A strange thing happened on the way to a client meeting: as I was getting dressed in my hotel room, I snapped my shoelace. Being that it was the only pair of dress shoes I brought, and that the front desk didn’t have any laces that fit, I found myself rushing to a nearby mall – hoping that there’d be a shoe store with the laces that were the right length and color. And that’s when things got strange.
I must admit, I found the mall a bit disorienting. Like many of you, I’ve spent much of the past two years away from crowded indoor spaces. I shopped mostly online. So, when I stepped into this mall, it felt like a strange new world. At first, I chalked it up to being in an unfamiliar city. As I made my way to the shoe store, though, I started to see signs of a retail landscape very much in transition. Many of the traditional anchor stores were gone. There were brands I recognized as solely direct-to-consumer with physical storefronts. There was a showroom with a single prototype of a pre-production electric car, and a store dedicated to taking selfies.
In case you’re wondering, I was able to find some shoelaces. But I walked out of that mall with much more. It’s one thing to read about retail industry trends from analysts and trade publications. It’s quite another thing to see the impact up close. On the plane ride home, I couldn’t stop thinking about this moment in time for retail executives: how they’ve been able to survive amidst a turbulent few years, the challenges they’re currently facing, and opportunities that they have to thrive in whatDeloitte describes as the great retail reset of 2022.
I’ve been amazed by how resilient and resourceful retailers have been over the past few years. At the start of the pandemic, for instance, in-store shopping plummeted in many retail sectors. 2020 saw a record number of net store closures, with nearly 5,500 more stores shuttering their doors than opening. The flip side of that? Ecommerce flourished with sales jumping 32% from the previous year – nearly double the growth of any year in at least a decade.
Of course, it’s not a one for one swap, and many retailers who found themselves having to close brick-and-mortar stores didn’t make up for that loss with a boost in ecommerce revenue. Those that survived (and even thrived) during this rocky period were the ones that were able to adapt their business model to the changing retail landscape. One example of this is Lululemon who, with 28% annual growth during the pandemic, is finding success both online and in stores in a sector – apparel – that has had a difficult run of late. A large part of that success comes down to Lululemon’s ability to plan strategically in the face of uncertainty, and to effectively connect finance and operations.
While the past few years have been turbulent for many retailers, there are positive signs for the sector. For instance, last year saw the fewest store closures since 2016. In fact, more stores opened than closed last year (just barely, but still…). Retail, overall, continues to grow, fueled largely by the growth of online (see figure 1). The volume of retail imports also continues to increase.
Dig below the surface of that top-line growth, though, and the story gets a bit murkier. Consumers are eager to buy, but are retailers equipped to sell? Imports are up, but are retailers’ supply chains equipped to deliver them? If retailers can’t deliver, will consumers forgo brand loyalty for whatever substitute is in stock? How and where do retailers deliver a winning customer experience – from interest, to purchase, to return – in an increasingly complex omnichannel world? Add the current challenges of inflation and geopolitical instability, and it can be overwhelming.
Being able to plan strategically to meet these challenges is a key first step. The real opportunity for retailers comes when they can turn that strategic planning into action with a unified platform that connects their planning and financials with their supply chain and their people management. It’s this kind of agility that helps retailers such as Europe’s PEPCO Group continue to grow (46% profit rise in 2021) amidst continued market uncertainty.
Regardless of how your organization made it through the past few years – highly successfully or just holding on – 2022 provides retailers with an opportunity to set themselves up for long-term success. As Deloitte shares in their 2022 retail industry outlook, “Now is an ideal time to take stock of the market to better understand what traits separate those who embrace the reset—the leaders—from the rest of the pack.” What they found, in their dozens of interviews with retail executives, was that the reset boiled down to the following three priorities: a reimagined workforce, supply chain resilience, and a greater return on digital investment.
These priorities certainly track with what I’m hearing from clients. Going back to my recent quest for shoelaces, though, as strange as the retail landscape may have looked in my walk through the mall, we can only expect it to get stranger in 2022 and beyond. That is to say, even if retailers are ready to hit reset, the retail industry will continue to evolve in the face of uncertainty and adversity. Choosing the right solutions and partners will be key to making sure that any reset will yield long-term results.
Figure 1: Source: Digital Commerce 360, U.S. Department of Commerce retail data; February 2022