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February 3, 2022

From boutique billboards to circular economies, here’s a look at retail 2022

Here’s a preview of the trends we expect to see as an outflow of the shifts experienced over the last two years.

Retail today is simply not the same industry it was pre-pandemic. When the world came to a halt, that was not an option for retailers, which had to hit the brake and the gas pedal at the same time.

While this was a complex undertaking for executives and employees, it also built some serious organizational muscle in the process.

Now, retail is in a new chapter. Here’s a preview of the trends we expect to see as an outflow of the shifts experienced over the last two years.

1. The rise of experience commerce: the boutique “billboard”

Some multi-brand luxury retailers are not just optimizing their footprint — they’re also reinventing it for the next generation of shoppers. Case in point is Bloomingdale’s newest boutique concept “Bloomies,” whose location, size, layout, design philosophy, products and services are all geared toward making each visit unique.

Rather than pulling shoppers into a typical 200,000-square-foot Bloomingdale’s, Bloomie’s is one-tenth the size and promises more of a revolving door of retail experiences. There will be new deliveries multiple times a week and a continuously changing floor plan featuring rotating display carts instead of static fixtures.  

The scaled-down footprint allows the store to sit side-by-side with other boutique brands in small-to-medium shopping centers where “accessible luxury” consumers already shop. Employees, of course, are on-hand to recommend and order products from online and traditional full-sized stores, allowing Bloomies to act as a billboard for the larger brand.

While the department store giant made this move in response to changing consumer preferences and a shrinking target market, a number of retailers could benefit from the strategy behind this approach.

2. The shift of the sustainability agenda

Retailers are moving away from sustainability rhetoric and toward action. Sustainability “signals” will become more visible and mainstream than ever, showing up everywhere from publicly available dashboards to product packaging.

Microsoft now has a dashboard to show customers how much they can reduce their carbon footprint by moving to cloud services, while consumer packaging goods leaders are introducing “carbon footprint labels,” as Unilever is aiming to do for its over 75,000 products.

Unilever expects these carbon use estimates to be around 85% accurate, but there are challenges to address. As the company’s head of global supply chain said, “It took 30 years to standardize [calorie labels], and we don’t have 30 years to standardize carbon labels.”

This is yet another example of how retailers and supply chain partners will need to act as an ecosystem to meet goals and consumer demands.

3. Cross-industry convergence = retail x everything

Retail will serve as the axis point for more cross-industry convergence than ever. The reason: It’s where the consumers are most often found. While consumers may not go to the bank or their doctor’s office that often, they do frequently interact with retailers.

Smart retailers are thinking about broader ways to leverage this frequent and repeated exposure to customers to drive cross-industry solutions. For example, Walmart is testing out “healthcare supercenters” to gauge the potential for rolling out primary healthcare services. Similarly, Dollar Tree has hired a chief medical officer to meet the needs of customers in rural areas that are typically under-served medically.

Meanwhile, Best Buy is reversing the direction of retail-healthcare convergence with its acquisition of Current Health, a care-at-home technology platform. Because remote health and technology are intertwined, Best Buy has a natural role to play a role in virtual care.

More cross-industry convergence will surely emerge, whether in the fitness arena, insurance space or under the low-risk legal umbrella.

4. Owning the pre-owned market

The market for pre-owned garments is fast-developing. ARCteryx’s Used Gear, SecondHand from Levi’s and Patagonia’s WornWear are just a few examples of brands focused on maintaining control of the pre-owned resell experience. Moreover, companies are emerging to help retailers accept used goods back under their roof.

This allows greater control over brand image by regulating resell prices and positioning used products in the best light. Retailers can showcase the long-lasting quality of their products, which simultaneously increases brand loyalty and expands their customer base. ARCteryx speaks to this with the clever tagline “too useful to be idle” on its resell website, stating “Our gear is built to last. If you’re not using your gear to its fullest potential, we’ll find somebody who will.”

Keeping resell in-house also helps retailers adhere to their sustainability agendas and position themselves as participants in the circular economy. On its resell website, Levi’s prominently cites a study about the opportunity to avoid 449 million pounds of waste annually through the purchase of used items.

5. POS financing: buy now, pay later — instantly

Point-of-sale financing is another quickly rising category that appeals to the demand for fast-paced, instant gratification shopping solutions.

Affirm, AfterPay and Klarna are leading the category, with the latter having recently signed deals with Macy’s and H&M, securing two of the largest retailers on both the high-end and casual markets.

The experience is not limited to in-store purchases. These personal-direct financing services can be utilized online with as little info as a name, address and date of birth. Some lenders require a Social Security number for a soft credit check, but the process is still far faster and easier than traditional methods, without impacting applicants’ credit score. Applicants get an instant decision, and those who are approved enjoy easy payment terms at a length of their choosing and no-to-low interest rates.

6. Supply chain is in the hot seat, and it’s there to stay

While the worst of the pandemic-driven product shortages may be over, supply chain optimization will stay in the corporate crosshairs indefinitely. This year, we’ll see solutions born from the need to fortify what proved to be the Achilles’ heel of almost every business.

Diversifying reliance on low-cost countries (LCCs) and creating redundancies for suppliers (particularly small but critical ones) is no quick or easy task. Starbucks is spending billions on supplier diversification over a nearly decade-long timeline, for example. We’re working with others to move away from legacy supply chain solutions to the cloud and gain visibility into networks and tracking. Not every supply chain improvement will be a fast or fix-it-all solution, but we will see a slow strengthening over time.

Anything that impacts shipment frequencies and product quantities is under review for a rethink. Take warehouse storage, for example. Microsoft is utilizing an automation solution at its Redmond headquarters to optimize storage vertically. Robots are now used to access shelves that humans can’t, adding even more value to each square foot of the building and enabling fewer shipments in larger quantities. Such solutions will take on more importance as mid-size businesses start to rely on strategic stockpiling, just as their larger international counterparts do.

To learn more about these trends, listen to Cognizant’s podcast series on reimagining retail.

Rajeev Saraf
Head of NA Retail, Consumer Goods, Travel & Hospitality
Picture of DIgitally Cognizant author Rajeev Saraf

Rajeev Saraf serves as Head of NA Retail, Consumer Goods, Travel & Hospitality at Cognizant. He is a senior exec with vast experience spanning strategy, ops, business and practice development across multiple geographies, roles and services.

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