Over the past 12 months, retailers across the UK have faced a myriad of challenges, from supply chain issues to labour shortages and continued uncertainty.
As predicted last year, in 2021 brands rolled out new technologies and strategies to keep customers engaged. Many also attempted to plug the gap between online and in-store to mirror the ease of digital in physical retail spaces – a trend expected to continue well into the New Year.
To mark the end of 2021, the editorial team at Retail Systems have rounded up a host of industry experts to tell us their top retail forecasts for the year ahead.
Hybrid retail for hybrid shoppers
Over the past two years, consumers have become increasingly reliant on digital technologies to keep them connected to their everyday needs – retail is no exception.
Alex Rutter, UKI director of retail at Google Cloud, thinks that there will be no going back from the “store of the future” and says retailers must merge online and physical retail.
“With the sudden closure of the High Street and subsequent shift to e-commerce, the sector was forced to pursue an accelerated digital transformation, and with 80 per cent of new customers now engaging with digital touchpoints on their shopping journey, retail isn’t going back to the way it was,” says Rutter. “In combining lessons from the pandemic with tried and tested retail strategies, leading brands have been able to merge the worlds of online and physical retail to offer customers the best of both.”
Ultimately, he explains, this means that retailers are enhancing customer experiences by merging the “emotional connection of in-store with the convenience of online.”
“Mobile purchasing, checkout-free stores, same-day delivery and in-store pickup are just some of the customer benefits enabled by an omnichannel strategy, whilst seamless digital offers of this kind allow retailers greater visibility into customer behaviour, shopping preferences and product interest,” adds the Google Cloud director. “In 2022, these strategies will continue to improve and expand; retailers will solidify the shift to omnichannel and define the so-called “store of the future”.
Dave Huntoon, managing director at Inalytics, agrees that next year retailers will need to identify what combination of physical stores, e-commerce, shop-in-shops, channel partnerships, and new prototypes will best serve existing and potential new customers.
Michael Green, UKI industry leader for retail & TTH at Salesforce, says that giving the hybrid shopper what they want, where they want it, will be key for retailers in 2022.
“Today’s shoppers have a whole new set of expectations as a result of the short-term solutions retailers implemented during the height of the Covid-19 pandemic, like virtual styling and curb side pickup,” adds Green. “Next year, physical location will still play a critical part in a brand's digital strategy.
“These environments should be built around experiences to engage the customer through pop-ups and collaborations and endless aisle technology or BOPIS (buy online, pickup in store) for efficiency.”
Sarah Friswell, chief executive at Red Ant, predicts that one way in-store and online will come together will be through online consultations as an extension of clienteling.
“Customers want to be able to shop on their own terms, and sometimes that means from the comfort of their living room rather than in a store,” explains Friswell. “Retailers will need to be able to facilitate this over the long term, and that means ensuring their virtual services are able to integrate both new and existing customer data – simply offering a top-layer video call with no data behind it will not be fit for purpose.”
She adds that personalisation and shopping by appointment, where store associates know the customer, their wants and needs, and are able to look after them throughout the shopping journey, owning the relationship – and thus any sales commission –online, in-store and beyond, will become a permanent trend next year.
Digital-first and check-out free spaces in-store
Experts predict that in the new year, technology will overhaul in-store customer service.
“Aldi’s checkout-free concept store and M&S’ same-day delivery service are testament to the capabilities of technology to enhance and transform customer service across all channels,” says Jack Wearne, chief executive of Ve Global. “In 2022, more and more brands will leverage technology solutions to create digital-first and checkout-free spaces in-store, and a level of service to match that of in-person sales assistants online.”
Mendel Gniwisch, executive vice president of business development at stor.ai, the end-to-end digital commerce solution for grocers, identifies automation in stores as a top prediction for the grocery market next year.
“Finally, after a sustained period of hybrid work and hybrid learning, we can look forward to hybrid shopping in 2022, with in-store automation operating alongside conventional shopping methods to make the brick-and-mortar experience more efficient and enjoyable,” says Gniwisch.
This year we’ve seen Facebook change its name to Meta to signify its move into the Metaverse, a new digital concept which the social media giant describes as a world of interconnected virtual experiences using tech like virtual and augmented reality.
In November, reports revealed that the platform plans to open stores which will be used to introduce customers to devices made by the business’ Reality Labs division. This would include virtual reality headsets and augmented reality glasses, key to the company's plans to develop the Metaverse. And earlier this month, boohooMAN revealed it was entering the Metaverse with the launch of its first ever NFTs.
“With the rush to the Metaverse truly on, 2022 will give rise to a Mega Meta Bubble,” predicts Jaward Ashraf, co-founder and chief technology officer at Augmented reality app Terra Virtua. “Seen as the new internet by many, companies and investors will be drawn by the shiny possibilities and will be keen to get involved in the Metaverse early.
“As with any emerging market and technology, we are likely to see some Metaverse projects launch too soon and fail to meet expectations. This test and learn culture helps to lay the foundations of the most successful ventures and both brands and customers will soon reap the rewards.”
