- Even with the increases in digital and e-commerce, many retailers will leverage physical stores as a sales channel as well.
- A tightened labor market is constraining the restaurant industry’s ability to provide the exceptional experiences customers expect.
Coming off a strong holiday season, retailers are looking to capitalize on changing consumer behaviors while restaurants continue to seek sure footing in 2022.
Omnichannel returns to retail
Consumers showed their adaptability and aptitude when traversing multiple sales channels to purchase goods over the last year as companies sought to adjust to various headwinds. Retail sales will close out 2021 as the strongest year ever, with a record 19.6% increase in year-over-year sales, and total sales of $6.776 trillion through November compared to $5.664 trillion in 2020 and $5.661 trillion in 2019. The previous record for year-over-year sales growth was 8.3%, in 1994. The increase in revenue has been offset by margin pressures, but retailers that are managing cash flow have an opportunity to make the most of the coming year.
The growth of e-commerce sales is well documented, as the pandemic accelerated adoption of virtual purchases, supported by “buy online and pick up in store or curbside.” Key in the acceleration are mobile devices, which consumers used in 54% of all e-commerce sales in 2021, according to Statista. Mobile devices will continue to be a strong engagement opportunity for brands as they find meaningful ways to deploy augmented reality and utilize data to curate tailored experiences for consumers. This is true not only for big box retailers; middle market companies can also take advantage of this trend by ensuring their websites are mobile friendly and responsive and their customer experience through all channels is seamless.
Even with the growth in e-commerce, companies still look to leverage physical stores as a sales channel. Net new stores remained relatively flat in 2021, according to Coresight Research, with discount stores seeing the largest increase with 1,760, as these retailers took advantage of price-sensitive consumers feeling inflation pressure. On the other end of the spectrum, apparel, footwear and accessories saw a net reduction of 1,191 stores in 2020 as consumer demand was tempered by new virus variants. While department stores experienced 1,334 closures in 2020 and 87 in 2021, they saw a net increase of 2.6% in 2021 total sales through November over the same period in 2019. The growth in physical store sales is the basis on which brands are evaluating their store of the future. More digital native brands that previously had no physical overhead costs are now opening strategic physical locations based on customer data. Nearly all retailers are evaluating the right channel balance now and into the future. Even retailers not as far along in their digital journey often have access to untapped data that can help them make this critical strategic decision.
The flagship store of the future is a showroom, as brands look to create distinctive experiences for consumers. Mobile applications have become extensions of the in-store shopping experience, allowing businesses to build deeper brand loyalty while gaining insight into their consumers. This year middle market retailers will look beyond gathering information about their customers to make the data actionable by all departments.
Restaurants seek firmer footing
Food away from home continues its struggle to return to pre-pandemic levels as restaurants fight to bring back seated diners. OpenTable, which tracks dining reservations, shows that U.S. diners hesitate to return to earlier levels of seated dining, with 2021 seeing gains compared to 2020 but still remaining below 2019 levels. The sustained headwind for fine and casual dining has restaurants focused on differentiating through experience.
A tightening labor market is constraining the industry’s ability to provide the exceptional experiences customers expect. The accommodation and food services sector looked to fill 13.8 million jobs in 2021 through November, an increase of 80.7% compared to 2020, when available jobs disappeared in record numbers. Much of the staffing shortage is due to low employee retention; job departures for the same period rose to 8,026 million, with November’s figure of 920,000 being the highest recorded in a single month since tracking of that data. In addition, excluded from the hard data is the impact of employees calling out sick due to illness or exposure as omicron spiked at the end of 2021.
Restaurants are addressing this shortage using various approaches, including technology for in-person dining. QR codes became common early in the pandemic as restaurants shifted away from physical menus. The quick adoption by consumers will encourage U.S.-based companies to bring additional technology solutions to customer-facing services needs. Quick serve and casual operators have expanded beyond using the QR code to display their menu and have started using it to take meal orders and customer payments.
Organizations are looking to get more out of technology through innovation in both front- and back-of-house operations. This year’s Consumer Electronic Show, held in January, highlighted robotics as well as artificial intelligence solutions to help alleviate labor constraints. From machines that help deliver food and bus tables to robots that mix and craft specialty drinks, technology innovation continues to offer future solutions in the sector.
That said, operators across all segments need practical, short-term solutions to address immediate challenges as their businesses evolve toward more sophisticated technology solutions. In addition to relying on traditional methods to attract and retain employees, restaurants need to invest in smart scheduling software, mobile applications for employees, outsourcing of back-office operations, and other solutions.
Both retailers and restaurants will be looking to increase their use of data and technology to address their current challenges and make strategic decisions for the future.
