New year, renewed turbulence. At retailers around the world, Omicron is writing a fresh chapter in the “managing in adversity” playbook. Amid so many operational challenges—ranging from ensuring staffing and supply continuity to anticipating government action and its business impact—it’s hard to stay focused on strategy, just as it was early in the pandemic. But executive teams must again look beyond the immediate task of keeping society equipped and fed. In my recent conversations with sector CEOs globally, six imperatives in particular kept emerging as strategic priorities for 2022.
- Understand the lasting changes to consumer behavior. Sure, some consumers have gone back on decisions made in lockdown, such as the purchase of overly ambitious gym equipment or a move to off-grid isolation in the deepest countryside. Yet there’s no doubt that how we live and work has changed profoundly since Covid emerged in 2020. The exact nature of those changes is not yet fully understood, although many CEOs will have felt the impact in traffic that stubbornly refuses to return to 100% of pre-lockdown levels. In 2022, retailers will need to anatomize the new behavior patterns of their shoppers with precise segmentation and alter their marketing accordingly.
- Fully adapt to the new realities. We’ve all learned ways of doing more with less during the pandemic: achieving a 20% uplift in sales without adding headcount, say, or handling the same volume of sales with 20% fewer employees. With many businesses and consumers likely to face rising cost pressures in 2022, efficiencies from new ways of working need to be realized to their fullest extent (think cost savings in the double digits, percentage-wise). But adaptation isn’t just about streamlining. It covers an array of questions executive teams need to ponder, such as “How do we reset our asset base over the long term?” and “How can we continuously improve our omnichannel capabilities?”
- Innovate on three fronts. In 2022, innovation in all its forms will be crucial, but a few stand out. One is exploration of adjacent business models. For an apparel retailer, that might mean entering the secondhand clothing market. For a grocer, it could be dark kitchens and hot food delivery. The second form is technological innovation that improves efficiency. The third relates to innovations that promise the boldest advances in the digital shopping experience. That potential can come wrapped in disorienting hype—as with some non-fungible tokens (NFTs). But just consider all the possible uses of NFTs when today’s omnichannel shopping further virtualizes into the metaverse. Digital inventory will likely have its day.
- Retain and recruit talent despite the turbulence. The flux in the retail market at the start of 2022 is hard to overstate. At even the most elite global retailers, vacant positions can run as high as 20% of the workforce. Meanwhile, executive teams are trying to predict and nurture the skills needed to keep up with the evolution of e-commerce. It all adds up to a great opportunity for retailers with a strong people-centric strategy.
- Foster “buy better” sustainability. Consumers may well need to buy less in some cases but focusing on buying better can give retailers continued commercial momentum. Another challenge: improving sustainability without creating insupportable cost increases.
- Expect more scale-driven corporate maneuvering. The pandemic has only heightened the strategic importance of scale that Bain highlighted in the 2019 brief “The Future of Retail: Winning Models for a New Era.” That need will continue to power activist investments and other mergers and acquisitions activity. “Virtual scale” alliances between noncompeting retailers could be a potent way of pooling resources for tech investment, for instance.
The frenetic start to 2022 is unlikely to be followed by a sudden lull: Turbulence could well be one of the few constants this year. That only increases the importance of companies codifying what they have learned about managing in adversity throughout the year—so they can adapt the playbook quickly for the next unexpected twist. But for all its operational challenges, 2022 will also present opportunities for those executive teams that can remain focused on the bigger picture.