Exclusive: Retail Predictions/Insights for 2022
Experts from several leading retail technology companies gazed into their crystal balls to provide Chain Store Age readers with a view of what industry will experience in 2022 and beyond.
Dave Spear & David King, senior partners, industry consulting, retail, CPG and hospitality, Teradata:
• Unintended consequences of safety stock. Many retailers are trying to contract ships for exclusive container shipments. Some have made big airfreight bets and filled entire planes with merchandise. Unfortunately, there will be unintended consequences, with huge amounts of extra inventory lying around stores and warehouses. This will place a premium on markdown optimization and signal monitoring to adjust ordering.
• Inflation is good for private label. Big brands will have difficulty getting essential raw materials and/or components to manufacture and place their usually broad portfolios on store shelves. In the absence of these iconic brands, you’ll see a boon for grocery private label brands. These home brands will save the retailer’s margin woes due to price increases that CPG’s have passed along due to spiking inflation. Consumers should carefully examine private labels because it might be the only way to save money at grocery stores in 2022.
• Inflation is good for pricing. Inflation – real and perceived – will provide CPG’s opportunities to raise prices or maintain price but on smaller packages after years of retailer’s squeezing prices. After – at times – indulging themselves with premium pandemic comfort food, many food consumers will respond to higher prices by moving more wallet-share to value discounters.
• Labor woes continue unabated. Competition for front-line labor between roles like retail, warehouse/supply chain and drivers will increase wages to attract and retain talent. Continued labor shortages and higher labor costs will intensify the focus on warehouse, store and delivery automation to reduce labor needs.
Randy Fields, CEO, Park City Group:
• Old is new in the supply chain. A new supply chain transformation will start in earnest with most of the developments that were added during the last 15 years being thrown out because they just weren’t flexible enough in wild swings like we saw in 2020 and 2021. Instead, we'll go back to the supply chain thinking pre-2005, with adjusted views on everything from localization to safety stock levels.
• Retail continues to benefit from foodservice woes. There will be a continuing shift away from foodservice and toward retail grocery. This will come in the form of added fully prepared and easy-to-prepare meals, as well as hospitality-like services. We will also see more restaurants moving into retail both by offering products for sale at their own location and supplying grocery retailers with entrees, sides and more.
• Limited growth for food e-commerce. We will reach peak online grocery levels. Due to capacity and labor issues, but primarily the unsustainable financial models currently deployed, retailers will finally need to charge customers what the cost of serving them via e-commerce actually is and many will demur.
Johanna Småros, co-founder, Relex Solutions:
• Supply chain issues will persist. The supply chain issues we’re seeing today won’t end in 2022. Retailers can’t improve resilience just by stocking up “just-in-case” because no one can afford to sit on stock that won’t move.
Instead, retailers need absolute visibility into their inventories and demand—down to the item and fulfillment channel—to react quickly and accurately to disruptions by switching sourcing and redirecting inventory.
• Growing recognition of retail labor as a key asset. Personnel cost is the biggest operational cost in retail, and recruitment is only growing more difficult and expensive. Retailers need to get much better at predicting resourcing needs to ensure they can accurately staff both stores and distribution/fulfillment centers to provide a great customer experience without incurring excess labor costs.
Accurate workload forecasting and planning also improves employee retention, providing a distinct competitive advantage to employers who can offer their staff predictable, well-balanced work schedules.
• Raising the bar for delivery speed. Consumers don’t expect to have their every need met within 15 minutes (yet), but the new speedy delivery players are raising the bar for everyone. Retailers will need to figure how to serve their customers with quick fulfillment, whether by leveraging their existing network of stores, implementing dark stores or micro-fulfillment centers to increase fulfillment speed or investing in online fulfillment centers for efficiency.
Whatever the model or models chosen, retailers also need to ensure that they have the demand, supply, space and workforce planning capabilities needed to run efficient fulfillment.
• Fresh and sustainable offers as a competitive advantage. Sales data and consumer studies show that today’s shoppers want to make healthier, more sustainable choices. As inflation pushes prices up, the retailers that can effectively manage fresh products without losing profit to unnecessary waste will be able to use fresh products as a differentiator and competitive advantage.
John Lert, Founder and CEO, Alert Innovation:
• Fresh, prepared foods remain focus for grocers. Supermarket visits will increasingly be primarily for fresh and prepared foods, with packaged goods ordered online for store pick up or home delivery. Customer segmentation around preference for self-selection of fresh goods will drive omnichannel execution strategies in the future.
• More tech comes to retail. Retailers will continue to experiment and innovate with ways to combine in-store and digital shopping and fulfillment. This will include everything from the increased use of QR codes on store shelves to incorporation of ordering support in consumer content.
• Even more tech comes to retail. Deployment of store-level automation solutions by retailers to achieve sustainable profitability and further engage shoppers will accelerate significantly in 2022 and beyond.
Brett Bever, global product management director, ToolsGroup:
• The Best Ability is Availability. As disruptions to the global transportation system continue to impact lead times, the buying decision for consumers is frequently determined by whether or not a retailer actually has stock to sell.
While this is of less importance for brand owners with no immediate competition for specific products, it is critical for general merchandise and specialty goods retailers to ensure they have modeled supplier substitution into their global supply chains and budgeted for appropriate inventory levels across redundant distribution channels.
• Focus on Fulfilment. As a secondary component to availability, the convenience factor of optimal order fulfillment is increasing in priority when consumers make a buying decision.
Opportunities exist today to challenge the hegemony of Amazon when it comes to online orders and thinking about stores as “hyper-local fulfilment centers” for buy-online-ship-to-home orders can be key to changing purchasing patterns in a retailer’s favor. To accomplish this, companies must also ensure that fulfilment demand is the driving force for inventory optimization at the store level, and not strictly sales demand.