A new retail landscape is emerging on the other side of the crisis caused by the pandemic, and with a new outlook for the year ahead comes new priorities. But, if the pandemic has taught us anything, it’s that our challenges are equal parts complex, intertwined, and urgent.
So while everyone might be talking about NFTs and the metaverse, the truth is that the most pressing challenges our industry faces aren’t trends, but rather tasks that require rolling up sleeves and addressing fundamentals. Follow along for our take on key areas of strategic focus for this year and beyond.
Supply Chain
The past holiday season saw a confluence of factors impacting the availability of goods available on retailers’ shelves – virtual or IRL. The fast-spreading Omicron variant, geo-political trade issues, goods stuck in-transit, and fewer discounts and promotions on tap – altogether these factors made for a weird and wholly unpredictable season for global retailers. And while we’re still deciphering the full results of the holiday season, one thing was crystal clear: more companies are going to be seeking out both flexibility and control when it comes to their supply chain in the coming months and years.
Some will be looking to last-mile solutions, while others will seek out sourcing options (like near-shoring) that de-risk their assortment decisions. And yet, despite the curveball COVID-19 has thrown at globalization, cross-border cooperation will continue to be our greatest asset to solving these sticky supply chain challenges.
Want to grasp just how important supply chain management will be in the years ahead? Look no further than Walmart’s recently announced plans to hire 20,000 supply chain associates.
Accountability
Fashion’s impact on the environment has been a hot topic for, well, a long time. But some might say that while our words on the topic are many, our actions have historically been few. But not for long. We predict that in the year ahead, accountability is going to increase – whether by mandate or by investment – so that shoppers and stakeholders can begin to see more of how their stuff is made.
Legislation like the proposed Fashion Act in New York will require brands to disclose large parts of their supply chain practices, share median wages and set science based targets for their greenhouse gas emissions. This type of legislation, along with others already in existence in Europe, can provide the first step towards accountability, which in turn can lead to meaningful change and progress towards our shared climate goals.
Yet it’s clear that there’s even more uncomfortable work to be done here. If we want to deal with our industry’s dirty laundry, we’re going to have to actually address topics like the imbalanced agreements between fashion brands and their vendors, the usage of third-party (out of sight, out of mind) vendors, and the pursuit of endless consumption.
Returns
Returns continue to bog down fashion retailers’ bottom lines. In 2020, research by the NRF found that more than $400 billion worth of goods was returned in the United States. Unsurprisingly, online purchases had higher rates of returns (compared with items bought in person). And, you guessed it, apparel was the category with one of the highest return rates.
With returns increasing in lock-step with the rise of online shopping, it’s clear that retailers need to do more to prevent returns and their negative impacts on both their bottom line and the environment. And with any complex problem, successfully addressing it requires a multi-pronged approach. It means: improving fit information so shoppers know upfront what they’re getting, increasing the free shipping ceiling or tacking on a restock fee to deter impulse purchases which are likely to be returned, and offering more flexibility about where and how items can be returned. Whatever the chosen strategy, shifts will need to be made by both the retailer and consumer.
Indeed, ignoring your returns problem is no longer feasible, and those retailers who can successfully deter high rates of returns can build a sustainable moat around their business.
Let’s make 2022 the year where we focus on these business fundamentals.
