How to Fix 2022’s Problems in the Retail Industry

How to Fix 2022’s Problems in the Retail Industry

The retail industry faces various problems, from overstock and theft to labor shortages and high return rates. Any CEO could lose sleep over a shopping public anxious about inflation and a media pushing the narrative of a cataclysmic, eminent Recession leading to more promotions and deals.

But many of those can be solved with a simple focus pivot from what’s wrong to what physical retailers can do. Let’s unpack the challenges before offering the solution.

Historic Overstock

Stores have more inventory than they can move quickly enough or sell at a profit before the next container ship arrives with more new merchandise. Nike saw its inventory surge 44%, leading to a $9 Billion glut of products. There are several causes of overstock, including poor forecasting, inadequate product selection, incorrect ordering quantities, long delivery times, and more.

To reduce overstock levels, retailers are working hard using artificial intelligence to improve their forecasting processes, reduce order sizes, optimize product selection based on customer needs, and streamline delivery processes. But Nike touted their use of AI years ago, and look where they are now.

Higher Theft Rates

High theft rates are another problem facing retailers today due to a lack of or ineffective security measures. Common causes of theft in the retail industry include shoplifting, employee theft, supplier theft, fraud, and organized crime. Target said shoplifting dented their Q2 sales by $400 million.

Budget-oriented clothing and department stores are experiencing higher theft after installing self-checkout to minimize labor. Many retailers already implement security systems such as CCTV cameras and alarm systems to reduce the potential for theft and even resort to locking more merchandise up.


According to McKinsey, retailers are grappling with high inventory levels and declining profitability going into the holiday season. Many retailers, anticipating aggressive markdowns to address inventory pileups, have been forced to update earnings statements, causing stock prices to take a hit.

Unfortunately, the trend is far from over. Inflation and supply chain problems have created a perfect storm for retailers because:

  • The buying frenzy is over. Shoppers are more insecure with their finances, home, kids, and jobs.
  • With the higher borrowing costs, many businesses that could formerly operate at a loss, including many DTC retailers, now don’t have that luxury.
  • Things that were masked before, such as bad operational models, sloppy buying practices, and weak promotional marketing, have all been revealed. Owners are looking at the bottom line and saying, “I’m not making money at this.”
  • Employees who couldn’t sell the merchandise at higher rates will promote the discounts rather than what is new. Hence, the cycle continues: merchandise sits, discounted, and employees only sell what is cheaper.

Online Returns

Returns are a necessary evil for any retailer, but they can be especially costly for brick-and-mortar retailers with online stores. Unlike pure eCommerce businesses, which can often simply reverse the shipping process, brick-and-mortar stores must find a way to get the merchandise back to the vendor, sell to a third party at a steep loss, or try to claw back some of the margins with something on their own like Macy’s Last Act.

This process, known as reverse logistics, can be complicated and expensive. In fact, according to a retail trade group, the average retailer incurs $166 million in merchandise returns for every $1 billion in sales. Even a small return increase can significantly impact a brick-and-mortar store’s bottom line by eating margin.

In-store return rates are typically much lower – around 9% and much lower when fitting rooms are utilized properly  while online return rates of up to 30% are not unusual,

Fewer Employees Sticking Around

The retail industry has undergone a significant transformation in the wake of the pandemic. Turnover rates have been high as employees leave for greener pastures or promises of better schedules.

Employees with proper training and development opportunities are likelier to stick with the company. In addition to learning the necessary skills for their role, employees need to feel valued by their employer. They are more secure when they know what success looks like and are given tools to achieve that.

Those associates and managers are more likely to be engaged in their work and less likely to look for new opportunities. Companies reduce turnover and create a more stable workforce by investing in employee training.

And as margin and sales go up, your percentage of labor goes down. As they say about the economy, a rising tide lifts all boats.

Check out more Retail Trends here

The Solution to 2022’s Problems in Retail

A host of new AI writing tools will make product recommendations, reviews, and eCommerce websites more alike with little personality.

That’s why it will be crucial to train employees on how to engage strangers to bring the best of their individuality to the job. And that job quite simply is…

To make shoppers feel they matter.

That’s because people who feel they matter buy.

And those that don’t walk.

It’s that simple.

One of the most significant contributors to all these problems is the lack of customer service training for retail sales crews.

But these skills are not the same as what they might do in their personal life…

You can get away with not turning on your camera on a Zoom call, but you can’t get away with that on the sales floor.

Retail salespeople are the face of the retail brand and play a key role in selling merchandise and driving customer loyalty. They are either faceless, bland, boring or engaged, interested, and trained.

Many retail salespeople lack the skills and knowledge necessary to provide exceptional customer service. Online retail sales training can help to fill this gap by providing employees with the skills and knowledge they need to sell effectively.

SalesRX is a leading online retail sales training provider, and its programs have been shown to increase sales by double digits.

In addition, SalesRX online retail sales training can help to reduce turnover, improve margins, and decrease returns. As online sales continue to grow in importance, retailers must invest in online retail sales training to ensure that their employees are prepared to sell effectively.

Let’s recap the current retail problems:

Supply chain – with spot shortages still occurring, you need to get shoppers to pivot from an out-of-stock to the one you have.

Theft – more bodies on the floor looking into strangers’ eyes are your first defense in protecting your merchandise.

Promotions – merchandise that moves doesn’t need to be discounted as much.

Returns – no sale is final until it is on the customer, in the home, and used. Utilizing fitting rooms reduces returns and helps convert shoppers’ interest to sales.

Margin erosion -when more merchandise can be sold for what it is worth, rather than simply get it out of the way, margins rise, and you can pay people more who understand how to get the sale.

Inflation – if employees couldn’t sell the merchandise when demand was high, they’ll have a hard time doing it when prices continue to rise. They’ll just sell from their own wallets, not what is best.

By understanding the major problems facing the retail industry today and providing a reason for customers who purchase items online to shop in-store—to get a feeling, they matter – retailers will be better prepared for any issues that may arise when running their business operations.

It looks like 2023 is going to be a tough and unpredictable year. So, if there were ever a time to invest in upgrading your teams’ abilities to sell your merchandise, it’s now.

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