A shift to first-hand data
For years, online ads, pop-ups, and cookies have been a “necessary evil” for brands to capture insights and target customers, says Ve Global’s Jack Wearne.
“However, with Google’s tracking cookies ban just a year away, it’s clear that these invasive data strategies are no longer being tolerated,” he warns. “Regulators and browser providers have forced many brands to rethink their approach to customer data, and more and more customers now actively avoid certain brands because of data privacy concerns.”
Wearne urges retailers to listen to their privacy-conscious customers, with or without the action of regulators next year, and ditch their outdated data strategies.
“This shouldn’t be seen as a restrictive measure,” adds the chief exec. “When the UK’s Information Commissioner Elizabeth Denham called on the G7 to join forces against cookie pop-ups earlier this year, she cited the fact that customers are “tired” of having to engage with pop-ups, adding that “fatigue is leading to people giving more personal data than they would like.””
With global legislation and consumer demands heading towards increased privacy online, e-commerce retailers may need to face the prospect of spending more to capture data in this way.
“Tracking user activity through third-party data across the web and mobile applications is expected to become more expensive, if not impossible, and first-party data, data that organisations collect and manage on their consumers will be king,” says Michael Green, UKI industry leader for retail and TTH, Salesforce. “We’ll see a redefinition of loyalty programmes, social media engagement and personalised email marketing, all offering opportunities for retailers to gather first-party data.”
Transparent data capture does give brands an opportunity to build better, stronger relationships with their customers.
“Receiving customer data directly from the customer themselves, rather than having to infer preferences through behaviour, allows businesses to build a clearer understanding of their customer base, and empowers them to deliver accurate personalised experiences,” says Wearne. “The cookieless future is coming, and if brands are to remain relevant to today’s customer, it’s a future they must embrace.”
Brian Gonsalves, chief executive at Netrush, says that just because ads that chase consumers around the internet will still be there in 2022, doesn’t mean retailers should use them.
“It’s a better idea to make sure your advertising is absolutely solid on the platforms where your people are most likely to buy your products — think sponsored brand or sponsored product ads instead of demand-side platforms (DSP),” he explains.
The rise of direct-to-consumer
Direct-to-consumer (DTC), where products bypass third parties and are sold directly to customers, is a trend that slowly started to pick up momentum this year.
But in 2022, says Ve Global’s Jack Wearne, those companies embracing DTC strategies will be the ones to come out on top.
“Spearheaded by the likes of Nike and Adidas, sporting goods brands have served as a case in point for the benefits of online direct to consumer (DTC) strategies for some time,” explains Wearne. “According to McKinsey, the rapid acceleration of DTC sporting sales by the end of 2021 is expected to condense six years of progress into just two years.”
It’s no surprise that since then, retailers from other sectors like Nivea and Unilever have jumped on the bandwagon with their own DTC e-commerce websites.
“Brands already know how to deliver boutique experiences in-store, but the shift to e-commerce means they now need to replicate this online,” he adds. “Going DTC offers brands the opportunity to present themselves exactly how they want to be presented, to control their own messaging and cultivate a unique user experience to rival a flagship High Street store.”
A new approach to supply chain
The past year has further amplified the instability of the supply chain, as the industry was hit hard by disruption brought on by the pandemic, driver shortages, and Brexit.
“The most unexpectedly disruptive force in the past year has been the labour market,” explains Netrush’s Brian Gonsalves. “Key players in the supply chain have taken their workers for granted for too long, but a new “take this job and shove it” mentality has forced them to rethink their approach.”
He thinks that next year, the industry will make “innovative efforts” to provide environments in both manufacturing and distribution that workers will embrace.
Alex Rutter, UKI director of retail at Google Cloud believes that the focus will move from customer to company personalisation.
“There is no business more customer-focused than retail, and so it’s no surprise that the sector has embraced digital technology to better understand what their customers want,” says Rutter. “In 2022, many retailers will come to realise that these now familiar personalisation solutions have value outside the customer-facing realm, and can be leveraged to tackle logistical and operational challenges too, such as disruptions facing the supply chain.”
He adds that every company has a unique set of circumstances to contend with, tackling challenges with partners, inventories, store locations and more. Rutter explains that in this environment, understanding how a particular supply chain disruption will affect customer delivery is critical.
“Company personalisation enables visibility of things like local weather, time of delivery, and even an outlook for finding and recruiting new staff,” he adds. “The ability to understand oneself and one's environment in this way enables retailers to look ahead and predict previously unforeseen challenges, empowering them to prepare with confidence.”
Evolution of the retail workforce
Martyn Cole, director of commercial operations at Retail Directions, argues that one of the biggest issues retailers will face next year is their own staff.
“Retailers need to focus on their employees and hiring strategy just as much as they focus on their customers,” warns Cole. “The retail industry is typically seen as one which people fall into if they can't get a job elsewhere.”
