022 than ever before. Expectations are through the roof and forgiveness is in short supply.

“Keep your friends close and keep your enemies closer” has never been truer for retailers. Shoppers previously willing to overlook a less than stellar experience are moving from benevolent to malevolent. They want the experience to be seamless; they expect retailers to know them and engage on a more personalized and contextualized level.

Retail has always been about understanding the customer but now it’s nothing short of imperative.

Transparency remains a linchpin. Shoppers care deeply about how a business does business — if your values don’t mesh with theirs, it could be a relationship buster. Are you committed to diversity, equity and inclusion? Are you backing Black-owned businesses? Is there a move toward sustainability?

Consumers are spending with brands that have an ethos on a par with their own. Retail has always been about understanding the customer but now it’s nothing short of imperative. We’ve spent an eternity saying that shoppers have all the power. Still, today’s consumer is digitally savvy, channel-agnostic and open to exploring the endless reserve of new products being served to them via social channels — replete with storytelling and how-to details.

Much like a snow globe, many more predictions are whirling in the wings.

Prepare for more cyberattacks in 2022. During 2021 an attack occurred every 39 seconds. Ransomware exploded and high-profile infrastructures were attacked. There are no signs this will abate.

Labor shortages are not going away. For retailers and restaurants the problem seems more acute because they have faced high turnover for decades. Look for companies to get creative — offering signing bonuses, higher wages and perks like higher education and greater scheduling flexibility. And expect investments in robots and other technologies to ramp up.

Sourcing and supply chain remain ripe for digital transformation and have the potential to streamline business processes, helping companies stay competitive. Nearshoring will become more prominent and on-demand sourcing will gain traction as well. The big unknowns: Will shoppers tolerate higher prices and potentially longer wait times for on-demand products?

Retailers that succumb to the pressure to spin out ecommerce divisions are in for a world of hurt. Experts have seen this movie; they know the ending and it will ultimately compromise the customer experience.

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