In 2022, gaining customer confidence and business will require proactivity and transparency from retailers. Proving sustainability efforts (as well as environmental, social and governance credentials), finding ways to solve supply chain issues, and communicating brand loyalty will top every retailer’s checklist this year. There won’t be any slowdown of competition. In fact, there will be more competition from manufacturers and startup organizations seeking to learn from successful retailers as they drive more direct-to-consumer (D-to-C) models. As retail technology continues to transform seemingly overnight, there are three trends industry leaders are planning for in 2022 and beyond.
New Competition Will Expand, Becoming Sharper and More Resourceful
The pandemic weakened many stores around the world — some temporarily, but others permanently. The result? A need for consumer brands to examine D-to-C models more closely. M&M’s, Coca-Cola, and Nike all expanded operations to replicate the success of “native” D-to-Cs like Gymshark, Hotel Chocolat, and Casper.
By having a transactional relationship with the consumer, these companies are transforming their definition of what it means to be a successful retailer. There are advantages for consumers, such as easy access to customized products. Having a direct relationship with consumers allows D-to-C brands to understand the end customer better and market specifically to them. Having said this, the model isn't without its challenges. Thirty percent of consumers who have a bad experience with a brand don’t return, and that rises to over 70 percent if consumers have three bad experiences. As McKinsey observed, “Merely selling online is very different from building a sustainable e-commerce business.”
Not all D-to-C operations will be successful, however. The ability to deliver on the brand promise and fulfil post-sale will be a crunch moment for customer experience. The smartest brands moving into D-to-C will look at successful retail operations to learn. This will be from a customer journey perspective, but also ensure they have the process and technical infrastructure to support ever-rising customer expectations.
Sustainability Will Be on the Customer Must-Have List
Investors, partners and customers are putting pressure on retailers to be more sustainable — and will undoubtedly abandon a brand if they cannot prove their efforts. This market force is more powerful than any government or environmental protest group could ever be. In fact, 73 percent of global consumers say they would change buying habits to reduce environmental impact. This situation is a double-edged sword for retailers, involving a precarious balancing act. For example, reducing plastic use can result in higher food wastage as wrapping some produce in plastic doubles its shelf life. Additionally, as consumers demand faster delivery, one might assume CO2 emissions will go up. However, this isn't always the case as more distributed fulfillment centers closer to customers mean final leg routes are shorter with a lower CO2 footprint.
In 2022, consumers should expect that retailers will validate their credentials. How? They’ll work on expanding local fulfillment centers, copying the Amazon model, reducing both CO2 and waste. They’ll promote "re-commerce," or the selling of used products. For example, Patagonia and Levi’s offer buyback programs to give used clothing a second life, and following a successful pilot at a sustainability-centric store in Leeds, Northern England, grocery chain Asda will now sell second-hand clothes alongside its own value apparel brand, George. For retailers, this new business model will require flexible technology to support it, like in-store energy use monitoring and control. Some large retailers are already moving in this direction, where Internet of Things has a major part to play. For example, in 2021, Ikea created its Buy Back & Resell program to give gently used furniture a second life. Ikea has also continued to invest in sustainably managed forests and owns solar and wind farms. Retailers won't pass their customer checklist in 2022 if they can’t provide consumers with some visibility into how their brand impacts the environment.
The Supply Chain Crisis is Here to Stay
Retailers will continue to focus more on supply chain visibility and real-time inventory in 2022. This will help them to successfully identify current delays and bottlenecks across the whole value chain, which began after pent-up demand for consumer products jumped this past year due to government stimulus, the reopening of economies, and worldwide delays in cargo delivery. As lead times grew, creating shortages globally, supply chains cracked under the pressure.
Real-time inventory and supply chain visibility were highlighted by IDC as the biggest challenge facing retailers today. Both are the result of data silos, which IDC noted as the single biggest technology barrier to retail business objectives over the next 12 months to 24 months. And according to CNBC, “… executives at multiple European blue-chip companies have said that supply chain problems, labor shortages and inflationary pressures will run for longer than policymakers are expecting.”
How will retailers respond in 2022? First, they need to work to eliminate data silos. In order to achieve key business outcomes such as creating real-time inventory visibility, scalability and single view of the customer, organizations will need fully flexible integrated technologies and systems. Those brands wanting to move quickly will not only look for pre-built libraries of connectors and accelerators to deliver rapid results, but will also need to test and experiment with innovative approaches to enhance supply chain visibility — which will result in new uses of IoT and AI.
To compete with these new and heightened customer experience expectations, businesses will need to build new delivery infrastructures and use partners as well as in-house operations to achieve frictionless scalability and seamless customer journeys. The new experiences customers demand is what we refer to as "blended" experience journeys — journeys that require brands to integrate smart, personalized services to surprise customers.
For example, some retailers are trialing walk-in/walk-out stores with cashierless technology experiences, such as Amazon, Tesco, and Morrison’s, to help consumers skip the checkout line entirely. These experiences require continued investment in technology to work, including cloud. In 2022 and beyond, it will also be essential for retailers to focus on the elasticity needed to expand or shrink computing power to meet demand. The pandemic has set the scene for some exciting new retail technology changes, but one thing is clear — being truly connected is more critical than ever.
Sean Riley is vice president, global industry solutions at Software AG, a company that empowers truly connected enterprises using integration and APIs, IoT and analytics, and business and IT transformation.
Sean Riley is the VP, Global Industry Strategy, for Software AG. Over the past nine years, Mr. Riley has been obsessively focused on enterprise digital transformation with a focus on leveraging technologies like IoT, Predictive Analytics, Machine Learning and Intelligent Automation as applied to production, field services, supply chains, logistics and new product development. Prior to joining Software AG in 2011, Mr. Riley has over ten years of experience in the supply chain, logistics & manufacturing fields.
In addition to his work experience, Mr. Riley has received a BA in Business Administration from Hanover College, a MBA with Distinction from DePaul University and is a certified Six Sigma Greenbelt. As well as being a continual guest lecturer for DePaul University, Mr. Riley also sits on the curriculum advisory committee for the DePaul Graduate Program for Supply Chain and Operations Management and has been named a Supply & Demand Chain Executive “Pro to Know” for seven consecutive years.