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Is 2022 the year of the retail reset? Deloitte thinks so

Breaking down the year ahead for retail supply chains and e-commerce

The Deloitte 2022 Retail Industry Outlook breaks down 2022's biggest retail supply chain and e-commerce trends (Photo: Jim Allen/FreightWaves)

It’s a new year, but retailers face the same supply chain mess that they did in 2021. Freight and shipping volumes remain at record levels and rates are higher than they’ve ever been. But at the same time, over 1 million retail jobs remain unfilled, while consumers expect to buy and receive goods with more convenience than ever before.

According to the experts, all of these factors mean we’re reaching a singularity –– a retail reset, if you will. Pulling together insights from 50 retail executives, Deloitte’s 2022 Retail Industry Outlook breaks down the biggest trends in retail e-commerce and supply chains for 2022. Here’s what the folks charting the future of retail had to say:

All about supply chains

Though it shouldn’t come as a shock, supply chains are top of mind for retailers going into 2022. Eighty percent of the executives surveyed in the report believe consumers will prioritize stock availability over brand loyalty, meaning retailers will need to place inventory above all if they want to turn a profit.

Report co-author Rod Sides, Deloitte vice chairman and U.S. retail, wholesale and distribution leader, believes retailers will flip the traditional sourcing model on its head.

“The interdependencies that exist between the supplier and the retailer are really the big thing that I think is going to be worth watching,” Sides told Modern Shipper.


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Sides says that rising costs and heavy delays are changing the entire supply chain calculus for retailers. As he sees it, the conventional wisdom among supply chain operators used to be that fewer sourcing partners were better because that meant lower costs, but the past two years have thrown all of that out the window, with disruptions impacting shipping lanes worldwide.


“Being able to expand the assortment, you might not get quite the enterprise that you’re looking for,” Sides explained, “but at the same time, you have much more flexibility to be in stock, or at least be relevant.”

Sides recommended that retailers gain as much transparency as possible from their sourcing partners while also bringing on new partners to expand their sourcing base and reduce the impact of widespread disruptions.

Automation

Sides and Deloitte also emphasized the need for automation in supply chains. Fifty-seven percent of executives surveyed have no plans to invest in robotics and automated materials handling, but half of industry leaders –– which the report defines as companies that support their competitive strategies with investment –– cited automation in fulfillment and distribution centers as a priority.

In the short term, the biggest opportunities for automation are in warehouses and distribution centers, where it’s cheaper to automate than in physical stores. The report recommends that retailers automate their warehouse processes as much as possible and invest in automated driving technology for the last mile.

Meanwhile, though, more than half of industry leaders believe that staff-free stores will be common in the next five years, so there’s at least some focus on automating the endpoints of supply chains too.

Data sharing

For all of the fuss around sourcing and automation, those processes are useless if a retailer doesn’t know where its products are. The Deloitte report highlighted the growing emphasis among retailers on data sharing and visibility, which can open up all sorts of efficiencies for supply chains.

For one, having that end-to-end visibility of products can help retailers improve the post-sale experiences for consumers. They can use data from suppliers and manufacturers to pinpoint where their inventory is, allowing them to anticipate delays, update inventory figures on their websites and provide better forecasts to customers. They can also use the data to schedule store labor around anticipated arrival times.

However, only one-quarter of retail executives surveyed by Deloitte reported plans to make “moderate to major investments” in data privacy and security, indicating that retailers aren’t as concerned as they should be given that 44% of retailers globally experienced ransomware attacks in 2021.

The last mile

According to Sides, one of the biggest obstacles facing retail executives will be reducing last-mile costs. With consumers expecting near-infinite fulfillment options, offering them all while keeping costs low is a challenge. Ship from store, curbside pickup, buy online pick up in store –– all are more expensive than a run-of-the-mill delivery.

“All of those required labor that was not built into the model,” Sides said. “And yet consumers were unwilling to pay for the additional service, for the most part.”


Watch: FreightTech highlights from 2021


One trend he sees emerging is real estate players offering last-mile fulfillment services to retail tenants, particularly in areas where they own clusters of properties so that they can consolidate shipments from several brands.

Sides also anticipates the development of strategies that bring delivery closer and closer to the endpoint: things like locker systems and at-home delivery.

“I think we’re going to get closer and closer to the endpoint, which is the doorstep of every home or apartment in America, in the next five to 10 years,” he said. “And so whoever wins that race, I think is gonna win.”

Make room for e-commerce

Of course, supply chains are far from the only thing retailers are thinking about. Two-thirds of executives surveyed in the Deloitte report said e-commerce and online shopping platforms would be their top investment areas.

In the short term, Sides thinks that voice commerce, an AI-based technology that enables customers to shop using just their voices, will be the biggest new e-commerce trend. According to Deloitte, 55% of industry leaders believe the technology will be “widely adopted” in the next five years, and while in-store automation is also on the docket, technologies like self-checkout, sensors and cameras are more expensive and less scalable.

“They’re trying to detect and prevent a fair amount of stuff that happens or can happen at that location. There’s a lot of room to cover there, whereas voice commerce is a little bit easier,” Sides explained.

However, he cautioned that retailers will need to be vigilant if they leverage voice commerce solutions from a third party. For example, if a retailer were to use voice commerce technology from Google Express, Sides advised they ensure that products that sell well on Google aren’t being recommended over their own top brands.

Social commerce

Social commerce, the idea of reaching consumers via social platforms, is the other major e-commerce trend that Sides anticipated will take off in 2022. A whopping 48 out of 50 executives surveyed by Deloitte said they expect that customers will want seamless experiences across all channels, and 35 are planning moderate to major investments in digital marketing to unify their online and in-store experiences.

A huge chunk of that investment is going toward social commerce, Sides said.

“We used mobile largely as a wayfinding device. We used it not necessarily to buy items –– it was really more of a shopping aid. Now, mobile commerce on our cell phones is big,” he explained.

Major marketplaces from Facebook (NASDAQ: FB) to Shopify (NYSE: SHOP) are experimenting with the model already, adding direct integrations between their social media platforms and their online shops. The allure, as with many other forms of commerce these days, is convenience, and Sides predicts that retailers will increasingly try to sell to consumers on the channels they use most.

The role of brick-and-mortar

For Sides, the most surprising takeaway from the report is retailers’ neglect of the physical store. Despite the rise of e-commerce, he argues that brick-and-mortar locations still have a place and that retailers are missing out by forgetting about them entirely.

Eighty-four percent of executives surveyed by Deloitte said they anticipate that consumers in 2022 will seek experiences outside the home, yet only a quarter of survey respondents plan to make investments in their physical stores. That gap is alarming considering the rise of fulfillment options like curbside pickup and buy online pick up in store.

To support the trend of omnichannel fulfillment, Sides and Deloitte believe that retailers will need to overhaul their in-store infrastructures. If they don’t, they risk their technology becoming quickly outdated, which can tank the user experience.

Clearly, retailers have plenty to think about. But despite a tumultuous 2021, there was a surprising level of optimism among Deloitte’s respondents. More than half –– 54% –– anticipated growth of up to 5% in 2022, and an additional one-third predicted growth north of 5%.

“In spite of all the economic headwinds and challenges, I think the retailers that we talked to were superbly optimistic about their place in the market,” Sides said.

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Jack Daleo

Jack is a staff writer for FreightWaves and Modern Shipper covering topics like last mile delivery and e-commerce fulfillment. He studied at Northwestern University, majoring in journalism with a certificate in integrated marketing communications. Previously, Jack has written for Backpacker Magazine and enjoys travel, the outdoors, and all things basketball.