The last three years of e-commerce have been anything but predictable. First, there was the pandemic, sending demand skyrocketing and forever securing e-commerce as a top consumer channel. Then came major shortages, causing delays and shopper frustration. Now, consumers are strapped for cash in the midst of inflation, and we’re battling a recession.
It’s been a wild ride to say the least.
But we’ve learned a lot too. For instance, consumers tell us they regularly use multiple marketplaces to browse, shop and buy. We’ve also seen the emergence of several new retailer-led media networks, demonstrating digital advertising’s acceleration.
We recently hosted our annual year-in-review webinar, 2022 E-Commerce Wrap-Up: Key Trends to Look for in 2023, along with a preview of what’s to come. Let’s take a look at what our Vice President of Digital Marketing Strategy, Link Walls, had to say about the past year — and what he predicts for the next 12 months.
The year was marked by record inflation at levels unseen in four decades. This put a major strain on both brands and consumers who were forced to choose between must-haves and nice-to-haves.
But it wasn’t all bad. We also saw some rates and markets start to stabilise after two years of nontraditional behavior. And some categories had their best year yet. In 2022:
- The economic environment slowed consumer spending. Inflation left little for consumers’ discretionary spending this year, affecting brand and retailer bottom lines. UK credit card borrowing rose by £740m month on month in June, demonstrating an unwillingness for consumers to return to their pre-stimulus lifestyles.
- The job market remained strong despite tech layoffs. Non-farm payrolls bounced back and have continued to stay well above pre-pandemic levels. Tech is the exception, however, as Amazon, Meta and Twitter all carried out mass layoffs in 2022.
- E-commerce remained a significant portion of retail. Pandemic-era claims like “retail is dead” couldn’t be farther from the truth. As stores reopened and repopulated in 2021 and 2022, in-store shopping reclaimed its position as the leader in commerce. E-commerce still maintains a large share of that spending — certainly more than it would’ve without the pandemic.
- Freight and other rates began normalising, helping inflation. After record highs the past few years, prices in categories like lumber, automobiles and freight are finally normalising. Ocean freight and shipping cost decreases are expected to help ease inflation.
- Trends varied widely based on category. While in-person schooling and social gatherings fueled categories like apparel and accessories, others like office equipment and supplies were at their lowest most likely due to continued remote work trends.
5 Key Trends for 2023
Based on market behavior over the past year and changes on the horizon, Link anticipates a variety of key trends for 2023, including:
1. Rising tension around privacy and regulations
Regulations around the UK, European Union and the world continue to increase with numerous ripple effects for brands, retailers and consumers. For instance, as Apple pushes for greater privacy throughout their products, companies like Meta and Snap Inc. will have to find other ways of securing rich data to inform advertisers. In the meantime, consumers’ responses to “Ask app not to track activity” directives have caused both stocks to plummet.
One other aspect of privacy is the use of third-party cookies. The tool’s days are numbered, but Google continues to postpone it. (Previously, expiration was set for 2022; it has since been pushed to 2024.) Google has its own tracking system to rely on, but some companies (particularly in Europe) have built their business on the use of third-party cookies, calling the tech giant’s move “monopolistic.” As tensions rise, we expect to see new workarounds and innovation like privacy sandboxes. Still, the industry has time to prepare and adapt before the changes come to fruition.
2. Frictionless social commerce
Social platforms will continue to make in-app purchasing as frictionless as possible with offerings like Facebook Shops, Instagram Shops and TikTok for Commerce. In 2023, these platforms will aim to make everything from discovery to checkout as seamless as possible for social users, whether they’re prompted to purchase in the app or access online and local buying options.
We anticipate deeper investment in social commerce in the coming year, as it gives platforms and advertisers a better sense of where consumers like to make purchases. This will also improve attribution with a clearer picture of where sales originate from.
3. The acceleration of retail media
Among the “big three” digital advertising platforms, revenue from retail media advertising on Google and Meta is significantly larger than revenue from retail media on Amazon. However, Google only saw a 3% increase in 2022 and Meta decreased 4%, whereas Amazon improved 25%.
In 2023, retail media will make up a larger chunk of the advertising pie than ever. Digital ad share for entertainment and social companies like Spotify, Hulu and TikTok will also grow in the next year, but retail media from companies like Amazon and Walmart will make a particularly hefty contribution to the category.
4. Continued consumer expectations for pickup and delivery
Consumers have gotten used to the luxury of next-day and same-day shipping — and they’re not going back. But “free shipping” isn’t free, and surcharges have also increased thanks to fluctuating petrol prices. It’s up to brands and retailers to figure out how to do it profitably.
To expand shoppers’ options, retailers have doubled down on click-and-collect offerings in the past year, expanding drive-throughs and parking lots for pickup. In the past 12 months, 44% of global shoppers and 47% of UK shoppers say they’ve used the service.
5. Increasing marketplace prevalence
More and more retailers are looking to extend their product selection by experimenting with new selling models. But they don’t want the cost of carrying inventory.
Retailers like John Lewis are launching their own digital marketplaces, and we believe you’ll continue to see more. Some may follow suit, while others consider expanding their drop-ship programs. These moves toward increased selection and marketplace-like environments are wise, as consumer data tells us 76% of global consumers say they regularly use multiple marketplaces for all shopping activities, including browsing, shopping and buying.
What Does 2023 Hold for You?
No one knows what 2023 will look like. But our ChannelAdvisor experts have been around the block enough times to know what safe bets to invest in and where to take some risks. In addition to these five trends, we’ve put together four key strategies to help you win in 2023, from selling in more channels to collaborating with other brands and retailers.
Get the full list and tangible tips to execute now by listening to 2022 E-Commerce Wrap-Up: Key Trends to Look for in 2023.