Seven Predictions For Retail In The Year Ahead
The retail industry was thrust into a period of rapid change when COVID-19 became a global pandemic, and several companies are still finding their footing as economies recover. But this year will bring new challenges as a result of continued supply chain bottlenecks, record-high inflation and ever-evolving consumer behaviors.
Retailers and consumer brands should keep these seven trends top of mind in 2022.
Consumers want more for less
The ongoing pandemic, supply chain bottlenecks and occasional shortages are causing record-high inflation. As prices continue increasing, consumers will look for added value in more of their purchase decisions.
When consumers become thriftier, they typically turn to less expensive brands and private label. They also eschew upscale supermarkets in favor of discounters or online retailers, which may sell products at cheaper prices. The discounter format will post a moderate growth rate in 2022, coming off a decade-long run as the fastest-growing physical format globally, according to Euromonitor International. Value-driven buying remained popular following the Global Financial Crisis due to the improved quality of private label products, but inflationary pressures will likely encourage such purchases this year.
Accelerated investments in virtual tech
More than half of retail professionals point to ramping up investments in AR and VR to enhance the online experience, according to Euromonitor’s Voice of the Industry: Retailing Survey 2021. These technologies turn the static online experience into a multi-sensory one and quickly gained momentum during COVID-19.
There was a subsequent boost in consumers using these virtual applications to try household products and clothes before purchase, according to Euromonitor’s Voice of the Consumer: Digital Survey 2021. Digital technologies, including AR and VR, continue to take online shopping to the next level in 2022. The holistic virtual world known as the metaverse will add even more dimension to virtual interactions.
Asia Pacific remains the retail growth engine
Consumer expenditure in Asia Pacific is expected to become the largest in 2026, surpassing North America. This rapid expansion directly benefits Asia’s retail industry, which Euromonitor projects will post the strongest regional growth rate in 2022.
Asia might be most known as the world’s innovation hub, driving generational shifts and inspiring trends like social commerce, super apps and livestreaming. In 2022, Asia will power the global expansion of e-commerce, accounting for 60% of total sales growth. And now three of the top-four e-commerce players globally, Alibaba Group Holding Ltd, JD.com and Pinduoduo Inc, are based in Asia, specifically China.
Eastern Europe overtakes Latin America in e-commerce acceleration
After a couple stellar years of growth, e-commerce sales in Latin America will slow this year. All regions with emerging economies will expand faster than Latin America with Eastern Europe posting the strongest growth at 18%. Several retailers in Eastern Europe expanded their omnichannel capabilities to capture the pandemic-driven channel shift.
In 2022, the strongest e-commerce category opportunity will be within food and beverage, which Euromonitor projects to grow 58%. Grocery retailers are expected to continue improving their online assortment and overall infrastructure, while smaller chains are expected to join existing marketplaces to remain relevant.
Rapid order fulfillment becomes table stakes
To keep up with e-commerce growth, efforts will shift towards how to fulfill such orders more effectively and efficiently. Two trends are emerging.
Consumers will opt for pickup over delivery to ensure they receive the products they want in time. Retailers and foodservice operators are offering incentives for click-and-collect orders to avoid supply chain issues and reduce costs.
Roseville, Minnesota, A customer waits in her car for her order in the contactless curbside pickup ... [+]
EDUCATION IMAGES/UNIVERSAL IMAGES GROUP VIA GETTY IMAGES
Startups are also expanding the reach of e-commerce. These enterprises are making impulse purchases feasible online through ultrafast delivery services in urban centers. As a result, many city dwellers will soon be able to expect delivery times between 10 to 30 minutes on snacks, drinks and other convenience store purchases.
All in on omnichannel
Companies will continue to elevate their omnichannel capabilities. About 60% of professionals at retailers and consumer brands expect consumers to judge their digital capabilities post-pandemic. In fact, the top tech-related initiative that accelerated due to COVID-19 was the enhancement of an omnichannel presence, according to Euromonitor’s Voice of the Industry: Digital Survey 2021.
The complexity and scale required to integrate and implement omnichannel capabilities across departments and systems remains one of the greatest challenges facing retailers. Nevertheless, in the year ahead, retail professionals point to enabling customers to check inventory across channels as the top area to focus their in-store investment efforts.
Retailers and brands with strong values thrive
Values-based buying is not a top motivator for all but is becoming more important. Globally, 32% of digital consumers will buy from brands that are aligned with their values and 27% will go so far as to boycott brands where their social and political beliefs do not align, according to Euromonitor’s Voice of the Consumer: Lifestyles Survey 2021. This sentiment is strongest among educated urban consumers with high incomes.
Retailers and brands must go beyond providing consumers value for their money to now also showcasing their corporate and social responsibility credentials. In fact, professionals at retailers and consumer brands point to sustainability as the initiative they will accelerate the most in the next five years, according to Euromonitor’s Voice of the Industry: Retailing Survey 2021.