Consumer goods and retail is a forward-looking business; manufacturers and sellers are constantly preparing for what is on the horizon. As 2022 winds down, the industry is gearing up for the most highly anticipated period of the year: the holiday shopping season. From boutiques to brick-and-mortar franchises, e-commerce corporations, and more, retailers of all sizes devote a tremendous amount of time, money, and energy to this all-important time of year. They hope to sell as much merchandise as possible to deal-hunting buyers. Despite persistent inflation, they have high expectations that their efforts in this regard will pay off. Indeed, customers are poised to increase their spending by approximately 7% compared to last year, according to a recent poll conducted by Innovating Commerce Serving Communities.

But they are also looking ahead to 2023 to prepare for consumer goods and retail industry trends that may have an influence on their decision-making and how catering to those trends can improve the customer experience. If you are an organization in the consumer goods and retail space, here are a few trends to be on the lookout for in the coming months:

Growth in sustainable supply chain activity

Whether they are buying online via an omnichannel experience or in a physical store, customers are not just interested in the merchandise for sale; they are also interested in how it was made and the manner in which it arrived in stores. As a recent survey led by Gallup found, around 75% of adults in the U.S. say they care about what steps companies they patronize are taking to build a cleaner planet. Of this total, 43% indicated this was an issue they care about “a great deal.”

In addition to more consumer goods organizations rolling out environmental, social, and governance initiatives (ESG), many household names are working sustainability into their supply chain processes. In fact, Levi Strauss & Co., Great Lakes Cheese, Valvoline, Amy’s Kitchen, and J.M. Smucker Co. recently jointly purchased renewable energy from a wind farm based in Marion County, Kansas, Walmart reported. All of these organizations partner with the big box retailer and sell their merchandise at their physical and online stores as well. The 12-year agreement will enable the respective organizations to power their processes with renewable energy, enough to produce an estimated 250,000-megawatt hours annually.

Similarly, Apple is ramping up its sustainability efforts. The multinational technology firm recently said in a press release that it is working with its suppliers to fully decarbonize its global supply chain within 10 years. “Climate action at Apple doesn’t stop at our doors, and in this work, we’re determined to be a ripple in the pond that creates a bigger change,” said Apple CEO Tim Cook.

Several other well-known brands are also showing their support for sustainable business practices. This includes the Consumer Goods Forum, which is represented by PepsiCo, Unilever, Mars, and McCain Foods among others. In a letter of intent drafted in October, the group discussed the importance of utilizing recycled plastics to help the retail industry reduce its carbon footprint. By expressing their interest, these organizations hope to be able to obtain 800,000 metric tons of chemically recycled plastics by 2030.

Consumer goods and retail organizations that actively demonstrate how they are supporting sustainability stand to benefit by positively influencing consumer behavior. People may be more inclined to shop with a green-friendly company than one that does not care how their supply chain practices affect the environment.

Continued economic uncertainty

Elevated government spending, supply chain bottlenecks, and labor shortages have all contributed to higher costs for just about everything. Americans continue to spend, though, at a robust clip. In September, the most recent month in which retail sales data is available, total retail sales rose 8.2% compared to the same period in 2021, according to the United States Census Bureau.

But with the recession expected to deepen in 2023, economists believe it is more likely than not that Americans will rein in at least some of their discretionary spending. More than half (54%) of Blue Chip economists say they expect the recession to worsen next year, the National Retail Federation reported. Furthering their presumption is dwindling consumer confidence. In The Conference Board’s October assessment of consumer confidence, the Index fell to 102.5 from 107.8 in September. That is down sharply from 2019 when the Consumer Confidence Index was as high as 140.

Given these prevailing market forces, consumer goods and retail organizations will need to right-size their inventory planning and management to remain competitive and profitable without adversely affecting the shopping experience and compromising customer loyalty. Leveraging best-in-class enterprise resource planning solutions can help with demand planning so retailers can determine just how much of a given product they need to have available based on consumer behavior over time. Moreover, shaping the demand with the right promotional strategy to align best with your operational efficiencies and supply chain constraints can further help you reap better margins and increase the customer base.

