Summary. This article features insights from various ecommerce experts, which small business marketing consultants should take note of on the future of ecommerce in 2023. Topics discussed include the impact of economic conditions on CRM and pricing, the importance of omnichannel selling, the rise of social commerce, and the pros and cons of launching marketplaces.
The link to this article from econsultancy.com can be found at the bottom of this page.
The last year has been turbulent in ecommerce, following on from the surge in online shopping during 2020 and 2021. However, online sales are still growing steadily in the longer term (hitting 30% of total retail again in the UK in November 2022 according to ONS data), and the channel will be key for many retailers seeking to be as flexible as possible as inflation impacts on consumer spending.
We asked some old friends of Econsultancy, ecommerce consultants James Gurd and Stuart McMillan, what they are seeing at the moment and what they predict in 2023 across consumer behaviour, CRM, acquisition, CX and social commerce. We also sourced opinion from industry experts at Mirakl, Anaplan and growth marketing agency Space & Time, as well as our own senior analyst, Rose Keen.
For more on ecommerce, head over to our topic page.
How is the squeeze on people’s finances impacting CRM efforts, pricing and product?
James Gurd, owner of Digital Juggler, ecommerce and replatforming specialist, co-host of Replatform podcast, and Econsultancy report author:
“Consumer research [in the run up to Christmas] indicated shoppers were intending to buy fewer presents and spend less on average, so basket size is falling but it’s not consistent as some verticals are more insulated from the economic issues. For example, some of the luxury brands I work with have seen record sales during November and continuing into December. Christmas has always been discount heavy, so I’m not seeing the economic situation significantly impact CRM efforts but the increase in cost pressure has had a dampening effect on the size of discount some retailers are able to offer.”
Stuart McMillan, senior ecommerce and digital strategy consultant and long-time Econsultancy contributor:
“Specifically on CRM, given everything that is happening with data just now, like the increasing and impending loss of cookies, I don’t think it has ever been more vital for businesses to look after their owned data as well as possible. That might not mean a new CRM program, but at the very least they should be conducting an audit of what they have and have a data strategy. I know budgets are being closely watched, but there is the very real possibility that the data we all take for granted – that is essential to making core business decisions – may not be available in the very near future. The cookie-based data lake is drying up, are you ready?”
Spending to move down the brand ladder
Jessica Christenson, Regional Vice President, Mirakl:
“…while we see consumers cutting down when it comes to spending, we cannot expect spending to stop entirely. One of the major lessons we have learned from significant predicaments such as brought on by the Covid-19 pandemic is that we should expect shoppers to shift their spending down the brand ladder in 2023. As they look for the best value on offer for essential items or even pre-owned products instead of new, customers will look for opportunities to maintain shopping even while retaining a more conservative budget.”
Rose Keen, senior analyst, Econsultancy:
“After years of discussion of waning interest in Black Friday, US results showed record sales across 2022’s cyber week. What is more revealing is this was driven by net-new demand, not just price inflation, with many consumers viewing Black Friday as a way to compensate for inflation.
“As we move into the new year and the economic situation continues to look grim, increased competition for each consumer pound may put pressure on brands and retailers to enter into a cycle of potentially damaging discounting. Though competitive pricing will continue to be important, those likely to exit this crisis in the strongest position are those that focus on communicating value and meaningful difference, rather than simply engaging in a race to the bottom on price.”
Conversion has dropped online for some multichannel sellers. What does ‘ROPO’ behaviour (research online, purchase offline) mean for ecommerce brands?
Stuart McMillan, consultant:
“This question is particularly relevant given the postal strikes; it feels like the clock has been set back about six years to when there was greater uncertainty around the ability of couriers to handle peak trade volume! However, I don’t think strikes, or the post-pandemic high street resurgence actually changes the fundamentals. Multichannel retailers who have a joined-up approach to inventory, customer, logistics and customer service have a competitive advantage.
