Sometimes the best way to predict the future when it comes to market change and adaptation is to study the past. BRYAN PEARSON examines the lessons learned in 2021 and how they may impact 2022 as it continues to unfold.
If the past two years have taught the retail industry anything, it’s to meet the unexpected, eye-to-eye, with more of the unexpected.
I mean ’unexpected’ as in surprising channels, unpredictable brand partnerships and even a dose of the expected. Consumer desires have not changed; they still want shopping to be stress-free, convenient, personalised and good value.
When asked to rank how much 14 major retailers care about them – in terms of value and understanding– shoppers gave an average score of just seven out of 10, according to research by WSL Strategic Retail, in New York.
The reason may be that consumer expectations continue to evolve in unexpected ways. The most cost-effective methods for maintaining relevance throughtout 2022 and into next year, therefore, will hinge on consumer understanding. We can gain that understanding by looking back on 2021 in detail.
Lessons learned in 2021
If retailers and consumers think price tags are high today, consider everything – including non-dollar costs – that will influence purchase decisions tomorrow, such as time, convenience and experience.
Any of these factors could change a shopper’s choice. Every one of them can coalesce to form expectations that are unparalleled and shifting with every rip of the calendar page. Yet while 2021 may have been a challenge, nearly every month of it delivered a ‘return’ gift waiting to be unpacked.
Looking back on the top retail news in last year, here are nine trends and behaviors that should inform retailer strategies in 2022.
Earth-friendly appetites will persist: the emergence of climate-conscious eating is gaining market support. This preference extends beyond food to the packaging it comes in. The next year will be telling for eco-friendly innovators.
Technology will serve a bigger role in wellness: in 2021, many consumers struggled with anxiety and depression due to the pandemic, and merchants responded with a range of products to improve restfulness, creativity and a sense of purpose. We’re travelling through 2022 with the continued hum of uncertainty, so the desire for these products will likely continue.
Consumers will visit new stores: nearly 3,000 stores were expected to close in 2021, but close to 6,000 retail openings were announced during the first three quarters of the year. Look closer at the kinds of retail experiences that are being added, and one can see the decisions behind these additions hinge on emotional values: the human urge to resume social activities and to pamper ourselves in indulgent, frivolous activities. Retailers that make these experiences easy will attract customers.
‘May I?’ advertising will take hold: More retailers will adopt permission-based advertising, asking customers to opt-in to sharing their data. This follows a year when many retailers, especially startups, approached this marketing model as a standard. To consumers, it should be standard; 70 per cent think it’s unacceptable for a business to share their details with vendors without their permission.
AI will continue to set the price: in 2020, 58 per cent of the top retailers said they planned to implement some form of AI pricing technology by the end of 2021. We’ve reached 2022 and record-making inflation is underscoring the urgency for intelligent modeling.
The youngest consumers will be more active shoppers: sales are not wasted on the young. In 2020, a reported 80 per cent of children under the age of 12 influenced family purchases, translating to $US500 billion ($AUD665 billion) in purchases a year. Now all of those digital shoppers are a year older and exploring more ways to shop. Be tech-forward, be sustainable, be transparent – and be ready.
Retailers will make rewards cryptic, yet easy to understand: cryptocurrency, or digital money such as bitcoin, is becoming less enigmatic, so it’s a safe bet there are now enough crypto-curious consumers to justify rewards in that form. However, retailers will need to make the crypto-concept easier to interpret for new adopters.
Fortunately, cryptocurrencies are intangible, so simplifying and explaining the process, as well as providing some guarantees of value, will go a long way in stoking consumer interest.
Consumers will want to shake things up: in 2021, Home Depot’s 12-foot decorative skeleton became a national figure. However, the story behind ‘Skelly’s’ success is what should matter to retail in 2022.
It served as an outlet of expression, from frustration to humor, and a device that provided a sense of control. The pandemic may have kept consumers in, but they could still act out on their lawns and they loved it.
Untraditional retail hubs will become Main Street: Following nearly 8,700 store closures in 2020, developers registered a wealth of opportunity in all of those vacant fronts on main streets and suburban malls. What followed was a movement of innovative merchant combinations sexy enough to get shoppers away from their digital devices.
Profiting from these skills
The price of attracting new customers, and retaining existing customers, increases like inflation depending on the environmental factors that guide all buying decisions, from pricing, to the channel, to the most rewarding shopping experience.
Retailers that trust their customers as guides, and combine that input with insight-enriching resources such as machine learning, should be able to detect worthy trends, as well as guide their trajectory.
What’s around the corner?
Meeting the unexpected with the expected requires a review of the basics. Namely, how shoppers are using stores, what cements their purchase decisions and how they pay.
These five trends embody activities and services that click with consumers, through novelty, ease or necessity.
#1. Shopping in the stream will bring live retail therapy. Live-streaming – realtime, interactive video streams that sell products, often on social platforms – bring in-store personal service to the screen by enabling viewers to comment during the events.
The US women’s apparel chain Chico’s now livestreams on Facebook with regularity, as does Saks Fifth Avenue. Among Saks’s recent styling streams: a live wedding suite event with celebrity stylist Micaela Erlanger featuring dresses from designers Carolina Herrera, David Koma, Alexander Gaultier and Manolo Blahnik.
#2. Malls emerge in stores for a mini revival. In the US, traditional shopping centres may be closing, but a scaled-down version is emerging among big-name chains through store-within-a-store formats.
Unlike the Starbucks in the supermarket, however, in-store co-branding will be taken to a more sophisticated, digitally-driven level in 2022. Take the Hy-Vee store in Iowa (a supermarket) which is formatted to operate like a mini mall with a digital footprint so it can meet large-scale needs.
#3. Buy-now purchase plans coming sooner than later. Fee-free ‘buy now, pay later’ payment plans will become the norm in 2022 and beyond as more competitors enter the ‘pandemic economy’ fray.
Among the 10 installment services listed in the US publication US News and World Report in June are PayPal’s Pay in 4, Afterpay, Klarna and an option by Amazon.
Unlike traditional layaway plans, these plans enable shoppers to get their items up front without interest or other fees, assuming they pay within the allotted number of installments.
The service is more prominent online, and as the option becomes more visible, consumers will come to expect it and choose the retailers that offer it.
#4. Swap meets to beat inflation. Supply chain issues are forcing some consumers to consider alternative options, and ‘buy nothing’ giveaway groups are taking advantage.
The New York Times describes the movement as “a network of social media groups, mostly on Facebook, where people give and receive things, treating the stuff taking up space in their homes as gifts meant to be shared and treasured.” This trend can pose a threat to retail sales, unless retailers can position their reworked items as the next best thing to buying nothing.
This trend may especially have legs among younger consumers, including Gen Z, who are increasingly concerned about sustainability.
#5. Digital commerce will become less cryptic. There are more than 6,000 cryptocurrencies on the market, and more retailers are accepting them.
Crypto shouldn’t block them from also testing non-fungible tokens (NFTs) – digital files linked to blockchain that grant ownership to digital content, such as an image of Twitter CEO Jack Dorey’s first tweet.