The past two-and-a-half years have proven to be an immense challenge for most retailers operating across the country. The COVID-19 global pandemic, along with a number of other factors and influencers, has served up a litany of disruptions and disturbances for the industry to contend with. However, as communities in countries all over the world continue to slowly and methodically head toward something of a new “normal”, retailers search for ways by which they can maintain their relevance with the consumer and ensure future growth and success. With these things in mind, Deloitte recently released its 2022 Canadian retail outlook, highlighting five key insights that will shape the retail landscape over the coming months. And, according to Marty Weintraub, Partner, National Retail Leader at Deloitte, it’s a landscape that continues to evolve in the wake of impacts of the pandemic.
“Merchants within the industry have been through a lot over the course of the past couple of years,” he says. “Impacts of the pandemic, most dramatically pronounced by store closures and social restrictions, had a profound effect on the industry. And, most recently, the war in Ukraine and continued rise in inflation have only added to the disruption and challenges that retailers have been facing. Having said that, however, the economy is still doing fairly well from an employment and growth perspective. So, over the next 12 months or so, we’re going to continue to see ups and downs, just as we’ve become used to. But overall, based on a number of things that we’ve uncovered, the outlook is relatively positive for retailers in the country.”
Optimism around growth and concern about profits
One of the things that Deloitte uncovered within its 2022 Canadian retail outlook is the fact that executives within the country are feeling quite optimistic, even confident, about the near-term future of their companies. The survey reveals that an incredible 77 per cent expect their revenues to increase, with 93 per cent believing in their organizations’ ability to meet growth targets and objectives. Though some 40 per cent expect margins to fall in 2022, driven largely by the threat of inflation and the continuation of rising costs, Weintraub says that much of the industry intend to invest throughout the coming year in order to drive revenue and facilitate further growth.
“There’s been an obvious accelerated digitization of the industry and everything else around us over the past couple of years,” he recognizes. “Retailers will continue to invest in digital technologies to support their ecommerce efforts and the digital evolution of their businesses. However, what’s equally, if not more, important is the reinvestment into the physical brick-and-mortar store. We’re already starting to see this shift as retailers are realizing the Canadian consumer’s increasing desire for experiences and to reengage in a physical environment. They are investments that are going to go a long way toward bolstering the omnichannel experience retailers provide. And, of course, supply chains are going to receive attention. We’ve learned over the last couple of years that supply chains are fragile. And, because resilience is key, there’s going to be a lot of investment into all aspects of supply in order to enable the growth that’s expected.”
Strengthening supply chains
As unsung as it may have been, escaping much of the spotlight prior to the pandemic, the supply chain is a pivotal component of the retail operation and integral to the overall customer experience. And, responses within Deloitte’s outlook reflect its importance, revealing a number of priorities for executives, including avoiding stockouts (95%), making their supply chain networks more agile (90%) and ensuring their resiliency (90%). The outlook also suggests that there are a number of ways by which retail organizations plan to support these priorities, with nearly two-thirds (65%) seeking diversification of their overseas supplier networks and 10 per cent expecting to reduce their reliance on overseas vendors altogether. However, as Weintraub points out, much more of their focus is going to be around investments in technology that will help them better prepare for the future. In fact, the outlook indicates that 85 per cent of retailers expect to invest in supply chain automation and other types of technologies.
“One of the biggest questions that retailers have got to answer today is how to better forecast and plan for demand,” he asserts. “It’s another aspect of the retail operation that’s completely changed over the course of the past two years. Using history as a source to predict the future is not proving to be all that reliable at the moment as consumer preferences and behaviour have shifted and continue to evolve with the digitization of everything. As a result, many within the industry are going to be leveraging newer techniques and innovative technologies, including those equipped with artificial intelligence, in order to help forecast and plan with greater accuracy and assurance. There’s going to be a real push over the next 6 to 12 months toward gaining clearer and more granular visibility to all of the signals along the end-to-end supply chain, ultimately enabling them to react timelier in the event that shocks or disturbances occur.”
