The past two years have accelerated ecommerce growth faster than the retail industry expected. The COVID-19 pandemic shone a light at the importance of ecommerce for retailers and the convenience it offers for consumers.
Now as the calendar flips to 2022, the Digital Commerce 360 editors are looking ahead to see what the new year will bring. While the unprecedented levels of online sales growth of the past few years are unlikely to be repeated, the next few months could surprise us all. Here is what the Digital Commerce 360 editors predict for the year ahead.
Ecommerce growth to slow
2021 U.S. online sales will increase 16.2% year over year, according to early estimates from Digital Commerce 360 that were recently published in its 2021 Ecommerce Market Report. This is healthy growth, but a slowdown from 2020’s 31.8% year-over-year growth.
Jessica Young, Digital Commerce 360’s director of research data, says that ecommerce growth will continue to normalize in 2022.
“The ecommerce growth we saw in 2020 will not be sustainable,” Young says. “So far this year, everything decelerated. That will continue in 2022, when I foresee online sales increasing around 14% year over year.”
This slowdown will force merchants to “get creative once again,” says senior consumer insights analyst Lauren Freedman.
“The store will look to make a comeback once again and perhaps as real estate will be a great value more stores will begin to return and change the dynamic of shopping once again,” Freedman says.
Retailers further dabble in new business models
Other changes online retailers will make in 2022 to stand out from the competition are investing in new business models, such as launching their own marketplace platform, selling second-hand goods or testing buy-back/trade-in programs, Young says.
Retailers launching their own marketplaces is already a trend Digital Commerce 360 is keeping watch on, with several top online retailers dabbling in the space in 2021. The model is attractive for retailers wanting to offer a wider variety of inventory, without the responsibility associated with purchasing, warehousing and fulfilling those items, Young says.
The luxury market is already ahead of the curve in terms of online consignment and buy-back programs and this trend will pick up momentum in 2022, Young says.
“Especially given many younger consumers’ focus on sustainable products and distaste for fast fashion, which has been associated with negative environmental impact and ethically questionable labor practices, retailers will pivot to test out new business models that aim to solve some of those issues,” she says.
Supply chain issues will fade
Perhaps this is wishful thinking, but a few editors are predicting that supply chain issues will gradually get better in the second half of 2022. Of course, this all depends on the world getting the coronavirus pandemic under control. “Factories and ports will gradually get back to normal post-holiday, unless there is a big resurgence of the coronavirus. Then all bets are off,” says editor at large Don Davis.
Inflation will be the new retail disruption topic
The U.S. is now experiencing the highest inflation in almost 40 years. The Consumer Price Index in November was 6.8% higher than it had been a year earlier.
This is likely reflecting increased supply chain costs and constraints, says senior editor James Melton, who has been following the supply chain challenges all year.
“Inflation is more of a symptom than a disease,” Melton says.
Heading into 2022, inflation will impact the retail industry in a few ways, says Paul Conley, director, editorial research.
“Inflation in the price of goods leads to inflationary pressure on wages,” Conley says. “That could prove disastrous for retailers who are already paying premium prices to find employees.”
But inflation provides breathing space for raising prices in a way they haven’t been able to in years, Melton says.
“Unless the economy goes into recession, those higher prices might remain baked in, just as supply-chain costs—like the prices for sending shipping containers cross the Pacific—start to normalize,” Melton says.
Inflation is also good news for discount stores, Conley says, which is a growing category online, Young adds. While discounts merchants like T.J. Maxx have not been quick to invest in ecommerce, the pandemic has changed all of that. In fact, discount home retailer HomeGoods (owned by TJX Cos. Inc., No. 63 in the 2021 Digital Commerce 360 Top 1000) launched an ecommerce site late in 2021.
“Between inflation fallout this year and with the success some of these guys had testing out omnichannel services during the pandemic, this group has been making strides and will continue to do so in 2022,” Young says.
Weddings, delivery and the feds
Other trends Digital Commerce 360 editors are keeping watch on in 2022 are a wedding boom, more antitrust woes for Amazon.com Inc. (No. 1 in the Top 1000) and mergers in the last-mile delivery space.
“After canceled and postponed weddings in 2020 and bleeding into 2021, 2022 will be a boom in wedding-related shopping including formal apparels” says April Berthene, director of editorial, retail.
Other happy unions could ensue in what Conley calls the “ultra-fast” delivery space. After rumors that DoorDash would buy on-demand grocery delivery service Gorillas never came to fruition, DoorDash announced it would launch its own on-demand grocery delivery service.
“Look for millions of dollars to trade hands in the next few months as investors scramble to buy existing providers or launch new ones,” Conley says. “The most likely deal is that GrubHub will buy Gorillas. But Jokr, Fridge No More, Buyk and a slew of other providers are all likely takeover targets.”
And finally, 2022 may not be the happiest year for the U.S.’s largest online retailer, Amazon, predicts Davis.
“The Biden administration has put together a dream team of anti-Amazon trustbusters,” Davis says. “In 2022, they’ll attempt to curtail Amazon’s power with legal challenges that will still be being fought out long after Joe Biden leaves the White House.”