How will the shape of the retail sector in the U.K. and Europe change during 2022? Here are eight trends likely to loom large for retailers and their suppliers.
1. COVID-19 uncertainty will persist.
Before the emergence of the Omicron variant, consumers in the U.K. and across Europe were looking forward to 2022, with robust levels of consumer confidence boding well for retail sales and consumer goods producers. However, the surge in cases caused by Omicron – and the reintroduction of COVID-19 restrictions in many countries – has dented people’s optimism. With so much uncertainty, retailers are struggling to anticipate likely demand patterns in 2022 – and that lack of visibility now looks set to persist. That may impact their appetite to take on new products and curb demands for stock, at least in the early part of the year.
2. Online to remain in the ascendancy.
With non-essential retailers in the U.K. shut during COVID-19 lockdowns – and people eager to avoid stores such as supermarkets that remained open – the pandemic has accelerated the trend toward e-commerce. But now retailers have reopened their doors, brick-and-mortar shopping does not seem to be enjoying a resurgence. In research conducted by Attest, 50% say they “mostly” or “always” shop online for non-food products, versus 29% who shop in-store. Online grocery sales also continue to surge. From product providers’ point of view, product packaging designs that work well online as well as on the shelf will be ever more crucial.
3. Health and wellbeing products to find even more favour.
One impact of the COVID-19 pandemic has been to accelerate the trend towards consumers seeking out healthier foods and focusing on wellbeing products. Heightened awareness of health issues has prompted people to give more thought to what they consume. Plant-based foods, in particular, have been a major beneficiary of this trend, and that looks set to continue. In 2021, sales of vegan food in the U.K. rose by 29% compared to the previous year. Product providers able to sate consumers’ demand for health and wellbeing providers can look forward to a strong year in 2022.
4. Affordable luxuries will sell well, too.
Increasing demand for affordable luxuries is a different type of COVID-19 pandemic. Many grocers report that consumers are splashing out on their luxury ranges, cheering themselves up during the gloom of the pandemic with sweet treats and similar items that feel a little decadent without breaking the bank. The ongoing squeeze on consumers’ pockets – not least due to high inflation (see below) – should see that continue. Product producers in this corner of the market should find that it is a sweet spot.
5. Sustainability to top the agenda.
Supermarkets and other retailers in the U.K. and Europe are under huge pressure on sustainability issues. With European consumers demanding more sustainable products and growing awareness of the food sector’s contribution to climate change, this is a crucial supply chain focus for the retail industry. And as governments introduce new regulations and disclosure standards in the wake of November’s COP26 climate summit in Edinburgh, the stakes will climb even higher in the months and years ahead. Producers targeting European retailers need to be able to provide transparency on sustainability issues – and compelling sustainability stories will sell particularly well.
6. Inflation to cause real pressure.
In the U.K., inflation hit 5.1% in November, its highest rate in a decade, and prices are expected to rise even higher during the first half of 2022. Similar pressures are being felt across Europe, with inflation now at 4.9% in the single currency zone. Supermarkets and other retailers are acutely conscious of the potential impact on their customers of rising inflation and pricing will be a crucial element of their competitive strategy in the year ahead. That will mean some tough negotiations with suppliers, so producers need to be ready to fight their corner – and to think hard about what is required to maintain profitability.
7. Consumers to expand their horizons.
U.K. consumers in particular have become increasingly global in their tastes in recent years and this ongoing trend is not fading. Supermarket group Morrisons, for example, points to surging demand for paneer cheese. Restaurant groups are talking about increasing interest in wines from Eastern Europe. In practice, it isn’t easy for supermarkets to anticipate what will really capture shoppers’ imagination, but this demand for new products is good news for producers globally selling into the U.K..
8. Social media to extend its influence.
Finally, for producers hoping to get noticed, a strong presence on social media – and TikTok in particular – is going to be even more essential, particularly for those targeting younger consumers. In the U.K., the influential Waitrose Food & Drink report highlights how three-quarters of all 18- to 24-year-olds now look at TikTok and Instagram for food inspiration; one in 12 people across all age groups posted a picture of their food on social media, or sent a snap to a friend.
Although COVID still looms over the retail industry, consumer needs continue to persist and evolve. Although experts aren’t fortune tellers and the retail industry has proven to be pretty unpredictable these past years, retailers and suppliers will have to fight to keep up in 2022.