May 18, 2022
New Opportunities for Retail Brands to Increase Stability and Profitability
We’re in year three of a global pandemic that’s upended multiple industries, especially retail and ecommerce. The upside is that it’s forced us to take a closer look at existing legacy systems, inefficient supply chains, and inadequate inventory management plans, allowing many retailers to prioritize more long-term stability and profitability.
A recent report highlights that the next 12 months will offer opportunities for retailers to redesign their outdated global supply chains, rethink inventory management and bring their physical stores into the digital age.
Deloitte’s new 2022 Retail Industry Outlook Report is a great read on the future of retail and the factors shaping it. Deloitte’s experts surveyed 50 senior executives from across retail subsectors and asked a broad array of questions on a wide range of topics including consumer expectations, logistics, employee relations, industry trends, technology, and more.
Despite what you may be thinking, the outlook is decidedly positive. To save you time, we’re sharing a summary of the key takeaways from the report that are helpful for fast-growing ecommerce and retail brands.
Retailers Look Forward With a Healthy Dose of Optimism
Despite the relentless challenges they faced over the last two years, retail executives remain confident that consumer behavior is moving in their favor. Leaders are optimistic about future revenue growth and margins and more than half of them see inflation as an opportunity to raise prices and improve margins. With less product on the shelves, some brands offered fewer discounts and increased profits.
The executives surveyed in this report highlighted three top priorities for the year ahead:
- Workforce retention
- Supply chain resilience
- Digital/tech investment
Additionally, Deloitte identifies what they call Leaders and Laggards, businesses in the surveyed sector that will be able to thrive based on their research, and those who will lag behind. A summary of the areas a retail organization needs to focus on to be in the Leader category is included at the end of this section.
The reassessment of brand and personal values prompted by the pandemic goes deeper than what’s been reported as “the great resignation.” Increasingly people are judging employers by factors like flexibility, culture, and diversity, equity, and inclusion (DEI) choosing to join companies they are better aligned with these values over merely providing a paycheck.
Retail executives expect to see more labor over the next 12 months, especially for hourly wage jobs that are customer-facing. In Deloitte’s survey, 74% said they expect labor shortages in 2022, and 56% said they expect shortfalls in hourly supply chain, distribution, and logistics positions.
Supply Chain Resilience Takes Center Stage
Reshaping existing supply chain processes to include more redundancy, risk diversification, and overall resilience continues to be a top priority for retailers. is. Supply chain resilience means more than just being able to wait out disruptions. It means having a supply chain that can pivot when necessary, with freight that can be moved via a different route when there’s a port delay or a Covid lockdown at a warehouse. The goal is to make sure high-priority SKUs are always in stock.
For a supply chain to be resilient in 2022, real-time data must be collected and analyzed. That requires up-to-date infrastructure and end-to-end visibility. The top three intended major upgrades below reflect this: updated enterprise resource planning (ERP) modules, inventory management, and analytics software combine to put you back in control of your supply chain.
Digital Investment for the Win
Since the start of the pandemic, consumers have doubled down on their reliance on technology and digital platforms for how they work, live, learn, stay in touch, and shop. Though record sales in physical stores this year show that consumers may feel more comfortable returning in person, their preference for online shopping remains higher than before the pandemic.
The top three tech investments retail executives are prioritizing include e-commerce, digital marketing, and automated checkouts. Over the next five years, they’re also planning to invest in more voice commerce, cashier-less stores, and the selling of digital goods.
The advent and implementation of distributed network infrastructure has opened more avenues for retail businesses to build out truly omnichannel shopping experiences for customers by eliminating the bottlenecks previously encountered in legacy systems that can still be found in so many brick-and-mortar stores.
Are you a Leader, or a Laggard?
Deloitte calls out the following activities that a business will need to spend considerable time and energy on in the coming months to be considered a leader in the industry:
- Find alternative revenue streams
- Reset physical stores for omnichannel experiences
- Grow/expand digital offerings
- Grow ESG initiatives
- Enhance data privacy/security
- Modernize the supply chain
- Future-proof their workforce
Key Takeaways from the Report
In a report with so many great data points, here are five actionable insights:
- 96% of consumers have indicated they are looking for a seamless purchase experience across channels.
- 68% of consumers will use your ESG initiatives in the decision to purchase from your brand.
- 70% of executives say employee shortages (especially amongst hourly wage workers) will hamper their growth plans this year.
- 68% say the same about supply chain disruptions.
- 80% say they’re planning moderate to major investments in digital and supply chain combined this year.
Data Access Underlies Many of the Trends
Omnichannel is a common, yet often misunderstood term in retail. The biggest thing many don’t realize when implementing an omnichannel experience is the amount of data they’ll need in order to truly optimize it. Consumer buying trends, inventory management and customer relationship management tools all require massive amounts of data and the ability to analyze it in real time.
That data isn’t nearly as useful without end-to-end transparency. If you don’t know where in the world your shipments are, how can you give an accurate delivery date to your customers? Up- and downstream partners factor in here as well since each segment of a supply chain is inextricably linked to the rest.
Brick and Mortar Isn’t Going Anywhere, But Get Ready for a Reset
A truly omnichannel shopping experience might include click-and-pick, pop-up stores in a trendy new neighborhood, carefully curated, interactive locations that rely on terminals or apps and so much more. Each of these depends on physical spaces, and for retail companies who already have such locations, it’s proving ideal to reshape them into more interactive spaces.
Bonus chart: What do retail executives see as the most likely shifts to occur over the next five years? (note the discrepancy between items 1 & 4)
The two areas of concern the report mentions:
- Store improvements are not a priority for the majority of retail execs surveyed
- Data security is taking a backseat.
In 2021 we saw 44% of global retail brands hit by ransomware. Consumer trust is crucial for an omnichannel pivot to work. These two areas could make or break initiatives going forward in 2022.
You can read the full report here.
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