 

 

Expanded use of the physical store for ‘retailtainment’

While in-store shopping was once the exclusive channel for customers, e-commerce has dramatically changed the landscape. In fact, were it not for online checkouts, the world’s economy may have taken an even harder hit than it did during the pandemic. Point-and-click purchasing made most products easily available. And while many people continue to visit their local stores for their specific product-based needs, it is increasingly becoming a destination to explore what items they may be interested in purchasing rather than to buy a specific item.

Jacquelyn Baker, Chief Commerce and Customer Experience Officer for the marketing agency VMLY&R told The Drum that the function of the physical store has changed in the eyes of many shoppers, and the rise of e-commerce appears to have been the catalyst. “Consumers can have whatever they want, when they want, on-demand [and] digitally,” Baker explained. “For purchases beyond everyday essentials, meanwhile, the store serves more as a showroom for inspiration and ‘retailtainment’.” Baker further noted that the physical store gives consumers the ability to fully immerse themselves in brands in an up close and personal way.

Since this is something that even the most personalized online store cannot replicate, businesses within the consumer goods and retail industry should get more creative with how they arrange and embellish their merchandise to maximize the customer experience. Augmented reality — a technology that combines the digital world with the real one through a combination of visual and auditory overlays — may be worth exploring.

One company that is increasing its experiential efforts for in-store shoppers is the outdoor sports and apparel franchise The North Face. Over the next five years, The North Face plans on opening at least 70 brick-and-mortar stores in North America and potentially as many as 300 retail and partner locations worldwide, according to Retail Dive. Jason Thomas, Senior Director of Retail for The North Face, said the goal of the expansion is to provide a seamless and consistent experience for shoppers regardless of what channel they are shopping through. “This growth strategy will allow us to share our values and connect with customers on a deeper level in multiple different locations and touch points across the globe,” said a statement obtained by Retail Dive.

This is not a new endeavor for the retailer but a doubling down on its omnichannel strategy. Prior to the pandemic, The North Face revealed details on its experiential store concept planned for New York City. When the project is finished, the storefront refresh will feature reclaimed wood, granite, and low VOC paints so the 8,000-square-foot location “feels more like the brand and less like a store.”

Sourcing more locally

Thanks to reduced volume at several of the nation’s shipping ports, the consumer goods and retail supply chain is in a better place today than it was during the height of the pandemic. But it remains unpredictable, for some more than others. Furniture and appliance stores, for example, continue to have lengthy backorders for items like sofas, bedding, washing machines, and dishwashers, with some items not expected to arrive until 2023.

These lengthy lead times have played a role in diminishing import activity. Since August, import volume has fallen consistently, from 2.27 million twenty-foot equivalent units (TEUs) in late summer to a projected 2.01 million TEUs come December, according to Hackett Associates Global Port Tracker. That downward trend is expected to continue into the new year, Hackett Associates further noted.

In light of high inflation as well as gas price increases, imports are cutting into retailers’ already razor-thin margins. To bring more consistency and affordability to their supply chain, consumer goods and retail organizations should consider sourcing their end-user products closer to home. Paired with supply chain management software, sourcing more locally can help shorten lead times, reduce transportation expenses, and bring more visibility to where their deliverables are at any given time.

As a forward-thinking consumer goods and retail company, you know that getting out ahead of trends can give you a leg up on the competition. Considering the future can help you put the proper pieces in place to improve the customer experience and enhance supply chain resiliency. Inspirage can help you with your efforts by bringing the right teams, technologies, and industry-leading practices together to drive your company to the next level of success. Whether it is for product lifecycle management, digital transformation, or supply chain management, Inspirage can help you build a better business. Learn more about our success, like our supply chain initiative with this consumer goods giant. Contact us today to learn more about our expertise and our solutions.