After two years of retail turbulence, brands and retailers will wake up this year to face even more challenges — as well as opportunities — as shifts in technology, services, consumer behavior and privacy expectations crystallize.
Any period of change can be bracing, but after the initial shock and turmoil of the pandemic, Year Three brings new hope that the dust will settle, perhaps even in beneficial ways. Companies that can keep up with consumer trends, focus on experience and stay nimble will be best suited to tackle the new year.
Several major themes from 2021 will spill over into 2022, including live shopping, social commerce, augmented reality try-ons and digital fashion releases, as well as sustainability commitments. These tools and channels will remain strategically important.
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But experts have their eyes on even bigger-picture trends capable of shaping, or reshaping, the landscape of retail and technology in the year ahead.
COVID-19’s E-commerce Boom Will Give Way to Physical Retail’s Comeback
Even before COVID-19, online retail was poised to eventually overtake brick-and-mortar. The pandemic sped up the timeline, but the social distancing and mass migration to digital purchasing came with an unintended side effect: People simply missed shopping in real-world stores.
According to The NPD Group, the physical retail renaissance is already underway, setting the stage for even more of a comeback. In September, sales in brick-and-mortar stores rose to capture 64 percent of all retail, the firm said, while at the same time, online sales growth was slowing.
Since then, the holiday season gave e-commerce the edge, Mastercard data showed, but a multitude of likely temporary variables — including supply shortages, delivery disruptions, staffing issues, early shopping and the spread of the Omicron variant — complicated the picture. Still, it seems clear that even with e-tail sales increasing 11 percent year-over-year and beating brick-and-mortar’s 8.1 percent, per Mastercard, the dizzying highs of pandemic-driven online shopping are coming down to earth.
“When you look at the growth rate of where we are, in relation to how things are shaping up, it’s all about understanding that digital, while still growing, is not growing at an increasing pace,” Marshal Cohen, chief industry analyst at The NPD Group, told WWD.
“What’s happening now is that stores through the COVID-19 period have become more important again. And what’s also happening is they’re growing at a faster rate right now,” he said. “So what’s going to happen as we go into 2022 and 2023, stores become more relevant. Consumers missed it. They want it.”
Chalk it up to e-commerce fatigue, coupled with some inconvenient scenarios.
First, the advantages of online retail are going through a reset, according to Cohen, as tax regulations, speed and convenience make consumers think twice. People also want “touch and feel” opportunities that online retail can’t offer, so “digital has lost a little bit of its luster,” he said.
Shopping brick-and-mortar shops isn’t just a transactional affair either. It’s also a bonding activity with friends and family and entertainment, Cohen added. “The retailers that recognize that and tap into that experience, the return of the experience of shopping, they’re the ones that are going to benefit the most.”
The signs point to a resurgence of physical retail, and its charms have spurred digital-native brands like Warby Parker and Allbirds to expand their doors. Even Facebook parent company Meta is rumored to be setting up shop as a way to expand and reach more people. Amazon’s leap from screens to square footage spawned several physical operations over the years, including 4-star, Amazon Go and Whole Foods, its 2017 grocery acquisition. Recent media reports now have the e-commerce behemoth planning department stores studded with tech flourishes.
Of course, the pandemic is not over yet, and Omicron’s full impact remains to be seen. A highly contagious, but seemingly milder version of COVID-19, it is expected to set off an increase in infections, though it may not spur the sort of lockdowns and safety rules seen earlier in the pandemic. If its wide-scale effect is short-lived, as some health experts suggest, that may salvage most of the year.
Immersive Retail Will Bloom, While Old Tech Finds New Life
In 2021 it would be hard to find a more consequential tech for fashion than authenticated virtual goods via NFTs and metaverse virtual worlds. The themes will continue in 2022, with new initiatives and partnerships.
That will beg a reality check. The metaverse may replace the internet one day with immersive 3D environments, as technology companies believe, but even they acknowledge that it won’t happen next year or in the next several. It’s more of a long game.
Savvy fashion houses and other companies will use the time wisely.
Iván Markman, Yahoo’s chief business officer, predicted that “brands will push the boundaries of immersive experiences, going beyond ‘try-ons’ and into fully interactive experiences that make shopping more fun and convenient.” In that environment, personalization will be even more important. So will data-driven strategies to power it, he added. With anti-tracking measures from Google and Apple in play, zero-party data, or data offered directly from customers, will be critical. Brands agree: Forrester Research expects the number of brands collecting zero-party data to double next year.
It all makes for a hectic 2022, with retail expanding in multiple directions at once. Physical stores will regain steam, demand will rise for new immersive and personalized experiences and e-commerce, social media and other applications will continue to require sustained focus.
Perhaps it’s no surprise, then, that older tools capable of traversing platforms or bridging physical and digital environments would make a return.
It’s an “old is new again” twist, according to Markman, which will “see a resurgence of tech like QR codes that support our new lifestyles and make it easier to get brand experiences into consumers’ hands.”
If QR code promotions help move merchandise, even better. Perhaps they can alleviate a particularly frustrating inventory overage problem, NPD’s Cohen pointed out. Some retailers saw months of supply shortages end with a flood of product — as much as three months’ worth — arriving all at once.
Some Retailers Can Finally Nail Omnichannel Business, Thanks to Cloud Services
The physical store’s comeback won’t be a throwback to old-fashioned retail, but another valuable “source of signals,” according to Jose Gomes, managing director of retail at Google Cloud.
Data gathering, storage and analysis across one or several locations have become easier and more affordable now, he said, with intelligent systems factoring everything from local information, inventory, weather and sustainability impact to delivery preferences and income levels. His preferred platform is obviously Google Cloud, but it’s one of several offerings, including Amazon Web Services and Microsoft Azure.
