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Perspectives

Early 2022 retail and consumer products industry trends

Trends to watch for retail and consumer products companies

The rise of a new COVID-19 variant and wrap-up of the holiday shopping season will likely have near-term implications for retailers and consumer products companies. Navigating 2022 retail and consumer products trends will accelerate organizations’ need to proactively align offerings to market and consumer forces, strengthen talent and customer engagement, and invest in key infrastructure to build and maintain a leading position.

New year, new priorities call for bold decisions

The future of the retail and consumer products industries is being defined right now. As companies emerge from their near-term, pandemic-influenced priorities and assess the customer, product, labor, and supply chain implications of the recent holiday season, they will need to make bold operations and management decisions to address retail and consumer products trends in 2022.

Amid continued uncertainty—in customer buying preferences, workforce retention, and lingering, pandemic-induced manufacturing and retailing challenges—companies that take proactive action will position themselves well to capitalize on existing and emerging opportunities in the coming year.

COVID-19 pandemic-induced trends are here to stay

As COVID-19 changed the way that consumers live and work, retailers evolved their product mix, delivery models, and even brand positioning to accommodate trends in what, how, and why consumers make buying decisions.

Despite a projected early 2022 return to the physical office for more of the workforce, trends in clothing (the popularity of athleisure) and food (shifting toward health-conscious options)—which many could argue were exacerbated by a year of life “at home”—remain sticky. In the clothing and athleisure space, leading companies are experiencing staggering growth, with one industry leader in technical clothing on track to quadruple its international revenue footprint by 2023. A competing women’s activewear company has broadened its customer base, reworked its forward-looking strategy, and will reach $2 billion in net sales over the next two years, beyond any pre-pandemic projections. In the food space, 60% of consumers reported in mid-2021 that they are trying to eat healthier, up four basis points from 2020. Some companies have decided to spin off unhealthy businesses as they reimagine a product mix more attuned to customer preferences. These shifts in product assortment—among others—indicate an imperative for retail leadership to differentiate passing fads from pervasive forces driving customer behavior and 2022 retail and consumer products trends.

Amid strong competition and ever-increasing customer expectations, retailers and consumer products companies also need to evolve their delivery models—namely, in the direct-to-consumer (DTC) space—as the “at home” economy grows. As buying channels proliferate, companies have invested in innovative DTC strategies to meet customers where they shop. In one case, a 100-year-old sporting goods company that traditionally sold product through big box retailers opened its first independent, permanent stores and invested in pop-up retail experiences. Relatedly, DTC initial public offerings (IPOs) have already hit a 12-year high, totaling at least 19 in 2021, up from 9 and 7 in 2020 and 2019, respectively. Although disintermediation is one of many recent retail trends, the pandemic wildly popularized grocery delivery, adding an intermediary to access the consumer in more convenient ways. Although grocery delivery shopping behaviors have dropped below the peaks reached during the heart of the pandemic, overall volume is up and will likely remain that way into 2022, with more relevant product assortments and localized delivery strategies increasing speed-to-customer.

The “why” behind consumer behavior is rapidly changing and influencing retail and consumer products trends in 2022. As a new COVID variant emerges and consumer trust in corporations and institutions lags, companies that communicate clearly and consistently about their brand’s purpose—one that now, more than ever, promises a focus on societally conscious choices including sustainable products (which customers reported seeking 37% more than they did pre-pandemic)—can earn loyalty and sales dollars. Brands with a well-articulated purpose continue to see customers four times more likely to buy and trust the brand into the new year. With more than one in five shoppers planning to support purpose-driven businesses in the coming months, companies should adopt this as a core business mandate for 2022.

Focusing on both employee and customer experience is a 2022 priority

Many retailers and consumer products companies implemented hiring freezes and mass layoffs during 2021 in response to the ongoing COVID-19 pandemic. The employment landscape will look quite different in 2022 and will elevate the imperative for companies to win the war for talent in a competitive marketplace where unfilled job openings rose in fall 2021 to 10 million, exceeding the 9.5 million reported to be unemployed.

Willingness to pay for labor rose ahead of the holiday shopping season to accommodate in-store and online shoppers, as evidenced by certain retail trends. Retailers and consumer products companies invested in everything from compensation and benefits to reduced work weeks and unlimited PTO to combat the “Great Resignation.” In many ways, there is now a renewed focus on employee experience that puts it on par with customer experience. Retailers and consumer products companies that invest in hiring and retaining talent—such as the retailer that lifted its average starting wage to a significant $18/hour and added 125,000 US employees in December, and a big box company that agreed to cover the cost of tuition for bachelor’s degrees as an incentive for workers to stay—may hold a competitive advantage in the new year.

Corporate leaders that also focus on elevating the customer experience in 2022 likely will be better positioned to match their employee “demand” with the talent “supply.” Among investments quickly becoming table stakes are artificial intelligence (AI)—the technology’s retail market share is set to grow to $20 billion by 2026—and cloud computing, as more and more retailers feel pressure to leverage first-party transaction data to support demand generation and customer satisfaction.

Supply chain and next-gen advertising investments can convert pandemic struggles into strengths

As retailers and consumer products companies look ahead to early 2022 after rounding out a holiday season of record-setting demand—sales are expected to increase 8% to $1.3 trillion by January—they must continue to navigate rising shipping costs and persistent supply chain delays. Companies will need to reassess their portfolio of suppliers, weighing whether to bring certain legs of the supply chain in-house. As an example, one Fortune 50 wholesale retailer recently decided to charter its own cargo ships to reestablish overseas delivery with certainty and reliability, which is at an all-time low. Further, given increasing tensions between global and local supply chains and the spread of hybrid work models (partly in-person, partly virtual), retail and consumer products companies may need to localize delivery to keep pace with the customer expectations and growing demand evident in retail and consumer products trends in 2022.

The pandemic-fueled surge in e-commerce shopping has created a substantial digital advertising opportunity for both brands and retailers. Many of the largest grocers and retailers have bolstered their e-commerce platforms by offering first-party data to brands. Paired with their intimate knowledge of customer buying behaviors, retailers are empowering brands with highly targeted advertising at the online point-of-purchase. Brands have demonstrated a strong willingness to pay, resulting in two times growth for many of the largest retailers’ ad business. Paying for placement is becoming increasingly necessary to be successful on these sites, as organic search results are shown further and further down on search result pages.

Planning for continued uncertainty

While many hoped that the pandemic-induced period of uncertainty would be over by now, the rise of a new COVID-19 variant and trends in customer buying preferences, workforce hiring and retention, and supply chain operations will have implications for retailers and consumer products companies in early 2022. This will accelerate the need for proactive action to maintain competitive positioning and thrive amid continued marketplace uncertainty.

Special thanks to Grace Cleland, Natalie Weinberg, and Chris Paradis for their authorship, support, and research throughout the development of this article.

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