Collaborations, Profitability & Quick Commerce

By Neil Moses, CEO, Wynshop and Mi9 Retail

The US economy’s robust recovery is great news, but has helped cause supply shortages and inflationary pressure on everything from computer chips to potato chips that will carry on well into 2023. Retailers across industries will continue to face both labor and inventory shortages. These considerations are the guiding force behind my three predictions for the upcoming year.

• Adoption of automation and innovation will accelerate. With inflation at a 39-year high, retailers will become extremely focused on profitability. Wynshop conducted a joint study with Incisiv in 2021 called the State of Digital Grocery: Growth at the Cost of Profitability and found the #1 challenge facing grocery retailers is the low profitability of their online business, with 56% of grocers surveyed reporting that they lose money or make less than 10% average gross margin per online order. For retailers across all sectors to remain profitable, I predict there will be an increased emphasis on labor utilization, picking efficiency, micro-fulfillment centers, semi-autonomous delivery, contactless check-out and improved curbside experience. We should also expect closures of less profitable stores and significant investments in online commerce.

• The growth of “quick commerce” will expand. The “30 minutes or less” rapid commerce model that swept grocery in 2021 will continue to expand into other retail segments such as convenience stores, liquor stores, pharmacies, and perhaps even DIY. Retailers will develop their own rapid delivery capabilities or partner with last-mile partners to deliver in 30 minutes or less.
  
  
• Retailers will enter a new era of collaboration. Retailers and manufacturers will find opportunities to share data more directly in order to gain a comprehensive understanding of shopper preferences and purchase intent. It may also be time now for retailers to choose collaboration over competition with each other. Home Depot has already made the leap, partnering with GoLocal, Walmart’s last mile service. Bed Bath & Beyond have signed on to offer home and baby products in Kroger aisles. In the UK, garden centers are partnering with clothing retailers. I predict we will see more of these types of collaborations in 2022.

Digital Transformation: Accelerating Omnichannel Capability

By Jim Barnes, CEO, enVista

Over the last two years, the retail industry has seen a fast, far and wide shift from physical retail practices to omnichannel retail and digital commerce. In the next year, there is no doubt that the retail industry will continue to shift from physical to digital. For example, one of enVista’s clients, a leading specialty retailer in health and nutrition completed a successful digital transformation at the beginning of 2020, accelerating omnichannel agility, rapidly deploying buy online, pick up in-store (BOPIS) and reducing transportation costs and the vendor footprint along the way. This is just one example of large, omnichannel organizations that made significant investments in digital retail processes and ecommerce as a result of the pandemic and changing customer shopping habits. I expect this to continue into the future, even as shoppers become more comfortable returning to stores. In the next five years, ecommerce and brand sales will be 30% of all retail sales. Additionally, wholesale is becoming the new retail to drive revenue, and retail is becoming the wholesale to improve gross margins.

Stores should also expect to carry less inventory, only keeping what they need as visual merchandise. If there is a micro-fulfillment center within 60 to 90 miles of the customer, then same or next-day delivery will be crucial. This gives retailers the opportunity to reduce their inventory foot print.