What can we learn from the pandemic?

Three things shaping the future of retail in 2022

1 We have changed the way we shop

Omnichannel shopping became the ‘new normal’, dramatically elevating consumers’ use of online and offline channels across all age and demographic groups.

Two pandemic years led to significant growth in online shopping. As well as a greater awareness of prices, consumers have shown an increasing desire for (sustainable) branded products. Now more than ever before, changing consumer behaviour has become the centre of focus.

These are the conclusions of a report by customer experience platform Mapp (mapp.com).

As well as the pandemic, issues like sustainability, fair working conditions, animal welfare, and environmental protection are also influencing consumer behaviour. For example, in a study by a German research company, 38% of respondents said that environmentally friendly, sustainable, and fair production conditions in the food industry are very important to them.

The circumstances of the pandemic did not leave the retail industry with much time to implement seamless and scalable end-to-end processes, says Mapp. Instead, it was a matter of making pragmatic decisions to stay relevant to consumers. This didn’t always lead to the positive shopping experience that customers were looking for, but they were understanding given the circumstances.

But post-pandemic, customer expectations are rising, while their tolerance of mistakes is decreasing. Satisfied customers, on the other hand, will return repeatedly and tell others about their positive shopping experience.

For retailers, a key conclusion of the Mapp report is “don’t get left behind as the bricks-and-mortar world of retail changes – take the initiative yourself. Customers no longer just want to shop, they want to have a shopping experience”.

What better environment for that to happen than in a happy, well-informed specialist health food store? But marrying what we have learned about ‘omnichannel’ and promoting/selling online with what we already know about ‘real’ in-person shopping, has led to complications.

“The increased complexity that retailers must deal with when aligning online and offline processes can often lead to a frustrating experience for customers,” says Mapp. “This means that a successful customer journey, which makes shopping an ‘experience’ for all customers, is now the name of the game. To address the problems and challenges of each individual customer, companies must carry out a comprehensive analysis to optimise their way of doing things in the interests of the customer. This is the only way to create a ‘wow effect’ and a pleasant customer experience.”

That’s daunting, but probably necessary. Since many customers are now omnichannel customers, you also need to optimise your strategy across channels. Improving data collection in your store to be utilised cross-channel is an essential step to help combine online and offline data into a comprehensive customer profile.

Consumers are looking for the best of both worlds to feel in control of their shopping journey. They want the convenience and ease of online shopping, yet yearn to see, touch and listen to advice before buying.

“Just as consumers have demanded online retailers to up their game on-site, it’s time [for them] to look in-store. The retailer’s big challenge is to join up their physical stores with their virtual ones to create a seamless end-to-end omnichannel shopping experience.”

The new era of shopping combines digital with physical. Online stores are here for good and the high street is here to stay. There are endless opportunities to adapt your in-store experience to provide shoppers with greater confidence, convenience and peace of mind.

“If you’re not already doing so, it’s time to adopt an omnichannel approach that seamlessly integrates your online and offline retail,” concludes Mapp.

2 Online retailing has slowed

People like to shop in real stores. They like talking to people who know how to help them. Especially in health food stores. That’s not going to change any time soon.

A report by IMRG Capgemini Online Retail Index suggest the online retail boom is over. April figures released in mid-May, tracking 200 online retailers, show online retail sales fell 12% Year-on-Year.

The results represent the first time in two years that the Index was not skewed by pandemic lockdown comparisons, and in fact there was no actual growth in online sales as the April 2022 performance simply mirrored April 2021’s growth of +12%.

However, there are signs of the current economic situation exerting an influence on the average basket value (ABV), which reached an all-time high at £146 in April, £3 above the previous pandemic record set in August 2021. With rising supply chain costs feeding through into product prices and cost of living increases showing no signs of slowing down, shoppers are taking longer to make purchase decisions and retailers are having to rely more heavily on discounting to stimulate activity – particularly for smaller goods.

Andy Mulcahy, strategy and insight director at IMRG, says: “Throughout the pandemic, there was much speculation as to what the ‘new normal’ might be once everything has settled down again. After two years of huge volume increases online, it would seem that growth is now over – this is not just a reflection of the pandemic effectively coming to an end in many people’s minds, the new phase of higher costs and bills is creating very unpredictable patterns of behaviour among shoppers. Many retailers report sluggish response to activity and erratic spending, and it feels like this is only the start of a tough year for UK shoppers.”

Lucy Gibbs, retail lead for analytics at Capgemini, adds: “Demand for certain categories became less predictable during the pandemic due to external factors and changes in behaviours and lifestyles. As we start to move on, we are seeing some signs of a return to norm, however it is clear that shifting priorities around new cost pressures and economic factors will also influence future demand patterns.

“If we project forward the pre-pandemic trends we can infer which categories are still overperforming – home and garden and health and beauty are still well ahead of where we would expect them to be despite tracking negative YOY growth for this month.

“As uncertainty continues to reign, this reinforces that retailers and brands will need to remain agile and resilient – listening to customer needs, where consideration will likely now focus on price point, necessity and value, to create a standout experience and drive other factors to maintain loyalty.”

3 Supply chain issues remain a big problem

In April, the Office for National Statistics (ONS) revealed the full extent of tumbling stock levels and broken global supply chains.

“Over recent years, the EU exit, coronavirus, higher energy and commodity prices, and events such as the blockage of the Suez Canal have presented businesses with significant challenges when acquiring and maintaining their stock,” said the ONS.

“As a result of these challenges, the UK has experienced increased business uncertainty, supply chain issues across a variety of materials and products arising from worldwide shortages, and rising inflation.”

One service industry supplier went as far as to say that manufacturers, retailers and their delivery and logistics partners will need to plan for a growth in ‘reshoring’ (returning manufacturing back to the UK) as global supply chains break apart.

Could UK manufacturing be on the verge of a renaissance in response to these challenges? Jacob Rees-Mogg and his boss Boris might think so. But what do you think? Retailers and suppliers alike are invited to contribute to these pages by emailing New Natural Business editor Alistair Forrest ([email protected]).