“That advantage is realised in two ways, they have a better proposition, improving their conversion rate (and reducing returns rate), but they also have more opportunities to be profitable as they make their inventory work as hard as possible. Stores are expensive fixed costs, but well-designed ecommerce processes can help increase their profitability.
Smart businesses encourage this cross-channel behaviour
“Ultimately, even though we do all watch the conversion rate per visit (to website or store), we do realise that what we actually care about is converting people into buyers, irrespective of which channel the end purchase is made in. Smart businesses encourage this cross-channel behaviour as there is a lot of data which shows that the more channels a customer interacts on, the more loyal they are.
“Hopefully there is pragmatism within retail, and the reality has sunk in that the pandemic was an ecommerce blip and that budgets shouldn’t be set expecting growth on top of the boom times! If you bought inventory on the basis of ecommerce growth on top of the pandemic boom, then unfortunately there is going to be a lot of discounting. Hopefully we don’t see retailers going to the wall in spring 2023 if gross margin has been an issue over the winter due to discounting.”
James Gurd, Digital Juggler:
“Omnichannel selling brings different challenges to pure online sales. The area most overlooked in my experience is the in-store process for handling omnichannel order management including click and collect and BOPIS (buy online pay in-store). [Periods of high footfall] place more resource demands on the in-store team to service walk-in customers and those visiting the store to collect online orders. Businesses with larger budgets invest in queuing systems that alert customers to busy and quiet periods to help regulate flow and demand.”
The future of ecommerce in 2023 is discussed by industry experts, including small business marketing consultants. In the first half of the article, the impact of economic conditions on CRM and pricing, the importance of omnichannel selling, and the rise of social commerce are examined. The second half of the article delves into topics such as marketplaces, the shift to online shopping, and acquisition challenges. Get insights from the experts on how to take your ecommerce strategy to the next level!
Balancing act required to accommodate hybrid shopping
Shankar Balakrishnan, Area Vice President, Anaplan:
“Over the past few years, we’ve witnessed a shift in the way consumers interact with, purchase, and receive goods and services, from a rise in grocery deliveries and hybrid shopping to new options like BOPIS. Now, an estimated 25% of retailers’ income is from online sales in the UK, and this number is sure to grow in 2023 as consumers push for more convenience and greater choice.
“For retailers with a robust ecommerce platform, this shift to online shopping is a boon. But for those who have yet to accommodate hybrid shopping practices, catching up to the competition will become mission-critical in 2023. Ultimately, I believe the year ahead is going to be a bit of a balancing act for retailers who have to create agile inventory and merchandising plans that support an increase in online shopping as well as the sustained need for physical stores.
“There’s also the challenge of the growing monopolisation of ecommerce by the largest players in the space, which has brought about the slow demise of direct-to-consumer brands, from Amazon now selling Peloton bikes to Glossier products appearing in Sephora stores. This new reality will have an effect on the way retailers interact with partners across the supply chain, from manufacturers to logistics providers.”
Acquisition has seen some big shifts recently – Facebook signal loss, rising ad prices, D2Cs selling IRL, retail media growth. What do you see in 2023?
Stuart McMillan, consultant:
“Acquisition is going to be the big issue of 2023. Budgets are going to be tight and costs are going up, to the point that it will not be practical to pay for some traffic that was barely marginal in 2022. Unfortunately I don’t see any big wins in this area; it can only be won by small, incremental, marginal gains. AI-driven attribution modelling will become even more important, but unfortunately even more opaque.
“Brands continue to up their game, with D2C growing at a rapid rate. They have the margin to win in the paid media arena, however I would say in general that brands have a bit of catching up to do when compared to the more sophisticated retailers. For example, I’d say that a lot of brands aren’t conducting a lot of A/B tests (or conducting CRO in general). I’d like to see brands challenging themselves to open up their user experience to experimentation.”
What does the balance between pragmatism/margin and slick customer experience look like in 2023? Is this a trade off?
