Optimizing brick and click
Consumers were flush with cash – and retailers were ready to take their dollars in 2021. Retail firms saw astounding profitability in the first three quarters of 2021, despite a deficit of products and labor.
The reason? Responsiveness. Retailers accelerated digital offerings and adapted physical spaces to match new shopping behaviors. And technology helped the industry respond to changing conditions, engage consumers and create safe shopping experiences, both in-person and online.
Even with fewer employees, retailers figured out how to address shoppers’ needs and deliver better customer service. Curbside pickups, reserved shopping times for elderly patrons, and contactless payments were appreciated by consumers – and paid off for retailers.
Consumer spending will eventually taper off, but retailers remain optimistic through 2022. Supply chain disruptions will continue to be a headache, but have been well-managed by the industry through pricing.
As they enter the New Year, retail leaders should keep an eye on:
2022 Retail industry outlook
- Marketing and technology. The pandemic accelerated digital adoption among all generations. Now, ecommerce is becoming table stakes. Advanced players are creating true omnichannel experiences, where shoppers can seamlessly switch between physical and digital storefronts. Retailers that are easiest to do business with – when, where and how customers want – will win. Expect additional investment in technologies that support health and safety (contactless payments), customer service (chat bots) and decision-making (analytics).
- Customer preferences. Retailers must intimately understand customers’ wants, needs and preferences – and have the operational agility to respond. In addition to product quality and availability, today’s customers also expect responsible and transparent corporate behavior. Policies and investments toward social justice, climate change, mental health (and other causes) are weighing heavier into purchase decisions.
- Branded shopping experiences. Retailers aren’t just exchanging goods anymore; consumers want a shopping experience. Brands that carefully manage the entire customer journey have the opportunity to build deeper, longer-lasting relationships and attract customers for life. Branded shopping experiences require tighter alignment (and possibly control) along the value chain – from production specs to shipping and delivery. They also require balance. Retailers can boost profits by replacing people with chat bots and automation. Ultimately, they need to choose tools and processes that produce the best customer experiences.
- Employee engagement. While the labor market remains tight, retailers have to do “more with less." Technology can ease some of the burden on staff – but retailers need to pay careful attention to HR issues like staff development, training and engagement. Employees are an essential part of the brand and shopping experience, and their happiness has real impact on the bottom line.
- Real estate. As more sales move to digital channels, brick and mortar locations will need smaller footprints. Retailers have an opportunity to manage their retail spaces differently going forward; bringing partners, complementary services or even competitors into some of their space. Downsizing or right-sizing is expected. Underperforming locations will continue to be trimmed from store counts.
- Loyalty and reward programs. Retailers collect an enormous amount of data about shoppers – and they can use the information to identify, reward and incent their highest-value customers and prospects. Loyalty and reward programs will become more sophisticated as data grows, and can be an effective mechanism for customer engagement and retention.
- Security. Consumers expect safe and secure shopping experiences. As ecommerce grows, retailers need advanced cybersecurity capabilities to mitigate financial and reputational risks. Ransomware attacks and other cybersecurity threats hurt consumer confidence and put retailers at risk.
- Creativity. The industry is facing a number of headwinds: supply chain disruption, labor shortages and dynamic customer preferences. Creativity can help retailers overcome these challenges. Look for new approaches to distribution, customer engagement and staffing in the year ahead. From video game- and app-based stores to drone deliveries and vending machines for cars … there’s no predicting what retailers will try next.