Brian Monaco, Vice President of Retail Services
Well, it’s that time of the year again. It is the time we look back over the past year and see how far we have come. When looking at the retail sector for 2022, we saw a couple of major disruptors to business as normal. Business was adapting to the way people were living in a world with COVID.
This year started out with a huge spike in COVID cases around the world. Every country started to deal with COVID a little differently. While some countries were in shutdown mode, others were in retail survival mode. Survival mode was accomplished with the easement of restrictions along with a reduction in the severity of COVID symptoms. The virus as we knew it was changing, and vaccinations became more available around the world.
We saw some signs that the global supply chain issues were getting better. However, we soon found out that while some sectors of the supply chain issues were getting better, others were going to take a lot longer to return to pre-pandemic levels. In the retail sector, nothing is normal but impacts and recovery are uneven among sectors, with some areas showing improvement and others not or declining. Product sourcing and procurement became a challenge in most retail sectors. Retailers that didn’t adjust or kept ordering and doing the same things they did prior to COVID found themselves holding a lot of extra inventory the consumers didn’t want or need. Those that found a stable, reliable supply chain had the upper hand throughout the year.
In the back half of 2021 we started to feel the global labor shortage. This was a major disruptor in 2022 as labor shortages again affected the supply chain. Retailers felt the pinch even more at the start of 2022. The shift in work-life balance was quickly evolving. Employee working practices and needs changed based on necessity and choice. Those retailers that had insight and took steps to retain their employees had the upper hand. Those retailers didn’t cut back services, hours of operation or eliminate programs. Some retailers had to make difficult business decisions due to staffing shortages. Those business decisions have impacts on sales, product availability and customer service. Retailers are still evaluating the different customer touch programs after COVID such as online shopping, BOPIS, delivery, self-checkouts and ease of the shopping experience. You can see with all these programs the staffing shortage has impacts on the success or availability of each program.
One of the biggest disruptors we saw this year is something we haven’t seen in over 10 years. Inflation. We saw how quickly inflation rose worldwide. There were a few signs late in 2021 that some of the supply chain issues were going to have an impact on prices. Inflation across the world spiked to levels not seen in many years. In the US, we hadn’t seen inflation numbers this high in over 40 years. Retailers took action. They did so with inventory controls and, as consumers responded to inflation, having availability of the items they now wanted to purchase. The environment is different, but the fundamentals are the same: retailers must have the items consumers want to purchase when they want to purchase them. Retailers leveraging a good forecasting tool that can provide insight into those key factors in the ever-changing retail environment will come out the strongest. Retailers that focus on the work and work content to drive their business will not have to adjust their labor analysis much as a result of inflation. Those retailers that use sales as a metric for their labor or labor results will need to adjust, and it’s always hard to figure out what level of adjustments to make during a high inflationary period.
What will 2023 bring?
Every year there are disruptors for retailers, and they are not always predictable. As we look forward to 2023 there is talk about inflation easing a little bit. Economists are split on if we will have a recession or soft landing from the high inflationary period. How retailers navigate these disruptors, and others no doubt coming, will determine their level of success. Conditions change, but the fundamental—providing great customer service—does not. The top-in-class retailers will utilize a great forecasting tool. They will focus on work content to drive their business. They will find a way to have the right products available at the right moment, and always with the right people doing the right things, the right way at the right times.
Enjoy your holiday seasons. 2023 is right around the corner.