These were supposed to be dire days for retail. The so-called retail apocalypse witnessed a record number of store closings over the past few years and the pandemic exacerbated the situation. With stores shuttered (either temporarily or permanently), even tech-challenged consumers were forced to shop online. Not surprisingly, both retailers and consumers adapted to these new realities. Shopping options like “buy online pick-up in store” (BOPIS) and curbside pickup became popular. Omnichannel retail operations became an essential element of the retail sector. Even as they adapted, however, retailers worried that the fast-spreading omicron variant of the coronavirus and inflationary pressures would dampen holiday sales.
It turned out that, for the most part, consumers were in a buying mood. Journalist E. Justin Swanson (@ejsnyt) reports, “Retail sales in the United States jumped nearly 11 percent this season compared with the holiday period in 2019, the year before the pandemic upended the global economy.”[1] According to the Mastercard SpendingPulse study, “Online sales were up 11% and in-store sales up 8.1% between November 1 and Christmas Eve.”[2] There were worrying signs, however, as sales slowed in December. So, what does the new year hold in store for the retail sector?
Retail Trends
Consumers adapt to the new normal. NBA Commissioner Adam Silver seems to reflect the feeling of many Americans. He stated, “As we look through these [Covid-19] cases literally ripping through the country, let alone the rest of the world, I think we’re finding ourselves where we sort of knew we were going to get to over the past several months, and that is this virus will not be eradicated, and we’re going to have to learn to live with it.”[3] Learning to live with Covid-19 means consumers are looking to get out more — and that means dressing up. This trend was reflected in holiday spending. “Americans flocked to clothing, which experienced a 47.3% increase in sales year-to-year as well as jewelry, with a 32% increase.”[4] Most consumers have come to the same realization as columnist Kathleen Parker (@kathleenparker) who caught Covid-19, despite being fully vaccinated and carefully practicing social distancing. She concluded, “I’m sorry to say it, but the dogs of Covid aren’t likely to relent until they catch you, too.”[5]
Digital Path to Purchase taken more often. During the early days of the pandemic, consumers were often forced to take the digital path to purchase. As a result, many pundits believe the rate of online sales accelerated three years in three months. Swanson reports, “Online sales made up 20.9 percent of all retail sales [in 2021], according to the Mastercard report. In 2019, online sales accounted for just 14.6 percent of all retail sales, underscoring how the pandemic has accelerated the shift to e-commerce.” Philippe Loeb, Dassault Systèmes’ Vice President for the Home & Lifestyle, Consumer Packaged Goods and Retail industries, notes, “The demand for e-commerce has risen dramatically stretching global supply chains with disruptions leading to product shortages.”[6] The staff at Capitol One add, “For 2022 and beyond, many retailers are focusing on their digital presence. Convenience is a must for consumers who increasingly report having less time to shop, and a brand that doesn’t make itself available across multiple channels may see business suffer as a result.”[7]
Supply chain snarls could affect demand. Mohamed El-Erian, President of Queens’ College at Cambridge University and chief economic advisor for Allianz, predicts continued supply chain challenges could eventually affect consumer demand. He states, “I don’t think we have an issue with demand. I think incomes are strong. Retail sales are strong. Companies have lots of money. The problem is the supply side. And unless we fix the supply side, it will contaminate the demand side. So that’s why it’s really important to focus on the two big issues that we have: supply disruptions and inflation.”[8]
Shift in consumer attitudes and behavior. Beyond their desire to get out more and their increased online buying habits, Keith Schwartz (@krschwartz), CEO of Bounteous, writes, “Consumers still want every available convenience at their disposal, but they also seek out more engaging customer experiences. Brands that can do both will win more sales.”[9] In addition to wanting better customer experiences, Loeb insists consumers are also become more conscientious. He explains, “Consumers ultimately vote with their wallets. As they focus on the environment and sustainable lifestyles consumers will increasingly prioritize the eco-profile of a product in their purchase decisions. We are seeing a movement to reward ‘brands with a purpose’; that purpose being to help create a better world environmentally, economically and from a humanitarian perspective.”
