Why A Summer Of Discontent Is Likely To Spark A Wave Of Retail Innovation

I was alerted to something today which perhaps will come to symbolise the somewhat flaky (sorry) nature of supply chains right now. For the second year in a row, Cadbury 99 Flakes are going to be in short supply this summer. And this comes after Cadbury owner, Mondelez switched manufacturing to a plant just outside Cairo.

And this is significant. Why? Because as the airlines are told to cancel summer flights now rather than when we’re boarding the aircraft, we’re most likely going to return to pandemic levels of staycations, rather than risk being stranded abroad.

But there again, the cost of filling up the family car just to get to the beach has almost doubled compared to two years ago and a £100 fill-up has now become the norm.

And don’t think that taking the train is an option because they’re all out on strike, because of……inflation. Yeah, we all want a pay rise right now.

For those of us old enough to remember, this has all the hallmarks of the 1970’s. And it’s not a British thing either. Australians in New South Wales have been told to turn off the lights between 6pm and 8pm to conserve energy as their long standing dependence on fossil fuel and the cost of raw materials begins to hit home.

Some experts are forecasting that food prices will soar by 15% this summer, putting further strain on household budgets. And in the UK a 0.25% increase in interest rates announced today, to 1.25%, will merely add to consumer woes.

However, the reason it wasn’t a higher increase can largely be put down to consumers already reigning in their spending. Consumer confidence is at an all-time low and the prospect of a recession is now very real.

Innovation

Not a great outlook and one could be forgiven for thinking that retail will do well to weather the impending storm. ASOS warned today on profits and Sainsbury’s announced it’s latest price war with the discounters. As one retail Chairman recently told me, retail faces a very uncertain future.

But retail is nothing if not resilient and whilst the remainder of 2022 is not going to be pretty, I predict that, largely out of necessity, we are about to experience the most significant amount of retail innovation ever seen.

Supply chains will be radically overhauled, bringing them ever closer to the end consumer. There will be an extraordinary drive to increase efficiency and reduce waste to a minimum, meaning that IoT technology, for example, will see a huge increase in interest.

Other areas that will receive investment will be inventory and demand management — knowing what inventory to have where and when will become increasingly important.

And let’s not forget that previously mentioned uncertainty, this time in the context of consumer behaviour. The customer journey has always been notoriously difficult to map, now it is well nigh impossible, which means that we should expect to see continuing investment in social and headless commerce, as brands strive to become ever more agile and flexible to meet ever evolving demands and expectations.

As spending slows and profit warnings become business as usual, expect to see more and more initiatives not only designed to drive cost out of the business, but in a way to position for future growth. Downturns don’t last forever, it’s how they are managed which makes the difference.

Because ultimately, where there’s a threat, usually there’s an opportunity lurking not far behind. The prize for those who do will be conspicuous, the trick is to spot it in the first place.