Retailers Are Optimistic About 2022, And Ready To Jump Into The Metaverse

A global pandemic closed stores, kept people home and caused waves of disruptions for two years and retail sales still grew by record amounts. So is it any wonder that the biggest U.S. retailers don’t seem too worried about inflation, labor shortages, or other challenges 2022 will throw at them?

“We’ve got this” was the prevailing attitude at this year’s National Retail Federation Big Show, a combination retail conference and trade show that the NRF hosts every January at the Javits Convention Center in New York.

Last year, the in-person event was cancelled due to Covid-19, and replaced by a virtual conference. Attendance at this year’s show was approximately half that of the last pre-pandemic show, with numerous last minute cancellations due to the widespread omicron variant.

The pandemic has made retailers more willing to try new ways of doing things, and embrace change. When the pandemic hit, the retailers with the best tech, and those able to pivot the quickest with innovations such as livestreaming, video store appointments, or app-enabled curbside pickup, were the biggest winners.

That message wasn’t lost on attendees at this year’s show. Retailers crowded into multiple sessions about monetizing the metaverse, and took meetings with vendors pitching drone delivery services, driverless delivery vans, and other forms of futuristic tech.

Ralph Lauren is one of the legacy brands embracing the metaverse as retail’s next frontier. “We are in the dreams business,” Ralph Lauren CEO Patrice Louvet told show attendees during a discussion about embracing heritage and reimagination. “There’s a great consistency between our philosophy and what the metaverse brings,” Louvet said.

Luxury brands, in particular, are looking at the metaverse’s virtual stores as a way to test collections and build brand awareness, but Walmart appears to be preparing to make the leap as well, with CNBC reporting that it has applied for trademarks related to cryptocurrency, NFTs and other metaverse-related merchandising efforts.

The Innovation Lab, a section of the trade show floor featuring 55 companies exhibiting breakthrough technologies, was the most popular attraction at this year’s show.

The show opened two days after the NRF reported that holiday sales in November and December rose 14.1% over 2020, to a record $886.7 billion.

“Generally, most retailers and most brands are coming out of the holidays pretty pleased with what they saw,” said Brian Nagel, senior research analyst and managing director at Oppenheimer & Company during a discussion with NRF Chief Economist Jack Kleinhenz and Wells Fargo economist Shannon Seery about the economic outlook for 2022.

During the holiday season, the consumer “came out to shop,” Target CEO Brian Cornell said in a keynote address on the first day of the show. “They were out physically shopping in our stores, they came to shopping malls, they wanted to be engaged and enjoying what retail had to offer. And it just gives me incredible optimism for the future.”

Asked about rising inflation in 2022, Cornell said it is likely that consumers will respond the way they have responded to inflationary periods in the past – by using less gas and consolidating trips, by eating at home more, and by choosing private label brands to save money. Those shifts all play into Target’s strengths as a one-stop destination, and in grocery and private label.

The nation’s largest retailers – Amazon, Walmart, Target – found themselves particularly well-suited to thrive during the pandemic, and their scale helped them weather this year’s supply chain and labor shortages.

Economists and analysts at the show said they expect spending to remain strong in 2022, although it will not grow at the same pace as the previous two years.

While acknowledging that headwinds exist in the form of supply chain and labor challenges and inflation, the NRF’s Kleinhenz said there are “significant strengths too in terms of the overall economy and its momentum.”

“We’re seeing job growth, wage growth, we still have a stockpile of savings that haven’t been used up. Consumers are not overly leveraged at all,” Kleinhenz said.

The two leading challenges retailers face in 2022 – inflation and labor shortage – could act to spur more innovation.

Consumers are starting to indicate that they will push back against rising prices, said Matt Kramer, National Sector Leader, Consumer and Retail, at KPMG, which conducts periodic surveys to measure consumer attitudes.

“I think consumers have probably started to hit that wall around willingness to accept pricing,” and will react by looking for deals, switching to lower priced brands, or choosing private label brands, he said.

Retailers, as a result, will be looking for ways to cut costs to hold the line on prices, and may turn to automation as a way to do that, he said.

“Retailers are going to accelerate around costs that are embedded in their business,” Kramer said. Innovations like self-checkout and mobile checkout have the dual effect of cutting costs and easing the impact of the labor shortage.

“They’ll look for automation to take costs out of their system. Some of that innovation will offset the inflationary environment they’re in,” Kramer said.

Even if the consumer is ready and willing to spend in 2022, retailers won’t have a good year if they can’t hire enough staff to serve those customers. “There’s clearly sales that are being left on the table just because they can’t fully open, they have reduced hours,” Kramer said.

He expects the labor shortage to be a persistent problem through 2022. “It’s really going to be a challenge that has to be worked through over time.”