But she says that retailers have an opportunity to change the perception of the retail industry. By making the sector a more attractive place to work, the customer experience can become a “source of differentiation” for retailers.
“So retailers will either need to invest more, or run a lot leaner through efficiencies than they are right now, while focusing on creating a more positive culture for their employees,” she adds.
If staff shortages are not addressed, in 2022 retailers will instead need to boost their technology investment in order to fill the gap. This, for example, could come in the form of more self-checkout services.
Sarah Friswell, chief executive at Red Ant, says that the shape of the workforce will continue to evolve next year, as diversity and inclusion become central to every business’ recruitment and development strategies.
“All businesses will be expected to have fair, transparent, supportive people policies which will need to stand up to public scrutiny,” she says.
Friswell agrees that retailers will increasingly use people’s values as a way to differentiate themselves, as well as to select vendors or suppliers to work with.
On top of this, says Friswell, the role of the store associate will continue to be elevated as they grow into their roles as tech-enabled shopping companions, whether they’re in store or doing a virtual consultation.
56 per cent of UK shoppers have clicked on a ‘shop now’ or ‘buy now’ button on social media, according to recently published research by shopping marketing agency Savvy.
The study, which surveyed 1000 Brits, revealed that this number is even higher among the younger population, with 73 per cent of Gen Y and Gen Z consumers having explored the shop now button on a social media platform.
Just this month, TikTok hosted its first live e-commerce event in the UK, where it collaborated with top retail brands including, JD, L'Oréal Paris, LOOKFANTASTIC, and Nutri Bullet, while social shopping platform eyezon revealed its plans to expand into the UK.
The Russian-founded company, which launched in 2019, said it connects e-commerce shoppers with retail sales agents, friends, family and product and category experts via live streaming sessions.
"Consumers are increasingly online and on social media, which is leading to a boom in social commerce,” says Zarina Lam Stanford, Bazaarvoice. “Brands and retailers are already prioritising social commerce now and are only set to increase their social commerce efforts over the next few years.
“According to our research, 67 per cent of brands and retailers say that social commerce is important to their online strategy today and 70 per cent say it will be important to their online strategy in the next three years.”
A consumer survey from the software company that it ran earlier this year found almost three quarters – 74 per cent – of respondents said they agree or strongly agree that they find themselves more influenced to shop via social media now than they did pre-pandemic.
A little more than a third – 35 per cent – said that before the pandemic they rarely shopped from social media channels, but since March 2020, 30 per cent said they now often do.
“Brands and retailers need to ensure that they are enabling product discovery, serving consumers with the content they need to purchase, and engaging with them post purchase to create loyal advocates," adds Stanford.
Adrien Nussenbaum, co-founder and co-chief executive of Mirakl, believes that traditional business models have “reached their limit.”
“By now, consumers and businesses alike are familiar with the likes of Amazon, Alibaba and eBay,” says Nussenbaum. “These marketplaces are now ubiquitous and represent the modern department store - a digital-first, one-stop shop driven by third-party sellers.”
The shift to online has made digital marketplaces a growing favourite for consumers.
“Many of the temporary behavioural changes originally brought on by the global pandemic are becoming permanent, including shopping on a marketplace,” adds Nussenbaum. “Most recently, a global survey found that four fifths of UK consumers said they would consider purchasing their Christmas gifts through online marketplaces.”
“It’s clear there is appetite for consumption through this model, underscoring the market opportunity for retailers operating a marketplace and businesses looking to sell via them. We expect this trend to continue into, and well beyond, 2022.”
Brian Gonsalves, chief executive of Netrush, says that while Amazon is still by far the dominant online marketplace across most of the world, vulnerabilities have appeared in its armour. These include struggles with the labour market, constrained supply chains, and limits on inventory capacity.
“Even though other marketplaces, notably Walmart, still lag behind, they are catching up,” says Gonsalves. “For brands, this offers a new imperative: think multimarket. Make sure you still tend to the all-important store on Amazon but start checking other options.”
In the latest Ericsson Ten Hot Consumer Trends report, the company identifies a new type of hybrid shopping centre, ‘The Multiverse’, which mixes connectivity-enabled technology, integrated into real physical environments to enhance shopping, and buying experiences, as a new trend for the coming years.
Technologies like AR glasses, haptic body suits, and tactile gloves would likely be powered by 6G connectivity. According to Ericsson Research, this will be common in everyday life by 2030 by the vast majority of existing early adopters of new tech.
In the meantime, perhaps even next year, we may begin to see retailers get the ball rolling on these hybrid shopping spaces.
We’re already seeing some retailers using virtual reality and augmented reality in some stores.
“The semi-public nature of shopping malls means latency bounds could more easily be controlled and next-generation experiences could be delivered early on,” says Magnus Frodigh, head of Ericsson Research. “XR devices could be provided on-site, making it possible to deploy private networks with custom applications also for consumers.”
What’s next for retail in 2022?
Over the past 12 months, retailers across the UK have faced a myriad of challenges, from supply chain issues to labour shortages and continued uncertainty.