As we head into the new year of 2023, ecommerce businesses are facing a complex economic and consumer environment and many are looking for strategies that will help them survive and thrive. We recently spoke with renowned retail industry influencer and former Saks CEO Steven Sadove to get his perspective on the current retail and ecommerce landscape and some of the trends that are likely to dominate in 2023.
In terms of ecommerce growth specifically, Sadove notes that we’re seeing a reversion to the norm. Online sales skyrocketed during the first two years of the pandemic, but slowed significantly as consumers returned to in-store shopping and shifted some spending back toward in-person experiences such as travel, restaurant dining and live events. Now, ecommerce sales are starting to grow faster than brick-and-mortar sales again, reverting to the trend we saw prepandemic, albeit at a slower rate than in the late aughts.
Overall, Sadove sees choppy waters ahead for both ecommerce and brick-and-mortar retail, as consumers and businesses will continue to grapple with high inflation and economic uncertainty in the new year. He notes that shoppers have been slowing their spending, with lower-income households currently focusing on essentials and looking for excellent value and higher-income shoppers pulling back on luxury goods and jewelry, categories that had seen strong growth throughout the pandemic. Retail sales growth overall has slowed from 10%–12% year over year in the spring of 2022 to what will likely be closer to 6%–7% coming out of the holidays, he says.
Facing high customer acquisition costs, businesses must focus on existing customers
At the same time, businesses are struggling with customer acquisition costs that are higher than ever and “will need to get more from each existing customer” in the new year, according to Sadove. To retain the customers they’ve already invested so much in acquiring, ecommerce businesses will be wise to provide the kind of value and experiences that drive conversion, repeat sales and long-term loyalty. But “value” doesn’t mean just promotions. Streamlining and simplifying the shopping experience, offering differentiated product assortments, and leveraging technology to create relevant and personalized, unique and immersive site experiences are all ways businesses can stand out and maximize their relationships with their existing customers, Sadove says.
Prioritize personalization and streamlined checkout
Two areas that ecommerce businesses can prioritize in the new year for positive revenue lift are personalization and a more relevant checkout experience. Consumers value experiences where their preferences are used to ensure that each shopping experience is more convenient, faster and more relevant. businesses that combine first-party customer data and machine-learning technology to offer customized promotions, messages and product recommendations will be ahead of the competition in 2023. With the right technology partners, ecommerce businesses can personalize everything from discount offers to fit and style suggestions to return policies that reward high-value customers with instant refunds or longer return windows. At checkout and confirmation, ecommerce businesses can leverage technology to unlock incremental value by presenting relevant upsell and add-on offers that are likely to appeal to each individual customer. This increases each transaction value and increases customer delight which improves downstream impacts including LTV (Life Time Value).
Businesses will also be well served by streamlining the checkout process, as the vast majority of ecommerce shoppers who leave a site before completing their purchase do so at checkout. Offering a simple, fast and frictionless checkout experience will be one key to success in the new year and with more and more consumers shopping by phone, optimizing checkout for mobile should be a given at this point. Businesses may be tempted to present multiple upsell, add-on, alternative payment and other offers during checkout, but too many can quickly become overwhelming and lead shoppers to ditch their carts. Each offer presented should be personally relevant to increase the likelihood of engagement.
Monetization of assets
The Retail Media Network wave has created enormous interest in monetization in digital experiences. This can carry risk and so, careful consideration and management is recommended. One risk-free approach is to monetize the confirmation page of an ecommerce transaction, presenting third party messages as additive (like a gift with purchase) as they walk out the door. It can also be a discreet and powerful way to test monetization as a broader strategy. We have seen this to have a very positive impact on customer experience and therefore LTV. Something worth considering in 2023.
To succeed in 2023, ecommerce businesses will need to prioritize retaining their existing customers and providing them with value across each point in the shopping journey. Leveraging technology to create personalized experience and streamlining the checkout process are just two of the ways businesses can keep customers engaged and coming back throughout the year.