“Retail sales are set to increase as a result of higher prices, and this dynamic has the potential to further drive e-commerce sales as consumers look for online deals to maximize their spending. Retailers across channels who remain aligned with consumer demand and offer convenient and affordable options can be well positioned for success this season.”
Nick Handrinos, Vice Chair @ Deloitte
The pandemic's initial impact on consumer behavior has left a permanent mark. Despite market volatility, the retail and e-commerce sectors were projected to settle down in 2022 as both consumers and businesses found their new normal in terms of purchasing habits.
The festive period of 2022 was a watershed moment for the retail business, revealing insights into current trends that would influence its future. Sales were predicted to rise by up to 6% over this period compared to the preceding season. We shall look at the significant developments, difficulties, and trends that surfaced over the holiday season last year.
Impact of Inflation and Pandemic
In March 2022, there was a noticeable increase in spending by US consumers, with an 18% rise compared to the same month two years prior, despite an 8.5% rise in inflation. This spending was also 12% higher than the pre-pandemic projections. During the holiday season of 2022, online shopping experienced a significant boost as consumers sought to avoid crowded brick-and-mortar stores. Retailers reacted by investing in their e-commerce capabilities, offering secure and streamlined customer experiences. They also embraced technologies such as curbside pickup, contactless payments, and in-store pickup to accommodate these changes in shopping behavior. This trend is expected to persist in the coming years, with e-commerce projected to take up an increasing portion of consumer spending.
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Global Supply Chain Disruptions
Retail supply chain disruptions constituted a massive issue for businesses of all kinds in 2022. Many retailers experienced longer lead times for goods, as suppliers struggled to keep up with demand. This made it difficult for merchants to maintain consistent inventory levels and meet customer demand promptly. The supply chain issues also resulted in increased costs for businesses, as they had to pay more for goods and shipping. The epidemic highlighted fundamental flaws in the global supply chain system, drawing attention to ongoing issues with product manufacturing and delivery. Addressing these challenges as well as ensuring a robust supply chain would demand not only significant reforms but also improvements.
Consumers Shift to Earlier Holiday Shopping
Consumers' holiday buying patterns are shifting as a result of persistent supply chain disruptions and poor inventory levels, with 87% starting their shopping before December. Major companies such as Walmart are taking notice and offering holiday sales in October to attract early shoppers and those seeking deals. Brands are eager to capitalize on this trend by acting promptly, balancing their need to secure purchases while still offering limited discounts to maintain their profitability. On the one hand, they are concerned about rising costs and want to protect businesses before household finances become strained. By securing purchases early, retailers that act quickly may gain a competitive advantage.
In 2022, Metaverse became one of the most important global retail trends, as well as one of the most difficult to navigate. As augmented and virtual technology advances, retailers are investigating the Metaverse as a cutting-edge platform for interacting with clients and elevating the shopping experience. Nike, Ralph Lauren, and Louis Vuitton join the Metaverse world, expanding their online presence.
The Senior Strategist at WGSN Insights, Cassandra Napoli, explains the benefits of virtual reality by claiming that it may take years for the Metaverse to fully mature and that brands should start considering entry points into this digital space sooner rather than later. These entry points include gaming platforms such as Fortnite and Roblox as well as emerging technologies like augmented reality and non-fungible tokens. Brands can stay ahead of the game and position themselves for success in the Metaverse by discovering these opportunities now.
Emphasis on Sustainability
In the 2022 holiday season, the retail sector witnessed an increasing trend of people becoming more ecologically mindful with their purchases. Merchants are reacting by expanding their offerings of eco-friendly items and embracing sustainable business practices. This tendency is expected to accelerate as customers become more conscious of the environmental impact of their purchasing decisions.
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Physical Stores Hold an Unbeatable Edge
Despite the expansion of internet commerce and delivery possibilities, brick-and-mortar stores have an unrivaled competitive edge. Consumers' ability to physically engage with items and receive tailored, fast help from sales staff has a significant influence on their purchase decisions and minimizes the percentage of product returns.
Omnichannel Integration is Key to Future Retail
Retail trends in 2022 will continue to evolve, with both digital and physical shopping playing important roles. To provide a seamless shopping experience, a frictionless omnichannel approach has become a top priority for retailers. While implementing such a strategy can be complex, it is now considered a fundamental requirement in today's retail market. A majority of consumers, ranging from 60-70%, are now opting for an omnichannel shopping approach. According to Nancy Trent of Trent & Company Inc., "Phygital retail" blends the advantages of physical and digital shopping, offering the best of both worlds. When executed effectively, this approach can enhance the overall retail experience and drive sales growth by mutually reinforcing the physical and digital aspects.
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Buy Now, Pay Later
The "Buy Now Pay Later" trend has been on the rise as consumers, particularly millennials and Gen Z, seek to avoid incurring credit card debt and interest fees. They prefer to finance their purchases using BNPL options to stay up with the latest trends and not have to wait. This drive by younger generations is fueling the growth of the BNPL economy, with nearly half of them expected to use credit cards, BNPL solutions, or personal loans to fund their holiday purchases.
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Demand For Same-Day Delivery Has Increased
As e-commerce has flourished in reaction to the epidemic, consumer demand for the speedy delivery of online items has increased. Many customers have grown to rely on Amazon's speedy delivery, and now other firms are seeking to keep up by partnering with same-day delivery networks. Cosmetics, office supplies, home products, and other quickly growing areas of US e-commerce are expected to expand their next-day shipping options in the future. These items are considered indispensable, and their popularity continues to soar.
During the 2022 holiday season, the retail industry unveiled a multitude of challenges and trends in consumer behavior, influenced by both the ongoing pandemic and rising inflation. Despite the significant challenges affecting the global markets, the industry demonstrated its resilience and innovation, with many retailers finding new ways to connect with customers and keep their businesses afloat. The core shifts and challenges facing the retail industry in 2022 have created new opportunities for growth and innovation, and the industry is poised for further transformation in the coming years.
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