The only thing permanent in commerce is change and to cope with it, merchants need to adapt constantly. Though business worldwide has contributed to over $27 trillion USD of retail sales, around 64 percent of businesses around the globe are still recovering from the pandemic dip.
During the pandemic, online businesses skyrocketed paving the way for digital innovation. However, soon after the restrictions were lifted, people rushed to the physical stores. In 2022, the aftermath of the pandemic compounded with sanctions due to the Russia-Ukraine war, thus adversely impacting commerce altogether.
In 2023, the brand will face a different set of challenges. With the recession on the horizon, merchants will have to add flexibility to their plans, policies and products in the upcoming year. Adding to the woes, the economy is facing the highest inflation in the last 40 years due to fiscal instability
Shopify’s Annual Commerce Trends Report 2023 about the latest global trends defining commerce will prepare brands to tackle unexpected circumstances. Here are eight talking points from Shopify’s Annual Commerce Trends Report 2023.
1. Impact of Inflation on Businesses
According to a survey conducted by Shopify in August-September 2022 in 14 countries, 83 percent are concerned about the impact of inflation on a company’s growth. 82 percent said that inflation is compelling them to take cost-cutting measures and 81 percent plan to increase the prices of their products. Meanwhile, 71 percent are preparing for the next year’s recession.
Inflation fear is not going anywhere in 2023 and according to Shopify, the average person is 208 percent more worried about inflation than the pandemic. Even the slightest possibility of recession impacts business expenses, investment by venture capitalists and the shopping behaviour of consumers.
2. Changes in Consumer Behavior
Consumers have freedom of choice. If your brand lag behind, they will definitely shop for better deals. From May 2021 to May 2022, over 7 in 10 buyers purchased from competitors of their favourite brand, stated Shopify. Product shortages also make consumers switch to another brand. 46 percent of buyers purchase from a brand that has their favourite product in stock. However, consumers are not merely influenced by price. Social, environmental and governance impact also affect their purchase decisions. Buyers look to support sustainable and ethical businesses.
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Finding new brands has become easier than ever. More than half of buyers like purchasing products instantly, for example, while browsing social media. They only need to go to the social media platforms they are already on to discover new brands and interesting products. At present, most global businesses are working to improve personalised customer experience
Besides consumers, employees also opt for companies that not only benefit them monetarily but also support their way of living and ethics. Flexible schedules and locations work influence one out of five employees, hence, companies with strong retail presence should keep this in mind.
“Commerce is everywhere. The purchase journey is non-linear. It can happen from seeing an ad on Instagram, an influencer on TikTok, or a drop on Twitter. You might be window shopping in person, or a friend might send you a link,” said Arpan Podduturi, Director of Product Retail and Messaging at Shopify.
3. Methodology
To understand the status and future course of the commerce industry, Shopify partnered with global market research firm Ipsos.900 business owners and decision-makers from the industry across the United States, Canada, the United Kingdom, France, Germany, Ireland, Italy, Spain, Japan, Singapore, India, China, Australia and New Zealand contributed to the study.
The survey results were combined with third-party data, research about brands on Shopify Plus and insights from almost two dozen interviews with subject matter experts.
4. Supply Chain Crisis And Long-Term Growth Plans
Though experts predicted normal supply chains in 2023, the Russia-Ukraine war pressurised the already disrupted supply chains. Few studies show that disturbed supply chains can lead to 62 percent financial loss. Though supply chains impact each business differently, however, brands should be quick in identifying the weak point in their supply chain and prepare accordingly.
To prepare for the challenges, business owners are rethinking single-sourcing and inventory. Such a change might be expensive in the short term, but they are important in creating robust supply chains. Companies are also digitising most of the supply chain so they can identify disruptions well in advance.
5. Cost-cutting During Inflation Along With Customer Loyalty
In 2021, global trade witnessed a record high of $28.5 trillion, a 13 percent increase from pre-pandemic. However, in 2022, the growth rate slowed. As oil and gasoline costs increased due to war, transportation costs and the time of small packages also increased.
Shortages of products are adversely impacting an already-weakened economy. Not only product prices but interest rates and borrowing costs are also increasing. Recession fear prevails. 73 percent of brands who are planning to go for external investors will face challenges this year. Pandemic-driven growth led to exaggerated investment in hiring. Now with slow growth and higher expenses, businesses are finding it difficult to maintain their balance. As a result-layoffs.
Both brands and shoppers are planning to reduce their expenses in light of inflation. Customers are looking for cheaper options. Hence, 81 percent of brands that have raised their product prices or plan to raise them might have to rethink on their decision. ads Meanwhile some brands are introducing a new line of products at a higher price instead of raising prices. Others are introducing budget-friendly product ranges or freezing prices to attract long-term loyalty.
6. Collaborations Over Third-Party Data
Three out of four shoppers experimented with a new product, brand, or purchase method during the pandemic. After the restrictions were lifted worldwide, 41 percent of consumers opted to try new products. With a decline in return on ad spend (ROAS), customer acquisition costs are increasing making customer conversion difficult. Strict privacy terms and regulations have reduced the brand’s dependency on third-party data to get in front of potential customers. As a result, brands are resorting to collaborations.
There are brand-to-brand collaborations where the non-competing brand creates a product or experience together to grab the attention of each other’s consumers. Collaboration with influencers will continue to benefit companies in 2023 and beyond. Influencer marketing grew during the pandemic and now more than seven out of ten business owners expect influencers to gain more prominence in near future.
7. Social Commerce Takes Over
Though the e-commerce growth rate has slowed compared to the pandemic era, “it’s still taking an increasingly larger slice of total retail sales worldwide,” states Shopify. By the end of 2023, one out of five retail sales will be online. Commerce has never been always about transactions.
Social commerce has become a thing. Nine out of ten shoppers purchase from brands they follow on social media. Social commerce simplifies potential sales and one-on-one engagement, minimising friction between discovery and conversion. To boost growth in the coming years, brands should use social media channels to the fullest. According to Shopify’s global survey results, social media platforms for promotions and marketing are the most important customer acquisition and retention strategy.
8. Retail Brands Diversify and Differentiate In-store Experiences
Companies are struggling to retain staff. 59 percent of companies are facing human resources challenges. Four out of ten workers across the world say that may quit their jobs soon. Half of them say that they can stay if offered higher pay. However, due to the ongoing economic crisis, instead of a pay hike, employees are getting laid off.
Stores require employees to cater to customers who blend multiple channels and expect retail the same. “The more we can connect online and offline, the better the customer experience. And that ultimately gives retailers and main-street brands a chance to survive and thrive going forward”, said Arpan Podduturi.
Brands are redefining their store objectives with the help of their shoppers. Pointing out the latest trend, Shopify Retail senior product marketing lead Kevin MacGillivray said, “Let’s assume it’s a soap store. Try the soaps, smell them, use them—do what you can only do in-store and add that bit of magic you can’t get from buying on a website. You can now shop for exercise equipment, a car, and a couch. All things you can’t replicate in a digital world. There’s no good way to do that yet because it’s so tied to your personal experience as you use it. More and more successful in-person retailers are doing this.”
Store owners need to understand their customers at a local level. To establish a lifetime connection with customers, companies should incentivise them to buy not just the products but also the brand experience.
