As the New Year starts, Mark Elward, Vice President of Enterprise Sales at Huboo, and Peter Edgar, Chief Financial Officer at Huboo share their thoughts on ecommerce and retail lessons for 2023.
Retail lessons for 2023 – what can we learn from a turbulent year in ecommerce?
The retail industry’s cautiously optimistic outlook going into 2022 has been eroded by strong economic headwinds, geopolitical instability, soaring inflation and plummeting consumer confidence. But for online retailers, there are still opportunities to ride out the downturn and grow their businesses. So let’s reflect on the retail lessons of a turbulent 2022 and consider how ecommerce can win in the year ahead…
Lesson 1: Meet the needs of the price-sensitive consumer
Consumers have already begun cutting down on larger expenses and trading down to cheaper products. In 2022, we’ve seen bundle deals – complementary products bundled together at a discounted rate – become a popular and effective way for retailers to incentivise consumers to increase basket size, while at the same time making them feel they’ve gotten great value for money. This is a tactic Amazon uses to great effect, but we’re now seeing it applied across a range of marketplaces and D2C brand stores.
There has also been significant growth in retailers offering subscription models – where customers commit to regular purchases of products such as alcohol, pet food or contact lenses for a discounted price. This is an astute way for eCommerce brands to secure repeat custom and smooth out sales highs and lows, while having the added benefit of drawing customers away from the big online marketplaces and onto their own websites, where profit margins are higher.
As the market continues to contract into 2023, eCommerce brands need to be extra sensitive to costs and focus on conveying value for money to their customers. Designing effective promotions is more than just slapping discounts on products or holding flash sales. Online retailers need to use sales bundles and subscriptions creatively, actively increasing product sales without devaluing their products or brand.
Lesson 2: Market in tune with the consumer mood
During the height of Covid, many eCommerce brands were able to adapt their communications to reflect the sombre climate. The most effective pandemic adverts were more restrained and less exuberant, often demonstrating support for broader societal causes. It’s a tactic worth repeating whenever times are tough for the population at large. The 2022 John Lewis Christmas ad is a great example of how retailers can modify their tone to reflect the mood of the nation.
But it doesn’t just apply to grandstand advertising moments. In 2023, everyday brands of all shapes and sizes must pay close attention to the tone of all ongoing marketing efforts – from digital ads to newsletters – to make sure communication is sensitive to their customers’ situation.
Lesson 3: Help customers spread the cost of purchases
The popularity of buy now pay later (BNPL) schemes exploded during the pandemic. To drum up sales at a moment of widespread uncertainty, retailers large and small partnered up with BNPL companies like Klarna to offer flexible payment options and help customers to spread the cost of purchases.
Of course, traditional BNPL – i.e. credit – was a mainstay of retail prior to COVID. The difference is that now retailers recognise these schemes have the ability to influence sales decisions, and so are moving to highlight flexible payment options earlier in the customer journey, rather than at checkout.
As the impact of the cost of living continues to be felt, offering flexible payment terms can be a competitive advantage – particularly on higher-cost items. We expect BNPL to become commonplace across the eCommerce arena, and retailers that see success will be those that think creatively about how to use these schemes to both attract customers and encourage them to spend more.
Lesson 4: Reduce costs by offering economical delivery services as standard
At the start of 2022, over half of online shoppers said they thought same-day delivery was important – up from a third of shoppers pre-pandemic. However, signs suggest that in these more frugal times, customers’ expectations are softening. In response, we’re seeing eCommerce brands swapping out expensive same-day or next-day delivery for more economical services. It’s a handy and quick way to reduce the price point of products without impacting profit margins. Brands can still retain the option of super-fast delivery for customers willing to pay a premium, but there is no need to offer this as standard.
Alongside this, many brands would be wise to decrease the price threshold for free delivery, in recognition that customers are unable to spend more. This is a particularly helpful tactic for retailers whose priority is to hold onto existing customers or to try and reduce cart abandonment at checkout.
Finally, eCommerce brands need to pay careful attention to their returns policy in the year ahead – which has the potential to make or break a sale. By keeping the returns process simple while reducing the cost for the customer, they should be confident of getting more sales over the line.
Lesson 5: Find frictionless ways of moving into new markets
The challenging economic climate means that online retailers are having to look overseas as a means of opening up new opportunities. Fortunately, there are a host of new eCommerce tools – such as Mirakl – that simplify and speed up this process to ease the pathway into new markets.
Similarly, cross-border payments services like Airwallex help businesses to operate seamlessly across borders. Whereas previously, retailers might have needed to set up local bank accounts, or require customers to pay in a particular currency, cross-border payments tech means that eCommerce brands can receive payment in their usual currency, regardless of where the customer is based.
Setting up overseas is not only a sensible approach for online retailers looking to plug the sales gap, but an increasingly viable one thanks to the growing variety of eCommerce tech on offer. We expect to see an increase in the number of retailers of all sizes moving into new markets in 2023.
A tough year ahead, but there are opportunities on the horizon
Retailers will be put to the test again in 2023, in yet another year of significant economic challenges.
As with the pandemic, we are likely to see a divergence of the fortunes of bricks-and-mortar and online retailers. Physical retailers will find themselves more exposed due to fixed costs – such as retail space, energy bills and shop floor staff. With fewer overheads and a greater ability to adapt their business models and sales tactics in line with market movements, eCommerce brands find themselves in a stronger position to ride out the downturn and achieve success in 2023.
Adaptability will continue to be the eCommerce secret weapon. It won’t be easy, but if online retailers take learnings from the last 12 months, they will put their businesses on a positive trajectory and will emerge from the downturn stronger, leaner, and more attuned to their customers’ needs.