James Gurd, Digital Juggler:
“More businesses are investing in loyalty now, realising that you need to find interesting ways to keep customers engaged with your brand and reasons to come back. Loyalty isn’t just viewed as discounts based on spend tiers, it’s becoming better aligned with customer insights and shopper needs, to reward people for positive behaviour and to encourage the behaviour brands want to see.
I see smarter uses of loyalty to help protect margin
“For example, one of Yotpo’s customers had a challenge with returns and decided to use its loyalty program to reward customers for reading sizing and fit guides, to help them better understand how to buy the right size and hopefully reduce returns as a result. So I see smarter uses of loyalty to help protect margin.”
Stuart McMillan, consultant:
“I think next year is going to have a lot of margin challenges, but I think it would be foolish to cut back on the customer experience because of that. I’ve already mentioned that CRM should be important, hopefully brands and retailers have an idea of what their cost of acquisition and cost of retention are. I’ve also mentioned traffic challenges ahead; everyone should be working harder than ever to retain their existing customers.
“But of course, you do need to know the profit impact of the customer experience, but just think about that profit over the customer lifetime. Short termism typically only sends businesses in one direction. Good customer experience doesn’t always have to be expensive, however it invariably is when the wrong KPIs are in place or teams are poorly led.”
Social commerce continues to develop, with more ad products and discovery – how important is this channel in 2023?
Jason Cotterill, Senior Performance Manager, Space & Time:
“With regards to social commerce, there is one main drawback which I fail to see being mentioned: first-party data ownership.
“What I fear is that no matter how strong a ROAS achieved from on-platform sales, long-term growth is going to be impacted. Being able to utilise first-party data in an omnichannel strategy to nurture relationships and increase brand loyalty is key to ecommerce growth.
“With social commerce, who owns that data? The social channels. Yes, advertisers may see amazing ROAS from these campaigns but their ability to retarget them and increase their customer lifetime value is going to be limited by how much they can continue to spend on that platform.
“Social commerce has the opportunity to be a great source of awareness and revenue for ecommerce brands and I am by no means saying stay away from it. However, I highly recommend thinking “how does this fit into the wider strategy?” when looking to invest in it and discourage having a reliance on it.”
Stuart McMillan, consultant:
“There’s no getting away from it, social commerce is here to stay. I don’t think it’ll be an essential channel on a last-click basis just yet, but its importance in an attributed view of the world is disproportionate. The difficulty then becomes, in a year of tighter budgets, can you continue to spend on an awareness channel? The answer, of course, is that you must.
“TikTok transactions are a nice to have, but not even offering them will lose you almost total visibility to a massive audience. And in 2023 the TikTok audience will probably have more discretionary spend available than older customers who have increasing mortgage/food/heating costs!”
Many retailers have launched marketplaces – lower margin, lower risk business that brings in new customers. Is this going to be par for the course in future – diversified online offerings? What are the drawbacks?
Stuart McMillan, consultant:
“There’s no doubt that marketplaces are on the rise, which is at odds with brands adopting a more D2C strategy. While we’ve not seen peak marketplace, I don’t think we’ll see meteoric growth. I think there will be a point soon where their adoption isn’t as incremental as it has been, due to reduced differentiation between retailers. If everyone sells everything, then there’s no differentiation; but in the meantime, there is incremental revenue to be had.
If everyone sells everything, then there’s no differentiation
“I see two main issues: 1) How do you market your expanding range if your existing customer base doesn’t look to you to fulfill that job for them (this comes back to not skimping on customer experience) and 2) product discoverability, but also where you have different margin considerations for owned vs. listed product, how do you maximise your profit?
In conclusion, this article provides valuable insights for small business marketing consultants on the future of ecommerce in 2023 from various experts such as James Gurd and Stuart McMillan. Their contributions shed light on the impact of economic conditions on CRM and pricing, the importance of omnichannel selling, the rise of social commerce, and other key trends that will shape the ecommerce landscape in the coming year. Small business owners can learn a lot from these experts as they navigate the challenges and opportunities of ecommerce in 2023.
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