Deloitte Predicts Opportunities for A Retail Reset in 2022
While predictions for retail over the last two years have created overwhelmingly dire outlooks — paired with admittedly dire reports this year of empty shelves, surging inflation and unfilled jobs — Deloitte’s 2022 retail industry outlook report says retail may finally earn some stability and even potentially see some profitability in 2022.
Retailers have been examining legacy systems due to the pandemic, opening the path for what Deloitte is calling a “longoverdue great retail reset.” Still, there is more work to be done to address outmoded supply chains, right-sized inventory management, review pricing, recalibrating promotional cadences and reinventing the physical store.
“Retailers face significant challenges that will likely last beyond the pandemic, but there are also unexpected opportunities that can help them reset and prepare for future disruptions,” said Rod Sides, vice chair and U.S. retail leader at Deloitte LLP. “For 2022, priorities for executives include addressing workforce challenges, supply chain resiliency and digital necessities. Retailers must figure out how to reset while meeting changing employee expectations, while fulfilling evolving consumer needs, and while helping to address societal challenges. All will be necessary to compete in the next era of retail.”
To better understand what’s next for retail, Deloitte looked to 50 retail executives to gain insights into their views of the industry for 2022 and combined the data with research and insights derived from working with clients.
According to the company’s findings, the industry can look forward to favorable consumer behavior with expectations for the consumer to be “active and outgoing, seeking experiences outside the home.” These consumers are willing to spend but are relying more on credit or buy now, pay later. Moreover, 96 percent said consumers will expect a seamless experience across all channels and 68 percent said consumers will be pursuing retailers with strong ESG initiatives.
While the company reported that executives are showing to be optimistic about revenue growth and margins, some are rethinking buying and discounting cadences. For example, retailers with fewer products to sell have stopped offering promotions to boost profits.
At the same time, retail executives told the company they are considering supply chain and labor shortages as they consider where to invest in 2022. In fact, 80 percent said they play to make moderate-to-major investments in digital and supply chains. However, the company notes that there is some differentiated thinking when it comes to views and actions around digitization, incorporating ESG practices and making the workforce future-ready.
Still, the company’s report notes that the great resignation has put many retailers in a tough spot. In part, this is due, according to Deloitte, to shifted priorities from employees, especially around flexibility, culture and diversity, equity and inclusion. Also to consider is that it is hard for retailers to compete with the flexibility of the gig economy.
Notably, 83 percent of retail executives said they are having to invest most heavily in recruiting new employees and training them while saying that labor issues are a top concern. Currently, 74 percent of retail executives said they expect shortages in customer-facing positions in 2022. In its report, Deloitte said this is an opportunity for retailers to reset by looking to invest in a workforce for the future that focuses on technology and automation and relies less on physical labor.
The pain of the supply chain was also listed as a top concern for retail executives, 80 percent of whom say they believe that consumers will prioritize stock availability over retailer loyalty in the upcoming year. In a large part, investments will take place as leaders look to automate with fulfillment and inventory and warehouse management expected to attract the most investments in 2022.
Although while retailers are investing, Deloitte researchers noted resets don’t happen overnight.
“You don’t build an agile supply chain,” said a Deloitte supply chain specialist. “Buildings don’t go up overnight, automation isn’t put in overnight. Agility means being able to adjust to the changes in customer behavior, to sense and get them ahead of that, and then help shape their behavior.”
As retailers face significant challenges from the ongoing pandemic in 2022, Deloitte said retailers must figure out how to reset and commit to pivoting toward the future.
After years of unsurmountable challenges for retail, experts say the industry is poised to find stability.