Brick-and-mortar retail remains important. Like Schwartz, the Capitol One staff believes customer experience will remain an important part of what draws consumers into physical stores. They explain, “While online shopping popularity is increasing, that doesn’t mean brick-and-mortar retail is dying. In fact, 75 cents of every retail dollar spent goes to a physical store. Retailers are using tactics like unexpected brand collaborations and experiential marketing to draw customers to their stores. Data indicates that both tactics are working, so you’re likely to see more of your favorite brands experiment with fun in-store setups in the future.” They add, “While 2020 saw a noticeable dip in foot traffic to nonessential businesses across the country, new data shows a pattern of shoppers returning to malls and other stores. In addition to experiential marketing and brand collaborations, retailers are using new approaches to omnichannel shopping to lure shoppers through their doors.”
Use of digital wallets. With many companies discouraging cash transactions during the pandemic, the use of digital wallets increased. Schwartz notes, “The consumer’s penchant for digital wallets is upending other critical workflows, like checkout and payments. There are over 100 digital wallets available, and consumers expect to pay for their purchases using their preferred option.”
Loss prevention needs an upgrade. The Capitol One staff reports, “Loss prevention is a hot topic among retailers. Despite decreased foot traffic, average shoplifting efforts increased by double-digit percentages in 2020, especially for essential retailers.” The latest concern involves so-called flash-mob robberies. Journalist Zusha Elinson (@ZushaElinson) reports thieves are using social media outlets to plan robberies. He explains, “A recent rash of thefts by fast-moving mobs at stores in the Bay Area and outside Minneapolis were organized on social media and committed by people who often didn’t know one another, according to law-enforcement officials investigating the incidents.”[10] Retailers are now working closely with local law enforcement agencies, state prosecutors, and the Federal Bureau of Investigation to address this growing threat.
Concluding Thoughts
The Capitol One staff concludes, “The retail industry is strong and resilient, even in the face of drastic economic changes and rapidly shifting consumer preferences. Retailers are smarter about blending online and in-store offerings to cater to shoppers’ needs, which results in a better shopping experience for everyone. Retail will continue to face new challenges, and the future of shopping will adapt to these changes in new ways.” Loeb agrees retailers and brands must continue to be innovative in order to thrive in today’s volatile business landscape. He concludes, “Winning today’s consumer entails more sustainable, smarter, localized and personalized experiences. Progress will mean integrating products, technologies and services with the consumer in the very center of innovation.”
Footnotes
[1] E. Justin Swanson, “Holiday sales soared, with e-commerce notching huge gains, a report says.” The New York Times, 26 December 2021.
[2] Agence France-Presse, “US Retail Sales Up 8.5% This Holiday Season,” IndustryWeek, 26 December 2021.
[3] Chris Mannix, “The NBA Has Chosen Its Path Against COVID-19,” Sports Illustrated, 22 December 2021.
[4] Agence France-Presse, op. cit.
[5] Kathleen Parker, “My week with omicron,” The Washington Post, 21 January 2022.
[6] Philippe Loeb, “5 CPG & Retail Industry Predictions for 2022,” Consumer Goods Technology, 15 December 2021.
[7] Staff, “53 Retail Statistics To Know for 2022 + Beyond,” Capitol One Shopping, 1 October 2021. (Email Mike Floeck)
[8] Joseph Choi, “Top economist says supply chain issues could ‘contaminate’ demand,” The Hill, 28 November 2021.
[9] Keith Schwartz, “Commerce Trends That May Have An Impact Bigger Than Pandemic,” The Marketing Insider, 24 August 2021.
[10] Zusha Elinson, “Flash-Mob Thefts Planned on Snapchat and Other Apps, Police Say,” The Wall Street Journal, 13 December 2021.
