No one could have predicted the huge upheaval of retail that took place during this pandemic. Major brands, who used to rule the high streets, crumbled into administration. Supermarket shelves were stripped bare. Toilet roll, pasta and flour were gold dust, a scarce commodity which only the lucky could obtain. Government temporarily became paymaster to over one third of retail’s three million strong workforce. In fact, the only thing we could be certain of in the pandemic was that everything was uncertain.
Yet in the face of this uncertainty, some trends have begun to emerge, and we can be sure that they will follow us into 2022. Here are the three main ones.
Omni-channel retail
In the past ten years, consumers have become more digitally savvy, with the proportion of purchases made online steadily rising. In February 2020, online purchases of non-food were around 30% of retail sales. At the height of the third lockdown this figure had more than doubled before settling back to around 40%. This is about five years growth at previous trajectories in just eighteen months.
While it is unlikely that the double-digit growth in online sales will continue, the pandemic has cemented existing gains and is accelerating previous changes in consumer behaviour. This in turn is changing the role of stores and high streets, which must find new ways of drawing in customers. Meanwhile, many retailers made huge investments in expanding their online capacity and digital connectivity for their customers.
Experiential retail is now coming out of its shell, with greater use of pop ups, shows, connections with museums, galleries, and entertainment. Likewise, the integration of online and in-store retail will continue. Every time a customer browses online and buys in-store or browses in-store before purchasing on their phone, they prove the importance of all channels – and the way they are knit together. They are no longer separate.
Digitally connected strategies build loyalty, and enhance the customer experience: cashier less convenience, inspiration for connected goods, like suggestions for the jacket to go with the jeans, and ways to enjoy possible purchases to enhance experiences.
Sustainability
COP26 may have been and gone, but sustainability remains at the top of the agenda. It is being taken on by governments, businesses and, most importantly, customers. Almost four-in-five of us say we are changing our purchase preferences based on the sustainability of products we buy.
Many of us are drawn to products without plastic packaging, sourced using sustainable materials, or containing high recycled content. This is an important step towards Net Zero, but making the best choices are still being held back by a lack of information and transparency surrounding the origin or contents of many products.
Businesses and governments have a great opportunity to fill this information void, as well as a duty to help nudge us all into making better choices. The BRC’s guide for retailers on ‘Helping customers live low-carbon lifestyles’ is part of the start of our journey to help build more momentum on this. It is part of our wider Climate Action Roadmap inititiative, supported by over 75 retailers and brands committed to driving change in their own businesses, with their suppliers as well as with their customers.
Prices
While the rise of digitalisation and the drive towards green business and consumerism represent positive changes in the convenience and sustainability of retail, nobody wins in the trend towards rising prices.
From seasonal farm workers to HGV drivers to warehouse staff, the whole supply chain is being stretched by labour shortages, leading to rising wage bills. The HGV driver shortage alone has seen drivers receive sign-on and retention bonuses of thousands of pounds, pushing up the cost of getting goods to where they need to be.
It is essential for businesses and the Government to use 2022 to take a fresh look at how to find long term solutions to this both in terms of new skills, better training and well as a selective use of the immigration system.
There are other pressures on prices; 2021 saw energy prices soar, imports become more expensive, and retailers are having to navigate new checks and paperwork as a result of the UK’s departure from the EU. Global shipping costs have been rising steadily for over a year, meaning the cost of moving a single container from Asia to the UK might be ten times what it was in 2019. Meanwhile, global commodity prices are also rising, creating additional pressures for a country which imports almost half of its food.
Ultimately it is customers who will pick up the tab. Retailers have seen margins squeezed and are simply unable to absorb all these new costs. The Government also missed a golden opportunity to reduce the burden on retailers when they failed to live up to their promise of fundamental reform of the business rates system in favour of tweaking at the edges.
Retailers hope 2022 will be less unstable than the past two years have been, but that doesn’t mean there won’t be changes. We will see a more consumer-friendly, tech-engaged and sustainable industry in the future, but it will be a more expensive one.
By Helen Dickinson, Chief Executive – British Retail Consortium
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