With a bit of clarity in sight, expect retailers to shift their 2022 narrative from simply surviving to one of optimism. Hopeful eyes are also looking to lenders to ease up on borrower requirements for retailers, merchants and stores looking to take out loans, which will play an important role in the sector’s recovery and growth. At the core of future retail strategies: customer experience.
Overall, the retail sector performed well in 2021, staging a potentially bigger comeback for 2022. U.S. retail sales are projected to jump 2.5% this year, topping $6.624 trillion. eCommerce sales are expected to grow 16.1% and in-store sales should still account for more than 80% of total sales.
Brick-and-mortar saw a healthy jump in demand in 2021 following renewed consumer confidence and rising vaccinations. Foot traffic at shopping centers was approximately 25% above 2020 levels as of Q3 2021 and should continue its upward trajectory for the foreseeable future. 2021 also signaled more store openings than closures in four years. Overall U.S. leasing activity was steady, topping 53 million square feet by Q3 2021, 52% above 2019.
One of the lessons learned from the pandemic is that people like options and convenience. Looking ahead, expect more brick-and-mortar merchants to take a multi-sales approach to create a frictionless shopping experience. We call this the omnichannel approach. Services like buy-online-pickup-in-store (BOPIS) and curbside pickup that originally evolved as a temporary COVID-19 lifeline will now be a permanent fixture in the retail space. According to a ShipStation survey, up to 71% of respondents expect retailers to offer curbside pickup and BOPIS indefinitely, while another 44% state they are less likely to shop with brands not offering these services.
This trend allows merchants to expand online sales, satisfy customers’ product needs in almost real-time (many orders are processed within a few hours), and generate foot traffic (for in-store pickups), which could lead to more sales. Retailers such as Bed Bath & Beyond have eagerly launched themselves into this space, recently expanding its curbside offering to approximately 1,350 stores — representing about 90% of its fleet.
Going into 2022, more brands are anticipated to invest significant capital to remodel and modernize existing shops and make them more consumer-centric. Notably, Target updated about 150 of its locations in 2021 with swanky modern fixtures, better brand engagement, and enhanced Guest Services, BOPIS, and curbside pickup areas to make the shopping experience even more convenient. In early 2021, grocer Food Lion also completed a $212.5 million remodel of 112 Mid-Atlantic stores.
With strong demand in its sails, there is significant opportunity for expansion — especially in high growth population metros. New store locations are also likely to be smaller formats as merchants focus on leaner operations to simplify the purchasing experience. Trends point to an increased appetite for neighborhood centers and stand-alone single-tenant properties (which accounted for 90% of total net absorption in 2021), with grocer, discount, home decor/improvement and beauty sectors leading the charge.
Online sales will continue to claim a large portion of the market in 2022 and beyond. Retailers should sharpen their online experience by focusing on core conveniences such as shipping and handling efficiencies. Recent supply chain issues have made shipping transparency a consumer priority as illustrated by a ShipStation survey that showed 85% of respondents want to know exactly when they will get their product before making an online purchase. Drone package delivery could also make some headway soon as stores look to reduce delivery costs and improve efficiencies, as well as provide customers with another convenient and ultra-exciting shopping touchpoint. In November 2021, Walmart and DroneUp began its commercial drone delivery services in three stores in Arkansas, delivering items to eligible customers by air in as little as 30 minutes. Amazon is still working on its Prime Air for deliveries.
The emergence of new digital marketplaces could help retailers further build out their eCommerce platforms. This approach allows third-party brands to sell their products on these marketplaces, enabling the retailer to expand into new categories and reach a broader audience. Macy’s Inc. recently announced plans to launch its own curated digital marketplace in 2022 to bolster its reputation as a digitally-led omnichannel retailer.
There is no doubt that retail recovery is in full swing, and many experts predict — or at least hope — for an almost full recovery by year-end. This year should be pretty exciting and we expect to see some impressive transformations in the way retailers and brands interact with their customers. This is the future of retail as we know it.
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