After two years of uncertainty for Canada’s retailers, new and unexpected challenges continue to arise such as supply chain issues, higher shipping costs, talent shortages, and inflationary pressures, says the 2022 Canadian retail outlook report by Deloitte Canada. 

With the end of the pandemic in sight, these challenges are persisting, yet retailers now have an opportunity to pivot and implement effective strategies. 

“In the first months of the pandemic, they (retailers) shifted into crisis mode, making long-overdue investments in systems and processes as quickly as possible to meet consumers’ rapid embrace of omnichannel shopping,” said the report. “Then, new and sometimes unexpected challenges arose. Snarled supply chains led to empty shelves, longer lead times, and higher shipping costs. Demand for talent led to higher labour costs. Inflationary pressures increased at a rate not seen in years.

“Even as we edge toward a sort of normalcy, these challenges persist. The difference is that retailers now have an opportunity to catch their breath and plan for the future more strategically.”

The report offered the following five key insights:

1. Retailers are optimistic about revenue growth but concerned about margin erosion. Aggressively reining in costs and strategically investing in ‘no-regrets moves’ will be crucial to ensure top-line growth does not come at the expense of profit;
2. Supply chain complexities will impact planned investment. Retailers’ ability to meet customer fulfillment promises – from same-day delivery to easy returns – is critical to being competitive. The difficulty will be in investing the right amount at the right speed, as the fluctuating demand of the past two years may not be a reliable guide for the future. Retailers should be meticulous in removing as many friction points as possible from operations;
3. To fight for the best talent, know what you stand for. Retailers expect the competition for qualified talent to intensify over the next year. To succeed in this labour market, retailers must be employee-centric, developing workforce strategies that promote flexibility, support diversity, equity, and inclusion and make working in retail fun and rewarding. In other words, the workforce is as important as the customer;
4. Consider ESG an organization-wide responsibility. Organizations can no longer view environmental, social and governance work as the responsibility of any single individual or team – it must be embedded in a company’s culture and everyday operations, with goals and progress communicated to employees, consumers, and potentially regulators. This is a significant transformation in how successful retailers will operate; and 
5. Retailers must focus on their brand and the customer while remaining adaptable. Throughout the pandemic, retailers have proven how adaptable they can be. Those that can continue to be agile as consumer demands evolve and technology advances are more likely to succeed.

Marty Weintraub, Partner and National Retail Leader for Deloitte, said retailers in the past two years learned that “agility is critical.”

“Certainty is sort of out the window and be ready for anything. Building resilience is critical. There is no better example that I can think of than demand planning. Some of the shifts that have happened and how consumers are buying and shopping and where the wallet share is going has put a pretty big wrench in a lot of the planning processes that retailers would often follow traditionally and those have been thrown out the window. A more agile, a more broadly based set of demand signals that can now be used to help understand where the consumer is going and how he or she will shop, I think that is the number one takeaway,” he said.

“I think the second lesson learned is we can’t be overpresumptious or take advantage of our workforce. That may be a little bit of an aggressive term but the war for talent hit retail really, really hard and being as it was hard enough to already attract folks to work in traditional retail stores, that’s obviously got much more challenging now. So how you treat, retain and incent your workforce. That has to change.”

Weintraub said the retailers that don’t adapt take a huge risk of falling so far behind that catching up becomes either super expensive or impossible. 

“I wouldn’t say it’s a guaranteed result that you’re going to evaporate but I think time is important. How quickly retailers move . . . pace is important. Move quickly. I think historically retail has moved too slowly to invest, too slowly to adapt, too slowly to maybe realize what’s coming at them in hopes that maybe it won’t. The notion of moving quickly and trying things maybe you haven’t tried before at the risk of failure, that’s fine, you learn something and move on.”

The Deloitte report also found:

• Most retail executives surveyed (77 per cent) expect revenue to rise in 2022 and almost all (93 per cent) are confident in their organization’s ability to hit its growth targets;
• 40 per cent expect margins to fall in 2022 and 37 per cent feel they’ll remain stable;
• 87 per cent of retailers say worsening supply chains is a top retailing risk followed by worker shortages and inflation (both 65 per cent), government actions that reduce retail store capacity (39 per cent) and falling consumer demand (26 per cent);
• 97 per cent say they plan to invest in expanding their digital capabilities to mitigate these risks;
• 80 per cent intend to enhance data privacy and security;
• 77 per cent plan to modernize their supply chain;
• 86 per cent of retailers expect customers to prioritize stock availability over retailer loyalty;
• 85 per cent of retailers also expect to invest in supply chain automation, inventory management and other technology; and
• 77 per cent believe it will be tough to hold on to their best employees.

The report also asked retailers what is most likely to occur in the next 10 years:

• 70 per cent said staff-free, cashier-less stores will be common;
• 47 per cent said retailers will increasingly engage consumers through digital goods;
• 40 per cent said the resale/second-hand goods market will grow significantly;
• 30 per cent said cryptocurrencies will be widely used by retailers and consumers;
• 27 per cent said retailers will use autonomous vehicles and drones to transform customer/store deliveries;
• 23 per cent said voice commerce, where voice commands find and purchase products online, will be widely adopted;
• 23 per cent said retailers will widely adopt blockchain; and
• 13 per cent said renting of consumer products will be widely adopted;
• 3 per cent said direct-to-consumer sales of 3D printed products will impact retail sales.

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