The newer convergence of physical and digital retail marks an opportunity to connect the data dots and deliver the personalization Markman emphasized, bringing it within reach.
Think of it as a “holistic platform,” Gomes told WWD. “Online and physical worlds merge in things like curbside pickup, or stores that also function as delivery depots for e-commerce, even augmented reality within shopping experiences.
“For example, Google data shows that searches for ‘in stock’ have grown globally by over 800 percent year-over-year, and searches for ‘along my route’ have grown globally by over 1,000 percent year-over-year.”
If the past is prologue, retailers have a lot to look forward to.
Gomes pointed to a Google Cloud tool called Retail Search, which evaluates purchase intent across retailers’ websites and mobile apps and maps it to product inventory. In recent tests, Macy’s used the tool and saw a 2 percent increase in conversion and a 1.3 percent boost in revenue per visit.
But there’s added pressure, too, he warned.
“The blended online and physical worlds has also reinforced how important 24-7 reliability has become. The zero-downtime model that Shopify’s 1.7 million merchants enjoyed before, during and after the holiday shopping weekend is the model for how retail has to run in 2022 and beyond,” Gomes said.
Wearable Devices Will Get More Sensorial
According to research firm IDC, the wearables market saw global shipments grow 9.9 percent during the third quarter of 2021, hitting 138.4 million units. But so-called “hearables” led the growth.
Personal audio devices with advanced features, these ear-worn gizmos jumped 26.5 percent over last year and took a 64.7 percent share of total device shipments. Wrist wearables, like smartwatches and fitness bands, nabbed just 34.7 percent of the market.
IDC has long predicted the growth of hearables, and it believes they’ll continue to ring out in 2022.
Ramon Llamas, research director with the firm’s devices and displays team, explained that the appeal of spatial, or 3D, audio hinges on the directional sound, which feels more realistic. That makes them fitting complements for immersive metaverse environments, which is already teeing up quite a line of futuristic wearables.
Meta is working on a wristband that will read electrical motor nerve signals and interpret them as hand or arm movements, as well as high-tech eyeglasses akin to its EssilorLuxottica-designed Ray-Ban Stories, but featuring AR.
Llamas singled out another company called Nreal, a Chinese start-up that made a splash at CES in 2019 and recently launched AR glasses on Verizon for $600 — which is a bargain compared to Microsoft’s enterprise-focused $3,500 HoloLens.
“Within your line of sight, you will be served up data, whether notifications or messages or navigation prompts, and that’s really powerful,” he said. “I don’t know if Joe and Jane Consumer or Mainstreet USA is ready for that yet. But it pays a premium on how things look and [that the tech] should be invisible. Nreal is trying to hit on that cylinder as much as they can.”
Apple is expected to release its own AR glasses as well, with some reports predicting a 2022 launch. If that pans out it will beat Meta to market and present a formidable hardware rival. There’s no word on whether Hermès would design a Double Tour eyeglass tether that matches its exclusive Apple Watch bands but one can hope.
Beauty to Seek Out More Gadgets and Personalization, but NFTs Will Demand a Deep Think
The beauty business has a different gadget proposition in mind, and it’s rooted more in physical reality than virtual.
“I think we will see more magic applicators that will allow people to achieve results that their hand alone wouldn’t enable them,” said Guive Balooch, global vice president of L’Oréal’s Technology Incubator.
The beauty giant is no stranger to hardware development. Balooch’s team alone ushered in machines with a myriad of functions, from formulating custom actives for skin issues to blending lip color on demand.
Balooch explained that the blend of physical and digital innovation can achieve new levels of makeup and precision skin care, and this cross of beauty and wellness will be big for next year.
“We’ll see more smart applicators, more precision, more data-driven skin care and skin health,” he said. “And more biology — how biomarkers and predictive skin care can build the future when it comes to understanding how to have the right product for me.”
His approach to technology is enthusiastic, but it’s also grounded in practicality. Take NFTs, for instance.
He’s more cautious about those virtual products, which is a stark contrast to the fashion industry’s frenzy around them. Not that L’Oréal is unfamiliar with virtual applications — the company owns beauty AR firm Modiface, and it even dipped a toe in NFTs in December for digital artworks.
But that hasn’t translated into a race to spin up virtual piles of digital lipstick tubes.
“It may not be the year we see a lot of great consumer beauty applications in that space, but it may be a year where people are starting to learn what our value will be in that,” Balooch continued. “I can tell you we’re having a lot of conversations internally about that. But it always starts with, ‘What are we trying to achieve for people and how can we make their lives better?’ So I think that takes a lot longer than the tech wave or the tech itself.”
The sentiment seems to be true for the beauty sector overall when it comes to emerging virtual tech.
Clinique, for example, isn’t speeding into the metaverse proposition either.
“The way Gucci and others have created experiences, whether it’s sitting on social platforms, in Roblox or wherever else it is — yes, beauty is about two seconds behind,” said Carolyn Dawkins, senior vice president of Clinique Global online, consumer engagement and product marketing.
Like other beauty businesses, the Estée Lauder company offers makeup try-ons using AR, and it released NFTs in October as well. But it’s mulling over its metaverse strategy to make sure it’s true to the brand.
“We’re thinking about that space a lot, about who is that new customer that we want to bring into the brand,” said Dawkins, “and therefore, what is the experience that we want to give them that’s highly relevant to that platform, to that consumer?”
The idea fits the broader theme of personalization. It may also set up a new type of expectation, with some brands defined less by what they will leap into in 2022 than, perhaps, what they won’t.