The fight for retail talent
In addition to digitizing the business through automated supply chains and artificial-intelligence-aided demand forecasting, there’s also a growing need for retailers to ensure that they have the human capital required to keep the operation, and all of its bells and whistles, operating optimally. In fact, more than three-quarters (77%) of Canadian retail executives believe that the current talent shortage as well as their ability to hang on to their top employees is one of the top current concerns. To address the concern, and in an attempt to attract and retain top talent, 73 per cent plan to offer their staff better working conditions, 67 per cent intend on offering increased pay and benefits and 43 per cent plan to provide enhanced learning and development opportunities. Though these are all pieces or enticements required in order to attract and retain retail talent, Weintraub points out that an organization’s culture, specifically its initiatives around diversity, equity and inclusion, are of significant importance today.
“It’s been difficult for many retailers attempting to work through this talent shortage,” he says. “The main reason is because there is really only a fixed pool of talent. It’s the result of a number of people who have exited the industry due to early retirements, changes within their careers, or simply wanting more money for the work that they’re doing. In order to attract and retain talent, many retailers are realizing in full the powerful sway that a positive and inclusive corporate and employee culture presents. An organization’s diversity, equity and inclusion initiatives have become an important criterion for prospective employees. So, to keep workforces happy, engaged and motivated, brands have got to figure out what the best DE&I strategy will work best for their organizations.”
Environmental, social and corporate governance
Another aspect of an organization’s culture that links very closely with diversity, equity and inclusion are issues related to environmental, social and corporate governance (ESG). It’s yet another precipitation of the pandemic, one that’s rooted in the Canadian consumers’ increased focus paid toward their values and things they care most about. And, Canadian executives are taking notice. According to Deloitte’s outlook, 80 per cent believe that governments and regulators will increase related mandates, 63 per cent feel that employees are more willing to work for brands with strong ESG records, and 43 per cent believe that it will increase loyalty among customers. And, it’s all true, says Weintraub, provided that brands are genuine in their approach.
“The development of strong ESG initiatives and stances can be a significant lever for recruiting and retaining talent and for cultivating customer loyalty,” he says. “However, employees and customers today are looking for true, meaningful change and movement being made by brands. As a result, those that are serious about their commitments are beginning to imbed various ESG initiatives throughout their companies rather than it living within a siloed team or department. And, many of their initiatives are quite spread out, including support for local communities, enhancing ethics, integrity and compliance, leveraging more sustainable sourcing, and more. But, again, It’s incredibly important for retailers to remember that any initiatives put in place have got to be perceived as real and not something that’s being done simply because it’s expected.”
Focus on customers, brand and agility
One of the key takeaways of the COVID-19 global pandemic, as we hopefully begin to approach something of an end to its impacts, is the fact that agility within the retail business is paramount. Those that already had it baked into their operations were more easily able to adapt and pivot to evolving consumer demands and behaviour. And, those with more of a rigid structure and operation, generally speaking, were less inclined and able to do so. It’s the reason, says Weintraub, there will be such a concerted focus and effort paid by brands toward ensuring agility as we move forward. However, he suggests that it will be incredibly important to maintain a deep understanding of the brand and evolving consumer expectations in order to succeed in a transformed retail landscape.
“People have been talking for years about putting customers first and keeping them at the heart of every decision that’s made,” he says. “However, what makes this notion even more important is the fact that the customer has acquired more power over the course of the past 18 to 24 months than they’ve ever had before, enabled to shop wherever, whenever and however they want. It means that retailers need to meet them where they want to be met. It’s too easy today for customers to switch brands or retailers. As a result, taking care of the brand is imperative, requiring retailers to figure out what investments need to be made in order to grow and elevate the brand in the customers’ mind.”
Despite the amount of disruption that’s occurred over the course of the past two-plus years, and the uncertainty that it’s created across industries and the world, Weintraub believes that the resilience of Canadian retailers will continue to serve them well, helping them withstand many of the challenges that they face. And, although he recognizes that many of those challenges will likely sustain through the near-term, he adds that there are also immense opportunities available to those within the industry that can continue to stay close to the consumer, innovating to meet their evolving needs and preferences.
“Though there remain a number of headwinds that will challenge the industry over the next little while, there has never been such opportunity to win over the customer by standing apart from competitors. Increasingly, retailers will be focusing more of their resources and effort on achieving that through a number of different ways, including investing in the right technologies, closely monitoring cost, strengthening their supply chains, bolstering their brand values and finding the right talent to support it all. Those that can move the needle on each of these things in a positive direction are those that will be positioning themselves well to succeed and grow in this new retail landscape.”