The State of Retail Ecommerce: 2023 Recap

    Guru Hariharan Founder & CEO
    January 18, 2024

    There are many insights to be drawn from this year’s report, but it’s clear that brands still face incredible headwinds going into 2024.

    For example, the grocery category increased ordered revenue by roughly 5%, but pricing was up more than 16%, which raises questions about how sustainable the growth truly is.

    Overall we have seen gross margins fall by upwards of 10% in December 2023, which amidst rising prices can only mean brands are facing an increase in COGS that they haven’t been able to offset.

    Brands will need to focus on the fundamentals of meticulous inventory management integrated with their advertising strategies, and adopting new technological advancements like incremental advertising optimization that will allow them to drive growth without increasing ad spend.

    While 2023 is behind us, it leaves us some important lessons as we go into 2024. Below are some of the key takeaways going into the year.

    1. Tough Unit Economics Defined 2023

    What Happened in 2023?

    Growth in 2023 was driven primarily by an increase in prices. This increase in prices however was not enough to offset shrinking gross margins, which likely was eroded due to a similar increase in material costs.

    All categories except tools, office and baby saw a substantial growth in price levels which fully explained growth in almost all instances. This also correlated with a decline in gross margins in almost all categories, highlighting the impact of increase in COGS in nearly every category.

    ROAS fell gradually month over month as ad spend increased amidst flat glance views, further harming profitability efforts.

    What Should I Do in 2024?

    To thrive in 2024, brands must figure out how to reduce COGS to reverse the decline in profitability.

    Tactics such as altering pack sizes, focusing on ingredient or input innovations to lower costs, changing SKU mix towards more profitable SKUs or bundles are some ways to improve gross margins.

    From an ad strategy perspective, shifting ad strategies to optimize for incrementality over raw growth is the only way to offset further pressure on ROAS amidst an environment of lower consumer demand.

    Ensuring your advertising is optimized using day-parting bidding and is tied into inventory to ensure promotion of only in-stock SKUs are other tactics brands should consider going into 2024.

    2. Cash is King

    What Happened in 2023?


    Amazon’s main goal in 2023 was to drive Free Cash Flow, and one of the main drivers of this was optimization of inventory across their warehouses. This had a direct impact on brands, with Inventory levels falling year over year, and Revenue Losses due to out of stock dramatically increasing up until Q4.

    In some cases brands increased stock levels but still saw increasing revenue losses due to out of stocks, indicating a mismatch in demand planning and inventory planning throughout the year.

    What Should I Do in 2024?

    The continued focus on FCF by Amazon and other retailers will likely continue into 2024, so brands must be more meticulous in how they plan inventory going into the year.

    Having back-up direct fulfillment methods is one key strategy brands should implement for core SKUs throughout the year, especially during tentpole events like Prime Day.

    Running continual experiments on promotions and pricing will also help brands build a demand forecast for SKUs, and can help provide inputs on advertising strategies to manage inventory levels and overall profitability

    3. Tentpole Events Matter

    What Happened in 2023?

    Across all categories, Prime Day 2023, Prime Big Deal Days 2023 and Turkey 11 2023 all drove a material increase in sales. Of the three, Prime Day 2023 had the largest impact for brands and remains the marquee sales event of the year.

    It should no longer be a question of “if” a brand should participate in Prime Day or other events like that.

    Instead the question should be, how can brands leverage this concentration of consumer demand and interest to change their competitive position within the category.

    What Should I Do in 2024?

    Incredible amounts of planning needs to go into winning these events. Testing promo strategies, price elasticity, and ensuring inventory is setup to mitigate revenue losses due to out of stock are some of the most important things you can do going into Prime Day 2024, and subsequent sales events throughout the year.

    Leading into any event, building awareness audiences for retargeting and ensuring PDPs are fully up-to-date, incorporating the latest review sentiment and trending keywords into copy and imagery are core “housekeeping” tasks brands must perform before every event.

    During an event, focusing on New-to-Brand Customers, growing Subscribe and Save members, and conquesting competitors during tentpole events are some ways brands can permanently shift the competitive landscape through a tentpole event.

    These are tactics that should be paid careful attention to both enact and defend against if you are in a competitive category with declining glance views and increasing ad spend.

    Guru Hariharan Founder & CEO


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