Retail 2022: Why It’s Going To Be Tougher Than Ever

We may be cautiously emerging from the Covid pandemic — working from home guidance has been lifted today — but there are other challenges just waiting to heap yet more pressure on a beleaguered retail industry, emerging from two years of being disrupted by lockdown after lockdown.

One senior fashion retailer described to me the lockdowns as like having to constantly open and close stores except that none of it was planned.

And no doubt the industry will welcome the news that face coverings and Covid passes will not be required from 27th January, but if we thought that meant things are about to get a whole lot easier, we’d be in for a very rude awakening.

Because a number of factors are conspiring to make the outlook for 2022, just as challenging as during the pandemic.

Inflation

News today that no Generation Z has ever encountered in their lifetime; the rate of inflation in December hit 5.4% — the highest in nearly thirty years. For an entire generation used to never hearing about the rate of inflation, they could be forgiven for wondering what on earth is it exactly?

And the outlook makes for even grimmer reading, with the Bank of England predicting that inflation will hit 6% by the Spring, driven by the price of food, clothes and shoes.

Rising energy costs

As if that wasn’t enough, household budgets are about to come under increased pressure with the anticipated cost of energy rising by 50% in April, when the current Ofgem energy price cap expires.

Some industry observers believe that the global squeeze on the price of wholesale gas over the past year will mean that the average household could be looking at annual gas bills of around £2,000 later this year, which is an eye-watering prospect.

Faced with such an increase, spending on the high street and online will take a significant hit.

Global supply chain crisis

The pandemic has shown that the just in time nature of the global supply chain is fragile and easily susceptible to external influences. However, experts are advising that the crisis prompted by the pandemic will last for at least another two years, with the Omicron variant continuing to disrupt the global system.

“Further supply chain disruption is a significant possibility” Capital Economics

One of the largest shipping container owners, Maersk, has said that the problem is worst on the US west coast where ships are waiting up to four weeks to unload owing to a lack of workers. This is creating a chaotic ripple effect around the world and ultimately affects the availability of our new vacuum cleaner or TV — as outlined by Currys in their Christmas peak trading update.

The sustainable consumer

And if that wasn’t enough, according to McKinsey, consumers are becoming more and more interested in making sustainability-focused choices. However, they are also reporting that it’s a little counter-intuitive because there’s a behaviour gap. In other words, what people say and what they actually do can be two different things.

However, according to the findings, the desire to shop sustainable brands is becoming more acute across the globe.

Putting these together, rising inflation, rising energy costs squeezing household budgets, a continuing supply chain crisis and a newly energised sustainable consumer, it’s not surprising that rather than sailing into calmer waters post-Covid, retail is going to need to chart a course through perhaps even choppier waters.