Adapting in 2022: Navigating Retail Challenges and Trends

Retail Industry Trends for 2022

One can easily spend an entire day perusing articles on the internet about what is or will be trending in retail for this year. Most were written at the end of Dec. or early Jan. I have reviewed many though obviously not all trying to find common themes that might pertain to sporting goods retailers since we are now well into the second half of 2022. I have also received input from some retailers who were not the least bit shy when it came to expressing their concerns about where the retail business was trending. In no particular order I have put together a compilation of ideas trending in retail. Some may be important to your operation others not so much.

7 Trends/Concerns Facing Independent Retailers in 2022

• Supply chain
• E-commerce
• Inflation
• Workforce
• DTC Selling
• Transparency
• Inventory management

Supply Chain Challenges

Still an issue facing the retail industry though in most cases not quite as problematic as earlier this year. Issues with the supply chain are undoubtedly going to be with us throughout this year and perhaps beyond and will cost retailers millions of dollars in lost revenue. Coupled with those losses retailers can expect prices to rise due to materials increases container air freight and trucking spikes and labor shortages.

As an independent retailer there isn’t much you can do to change these things but what you CAN do is focus on what you can control. Things like reviewing your current merchandise assortment mix to include products you can get more reliable deliveries on would be a good start. A good example of this is a multi-store retailer I work with that had several locations tied only to one brand. When deliveries became unreliable and impossible to plan a decision was made to pivot from the single brand concept and restructure the assortment mix to include many top brands. This way if one brand can’t or won’t deliver there are other options available.

Embrace E-commerce/Virtual Shopping

I don’t run across many retailers in this day and age that do not have some sort of online presence. Correction I don’t run into any. That said just having a website that provides store information will not cut it moving forward. You must provide a way for your customers to transact business with you online or they will find merchants who will. According to drop-shipping app Oberlo there were 900 million more digital buyers in 2021 than there were in 2020. That is an increase of 4.4%. Consumers who never considered buying online became comfortable with the technology during the pandemic and are changing the way they shop.

Younger customers especially want to do their homework prior to shopping in your store. Stoic staid pictures on your website won’t excite this crowd. They want to connect with your store and your products “live”. I know this sounds futuristic but it could be closer than you think. They are connected to social media; Facebook Pinterest Instagram etc. are more appealing to them than simple email marketing. You need to be aware of this.

Inflation

With prices rising on everything from gasoline to food it stands to reason that footwear costs will and are rising as well. The good news is that progressive retailers are finding ways to combat rising costs through aggressive sourcing. I spoke with one retailer whose purchasing from Milan accounts for 10% of his total OTB with an initial markup of 70%. Unless you find a way to increase initial markups on the front end like this merchant has inflation will most likely erode margins.

Workforce

Current Hiring Challenges

It seems like everywhere you turn these days there are signs saying the business is looking for help. On one occasion the owner of a store I spoke with was actually working the sales floor so an overworked sales person could have a day off.

Successful Staffing Strategies

Another merchant actually claimed that staffing was not an issue this year. When I inquired what he was doing differently he explained that he pays sales associates $20 an hour versus a 10% commission and that nobody was making $20 an hour. Incentive-based pay not only increases sales but also reduces selling costs when managed properly.

Employee Perks

Perks at this store include:
– Paid vacation
– Free merchandise from key vendors
– 401K
– A generous year-end bonus program

As the saying goes “if you pay peanuts you get monkeys.” Finding and training good sales associates is challenging and costly. Keeping them is important. Don’t lose good sales associates over a few bucks. If they want to earn more money consider an incentive-based plan. If you have a sales person that isn’t interested in more money there is a strong likelihood that you have the wrong person.

DTC Selling

Direct-to-Consumer Marketing in Retail

By this point most retailers have had at least some exposure to Direct-to-Consumer (DTC) marketing. From a vendor’s perspective the benefits are obvious. By definition the vendor controls every aspect of the transaction from presentation to pricing develops a relationship with the consumer and does all of this at higher margins than by distributing exclusively through a retailer.

On the surface this arrangement might appear to be detrimental to the retailer and in some cases it might be. However there are more and more examples both within the footwear industry and outside of it where vendors and retailers are working together for their mutual benefit.

The Importance of Collaboration

Since DTC represents an ever-growing percentage of vendor sales 30-50% according to some sources finding ways for vendors and retailers to collaborate seems imperative. Instead of creating a competitive situation where one entity wins and one loses what harm would come from finding a solution where the outcome is positive for both parties?

Innovative Solutions for Partnership

One solution employed by an ever-growing number of vendors would be for the vendor to direct the sale to the nearest retailer in the area. This is currently being done with the locally.com platform whereby inventory is exported to the platform and updated several times per day.

When a customer searches “XYZ brand near me” the site locates the item and asks the consumer if they would prefer to:
– Reserve online pickup in store
– Buy online pickup in store

Retailers using this service have reported dramatic increases in Google rankings. Both entities make their respective margins and both maintain a strong relationship with the consumer.

A scenario such as the one described could serve to create a stronger bond between vendor and retailer and help foster a true “partnership.”

Customers and Honest Communication

Customers can appreciate and will accept an honest explanation about when merchandise is coming in as well as why prices are going up. You live with these issues every day they don’t. A $20 price increase on an item that can’t be delivered for three months might be the current reality. Under normal circumstances what could have been a lost sale might end up with a positive result if fully explained.

Loyalty to Brands and Values

One retailer I spoke with has customers who are very loyal to brands that align with their personal values. Some customers are willing to wait for delivery and pay more for products made in the USA. To others having an item domestically made may not be a big deal.

Inventory Management

Stores commented to me that having a merchandise plan that adjusts to current trends is vital to managing today’s ever-changing retail climate. One retailer’s strategy is to overbuy their current plan knowing that deliveries are most likely going to be late if not cancelled. By monitoring monthly stock-to-sales ratios they are ensuring proper inventory levels while keeping a constant flow of fresh inventory coming in. If business does slow down orders are modified all the while enjoying prices that were locked in when the future orders were written.

Share Your Thoughts

What trends or concerns are you experiencing in 2022? Feel free to share your thoughts with me. This is by no means meant to be an exclusive list.

Ritchie Sayner

Ritchie Sayner

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