The new year has kicked off in a fog of uncertainty. For while most reports indicate that the holiday season was successful, rising COVID infections driven by the new omicron variant have thrown the cards in the air once again. Some had confidently predicted that 2022 would be when that we put the coronavirus in the rearview mirror, but that still may be a case of wishful thinking.
“Even with the experience of the past two years, there is no model that can predict how the economy responds to a pandemic,” wrote Jack Kleinhenz, chief economist at the National Retail Federation in the United States, in article published on January 5. “What we have learned is that each successive variant has slowed down the economy but that the degree of slowdown has been less.”
But the truth is that the two years of living in the shadow of COVID-19 have had a number of macro-economic effects that ultimately will affect all business sectors. The one is rising inflation, created in part by the massive sums of stimulus money pumped into the markets by national governments seeking to keep their business sectors afloat, particularly during the long period of lockdown in 2020.
“What is ironic is that the monetary and fiscal policy that pulled the economy out of the recession has prompted unprecedented growth that is now undermined by accelerating prices,” Kleinhenz noted.
In the United States, inflation as measured by the Personal Consumption Index registered was only 1.3 percent in December 2020, substantially below the Federal Reserve’s target of 2 percent. But, about one year on, inflation pushed prices up 4.4 percent on average, raising the specter of a substantial rise in interest rates.
And rising inflation is not the only macro-economic impact of COVID. Another is labor shortages that are affecting the supply chain as ships jammed with retail merchandise are stuck offshore.
Brick and mortar shopping will remain here for the foreseeable future, says NRF research, but to stay relevant retailers will need to invest in new technologies.
BRICK AND MORTAR HERE TO STAY
But writing in another blog published by the National Retail Federation, Susan Reda painted a more optimistic picture.
“The retail industry’s resilience has been on full display for the last two years and shows no signs of abating,” she wrote. “Retailers developed technologies that took contactless shopping and payment from seed to substantial. Physical retail, often predicted to falter in the face of the ecommerce boom, is flexing its muscle as we head into 2022 and will continue to attract shoppers for the foreseeable future.”
Brick and mortar retailers can defend their turf, she said, but to do they will need to make some substantial investments in technology as well.
“Can physical stores deliver a competitive edge?” she asked. “Retailers believe so, and they’re investing heavily to capture shoppers’ interest and provide experiences that promise less friction and a more integrated experience.”
Also, while the store may be physical, retailers will need to make intelligent use of digital tools to advertise their products. According to InsiderIntelligence.com, U.S. digital retail media advertising is forecast reach $41.37 billion in 2022, growing $10 billion from 2021.
MAKE SURE TO MEET CONSUMER VALUES
“Consumers will expect more of retailers in 2022 than ever before,” Rader noted. “Expectations are through the roof and forgiveness is in short supply.”
What does that mean? Make certain that you are perceived as doing the ethical thing, and in the jewelry business that means keep close tabs on your supply chain, from the mine to the marketplace.
“Transparency remains a linchpin,” Rader stated. “Shoppers care deeply about how a business does business — if your values don’t mesh with theirs, it could be a relationship buster. Are you committed to diversity, equity and inclusion? Are you backing Black-owned businesses? Is there a move toward sustainability?”
“Consumers are spending with brands that have an ethos on a par with their own,” she continued. “Retail has always been about understanding the customer but now it’s nothing short of imperative. We’ve spent an eternity saying that shoppers have all the power. Still, today’s consumer is digitally savvy, channel-agnostic and open to exploring the endless reserve of new products being served to them via social channels — replete with storytelling and how-to details.”
Retailers will need to make intelligent use of digital tools. U.S. digital retail media advertising is forecast reach $41.37 billion in 2022.