In 2022, retailers are building more adaptable business models based on what they have learned from COVID-19.
Many of the lessons of a global pandemic have resulted in a digital transformation in retail that is expected to continue to accelerate at unprecedented speeds across the globe even post-COVID. The global retail industry is now requiring retailers to build an adaptable, composable business model built to scale in disruptive and traditional environments.
One of the many lessons learned from the pandemic is the importance of technology to the retail industry. According to the Gartner 2021 CIO Survey, nearly 2/3 of retail Chief Information Officers believe their relationship with the CEO has strengthened during the past year. CIOs have helped guide businesses through significant problems and necessary evolutions resulting in disruption.
2022 will be a year of continued capitalizing on the momentum created through the past two years of transformational activities. One area that will be critical is in building and maintaining the flexibility that is demanded of physical locations today. Changes in consumer behavior will significantly impact the retail sector over any other factor in the coming years.
It would be best to solidify consumer trust to extend to a better customer experience. Here are seven retail investment trends we will see in 2022 and beyond.
1. Fulfillment Execution
Fulfillment execution is what creates the overall excellence (or lack of) in fulfillment operations. Whether physical or digital assets, how inventory is configured, the labor involved, and the processes for efficiency, execution matters. In addition, an optimized inventory can create increased customer satisfaction and a more remarkable customer experience translating into business profits.
Fulfillment has become a top priority for retail businesses. Thanks to more competition in the E-commerce space and increasing demand for improved experiences, retailers are working to reduce selling footprints in favor of on-site fulfillment and curbside services. When the pandemic restrictions are lifted, many will not be willing to go back to pre-pandemic habits.
2. Algorithmic merchandising optimization
A retailer’s most prominent financial liability is often inventory. With the rise in customer expectations, operational costs are also rising. Retailers can no longer afford to spread inventory over a vast network of locations. Improved technology applies an algorithm to planning pricing, promotions, and product assortment across all available touchpoints.
Merchandising optimization through algorithms enables retailers to determine with pinpoint accuracy the best items to keep in stock and on display and pricing and promotion solutions to increase sales and profits. The use of sophisticated data analysis tools is critical to merchandise performance. To further add to the point, the 2021 Gartner CIO survey resulted in 63% of retailers saying they plan to spend more money on data analytics and business intelligence needs, and 35% stated they expect to spend more on artificial intelligence.
3. Touchless experiences
Touchless integration for a safe, physically contact-free interaction until delivery is now an embedded expectation for retailers, including a sanitation protocol along with a hygienic process for purchasing and consuming goods. In addition, there are other aspects of the touchless experience, such as scan-and-go and more.
A key thing to remember about touchless experiences is that they must still deliver a personalization level that makes customers feel special and cared about while doing business with you.
4. Associated enablement and effectiveness
A superior customer experience happens by way of an exceptional associate experience. Frontline workers are a pivotal investment when it comes to customer satisfaction.
For years, retailers have neglected this aspect of sales, and the results have led to brands suffering. Now, associate care is quickly rising as a necessity to customer satisfaction. A full one-third of retailers in the Gartner survey said they plan to invest in associates’ digital workspaces.
The need for workers to perform their duties properly while optimizing costs and delivering excellent service is more important than ever with increased competition. Investing in improved digital workspaces, particularly in brick and mortar store environments, has increased sales and profits and created satisfied workers who help improve customer experience.
5. Values-driven consumption
Customers expect honesty and ethics, including transparency and integrity when delivering products and services, and seek out businesses that share their values. The COVID pandemic has forced many institutions, not just companies, to reevaluate and reprioritize their values when dealing with the public.
Meeting the demands of values is not easy. It requires tight alignment between all of the internal players in all aspects of the company and creating and maintaining solid relationships with all stakeholders, internal and external. Retailers need to invest in constant vigilance to stay informed on customer values and expectations and make adjustments for their governance, sourcing, and other values accordingly.
6. Collaborative ecosystems
Significant changes to customer purchase patterns and behavior driven by the Coronavirus have shown vulnerabilities in many traditional business models. Engaging in partnerships with marketplaces, other tech platforms, competitors, and other retailers helps existing businesses extend their capabilities and support entirely new business models. Collaborative ecosystems help bring about new products and services such as new delivery options and help satisfy changing customer demands.
7. Cost optimization
Cost optimization is a discipline that is business-focused and continuous. It takes work to manage spending and cost reduction while still maximizing business value. In times of extreme economic uncertainty, managing costs is a pillar of intelligent business, causing many retailers to focus on cost management.
Developing cost optimization strategies requires four critical elements:
- Fulfillment execution
- Merchandising optimization
- Labor efficiency
- Organizational transparency
However, keep in mind that implementing short and medium-term fixed cost measures tend to be unsustainable in the long run when managing business finances.