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To say that consumers have been hit by a ‘force multiplier effect’ of negativity in the second half of 2022 would not be an understatement.
First, the war in the Ukraine disrupted global food networks at a time when supply chains were just beginning to stabilise after the worst effects of the pandemic had been largely weathered.
Secondly, almost every Western economy is now feeling the effects of measures taken by central banks during the pandemic to print more money (and stimulate consumer spending), leaving inflation levels higher than they have been in almost half a century – and Australia is especially not exempt from this.
Lastly, the energy insecurities resulting from the Russian sanctions in Europe, alongside Australia’s current energy crisis, has led to a doubling down on existing inflationary pressure, causing a cost-of-living crisis for tens of millions of ordinary people across Australia.
Sales events in ‘2022’
For many retailers the holiday season (starting around Black Friday/Cyber Monday and lasting right through to the New Year sales) is a crucial period that can often either make or break profits. Although the retail ramp-up to the holiday season is widely reported each year, the effects of 2022’s political and macro-economic events on the consumer purse means that many retailers are having to rethink their traditional sales approaches, starting (bigger) discounts earlier and for longer, inevitably putting added stress on already stretched supply chains and retail associates.
During the height of the pandemic, many retailers over-ordered products while there were supply shortages, meaning many retailers now have a surplus of products that they are keen to shift. Inflationary pressures will force many retailers to cut prices and offer bigger discounts than normal too, meaning millions of consumers across Australia can expect a wave of offers, discounts and other price cuts this holiday season.
Before that advent of Amazon’s next day delivery promise, retailers did not have to worry about loyalty so much, but that has since changed. Retail culture over the last decade has shifted to become a ‘yes’ culture, pushing retailers on service and delivery, adding complexity and challenges to the supply chain technologies that underpin brand promises.
Holiday season for the modern consumer
In addition to all these pressures, today’s consumers expectations are at an all time high. They want the same personalised experience whether shopping in-store or online. Retailers need to move beyond the basics to focus on delivering this experience and expectation while driving business growth.
According to recent research from Manhattan Associates, looking at Australian consumer and retail expectations in 2022, the vast majority of surveyed retailers stated that they have a level of interconnection between their online and in-store functions (83%), and only around half are offering buy in-store and return online (50%), or buy online and return in- store (46%). Only 6% of retailers believed that they had an accurate overview of their inventory across their entire business (in-store and online) 100% of the time – something that is absolutely vital to ensuring not only profitability, but also a seamless customer experience.
Furthermore, almost a quarter of consumers (24%) now expect shop assistants to be able to check availability in a nearby store if a product is out of stock, or order that product for home delivery or collection, highlighting the blending of the physical and digital retail spaces.
The cost-of-living crisis is influencing consumer spending habits too. According to the same research, 82% of in-store purchases are now influenced by online channels, and the most common reason for starting the shopping experience online was to find the best price (46%), followed by making sure the product is in stock (42%).
Retailers will have to leverage every single piece of inventory across in store and digital networks in order to deliver profits this summer, and many are revaluating the roles of their stores, recognising their added value as strategic hubs for online sales, not least as a fulfilment hub for click & collect, returns, endless aisles and same-day delivery.
As retailers brace themselves for prolonged sales cycles and greater discounts, there is a very real possibility of price wars in some markets. With such fierce competition for the consumer wallet this year, the emphasis will be on retailers to not only provide significant markdowns but to also deliver exceptional customer service too.
As the summer of consumer discontent looms, the economic challenges faced by millions of retailers and consumers have once again put supply chains firmly in the spotlight, making topics such as inventory visibility, omnichannel commerce and customer communication key topics of discussion for strapped retailers, around family dinner tables and journalists in news rooms all over the globe.
Raghav Sibal is managing director for Australia & New Zealand at Manhattan Associates.
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