Navigating the Retail Media Revolution: Strategies for Success in 2024
Sneak Preview at our 2023 ecommerce Predictions
It’s hard to believe but the new year is just around the corner. To help you prepare, CommerceIQ has released its 2023 ecommerce predictions ebook. Read the full ebook here, including all 9 predictions, and check out the sneak preview video at the end of this blog to see what you can expect on the 2023 ecommerce predictions webinar.
2022 has already been a tumultuous year for ecommerce. Behaviors and trends that began during the COVID-19 pandemic have matured and contributed to the uneasy state that shoppers, brands, and retailers find themselves in today. In light of high inflation, a pessimistic shopper, and defensive brands, the big question remains: What ecommerce trends will develop in the next year?
Ecommerce Prediction: Ecommerce Will Rebound
2022 was a precarious year for ecommerce. Growth flagged as large players like Amazon, Walmart, and Target saw their shoppers pull back on discretionary purchases leading to excess inventory on big-ticket items. Yet there are reasons for optimism in 2023. The ecommerce drop-off is not the “new normal.” After the industry anniversaries the return to in-store shopping, ecommerce growth will resume a healthy, double-digit upward trajectory. At its core, the ecommerce industry is not yet mature, and the shift back to growth has already begun. CommerceIQ’s 2022 mid-year analysis across retail ecommerce channels showed ecommerce growth recovery from early lows. In particular, CommerceIQ data shows that 1P brands on Amazon have maintained high Ordered Product Sales (OPS, meaning revenue for the vendor) through October that can keep up with inflation. Even if a prolonged recession dampens consumer spending, ecommerce is still likely to outperform store growth long term.
Figure 1: Ecommerce growth strong at Amazon for 2022
Source: CommerceIQ internal data
How should brands plan for ecommerce growth?
- Maintain or increase investments in ecommerce; vendors need to support retailers’ omnichannel aspirations to be available to shoppers however they choose to shop
- Plan for multiple recession or growth scenarios to adjust to real-time developments faster
- Constantly evaluate the state of the market to know which plans to pursue to grow or maintain profit and sales in 2023.
Ecommerce Prediction: D2C Growth Will Slow
According to Insider Intelligence, Direct-To-Consumer (D2C) grew 17% in 2022. Yet D2C growth may slow in 2023. As consumers tighten their budgets, some shoppers will turn away from D2C brands in favor of lower-priced alternatives and comparative shopping. D2C offers a limited assortment from one brand, frustrating shoppers eager to evaluate their options. Instead of shopping several D2C sites, they will want to compare prices on marketplaces like Amazon or Walmart to get better deals. In fact, 64% of global consumers are excited by the prospect of buying everything through one retailer.
Yet even as D2C growth decelerates, it will still act as an important avenue for driving customer loyalty, especially when the category economics are favorable. D2C excels at shipping big-ticket, low-weight items, where rising costs can be covered by strong margins. D2C should drive engagement with a brand’s most loyal shoppers, who can drive growth across the entire business.
Figure 2: Consumers want the simplicity offered by cross-brand marketplaces
Source: Wunderman Thompson: The Future Shopper Report 2022 (2022)
How should brands build a D2C strategy?
- Repurpose their D2C platforms to be focused on driving engagement rather than being a source of incremental growth alone
- Design the D2C platform to act as a central hub of information and content for shoppers
- Promote D2C at other points of sale across retail ecommerce channels to create greater connectivity for brands across platforms
Ecommerce Prediction: Retail Will Consolidate
The ecommerce industry will consolidate in 2023 as brands and retailers strive to protect profitability. As businesses drive efficiency, they will look for desirable acquisition targets. High interest rates mean raising capital for an ecommerce businesses is not as easy as it used to be.
Smaller players will be incentivized to acquire or merge with other businesses to scale and bring down costs. Even larger retailer players are looking for M&A opportunities that improve the efficiency of the combined entity. Kroger and Albertson’s merger agreement in 2022 helps both achieve more scale. It is a forerunner of more consolidation that will occur in 2023 in retail and ecommerce alike.
Macroeconomic forces mean shoppers will opt to shop at only a few large online retailers where they can more easily compare prices across brands. Despite their profitability struggles, Amazon, Walmart, and Target still managed to grow their ecommerce businesses at a strong pace for much of 2022 according to our data.
Figure 3: Margins have fallen for key categories
Source: CommerceIQ internal data
How should brands plan for retailer consolidation?
- Keep pace with industry shifts so that their online offers and pricing should evolve in step with these mergers, not after the fact
- Look at pain points within their own organization that could be alleviated by the right acquisitions or partnerships
- Offer shoppers simplicity as they look to comparative shop at large ecommerce marketplaces like Amazon and Walmart
2023 promises to be a unique year in retail ecommerce with new challenges threatening a tenuous normal. Brands must be equipped with the right data, tools, and insights to handle a new post-COVID landscape.
Interested in more? Download our full list of 9 2023 ecommerce predictions here.
Or… listen to our webinar that introduces these predictions here. Check out the preview below!