The end of every calendar year brings review, reflection, and a renewed focus on what’s to come.
Global trade in 2022 was impacted by a range of events including continued pandemic-related shortages, rising inflation, and explosive geopolitical tensions, and 2023 promises to bring more of the same.
At SkuNexus, we value any information from our friends at Shopify. As an eCommerce platform powering millions of businesses around the globe, Shopify has access to a vast array of actionable data — from the state of supply chains and marketing campaigns to deep insights about consumer behavior, both domestic and international. Armed with this treasure trove of information, they have produced a superb report on commerce trends for 2023.
Here, we would like to share with you 8 highlights from the report to consider for the coming year and beyond. From broad outlooks to fascinating developments, we think every merchant can gain something from these predictions.
1. Inflation and Recession Fears Will Slow Growth
We hate to start with bad news, but this is arguably the most important issue to consider for any business as it enters the new year. Hoping for the best yet preparing for the worst is always a prudent strategy, and all signs point to a sluggish economy. The WTO (World Trade Organization) has dialed back its 2023 global growth rate projection to an anemic 1.0%, and Shopify’s own polling of companies across 14 countries shows more than 70% of brands are prepping for recession, slashing costs, and raising their prices.
2. Customer Expectations of Brands Continue to Expand
When it comes to the number of options they possess, consumers have never had it so good. In turn, the challenges merchants face in keeping their business have never been so daunting.
Nearly half of today’s shoppers weigh a company’s environmental, social, and governance initiatives against price while just as many will jump ship to a competitor if their preferred brand doesn't have an item in stock.
Shopping via social media continues to rise in popularity, and commerce is becoming increasingly non-linear — shoppers get purchasing influences from everywhere and they want to make those purchases from anywhere. In the bluntest of terms, consumers want it all, and they want it now.
Supply Chain Trends
3. Businesses Balance Supply Chain Issues with Customer Demands
Despite the plethora of factors impacting global supply chains and disrupting normalcy, consumers are largely unforgiving — they have become accustomed to vast product selection and rapid shipping/delivery. With two-thirds of businesses reporting this crisis will only deepen in 2023, a series of adjustments must be considered to future-proof logistics networks and remain competitive.
- Holding more inventory is the logical first step, and thousands of the world’s largest brands have steadily increased stock-on-hand over the past three years. This addition, and the resultant impact on free capital, amplifies the need for strict inventory management.
- Just as consumers are awash in shopping options, so too must companies expand their supply networks. In addition to adding new vendors and sourcing from more countries, nearly a third of Shopify merchants have also focused on finding products closer to home.
- Reducing return rates is critical for retaining customers, shrinking environmental impact, and supporting the bottom line. Above all else, customers must be confident that they will receive what they think they ordered. To this end, thorough product descriptions, customer reviews, and 360-degree views of each product can help significantly. And, to give customers a more realistic and immersive preview of the product, the use of augmented reality will dramatically increase going forward.
4. Digitization of Supply Chains Will Expand
Reducing manual processes is a solution we at SkuNexus champion throughout order, warehouse, and fulfillment management, and brands are applying the same concepts to their supply chains as well. Beyond scanning technology and inventory management software, businesses are using AI and machine learning to eliminate inefficiencies between drivers and dispatchers. Greater insight into deeper tiers of supply networks will prove to be an enormous advantage, and early adopters of AI-enabled supply chain management will reap the benefits of lower logistics costs and vastly more efficient operations.
5. Brands Can Simultaneously Tighten Budgets and Increase Customer Value
In order to thrive, not merely survive, brands must find a balance between minimizing short-term financial damage and investing in the future. In a post-recession environment, the companies that flourish are those that work to establish, and retain, customer relationships. A number of methods can be employed here.
- Strategic pricing. While brands with strong loyalty can weather price increases, others may choose to freeze prices on specific products to foster solidarity with customers. It should be noted, too, that shipping is the one area where merchants should avoid raising prices if at all possible. Shopify’s extensive, long-term data show people order, spend, and buy more when shipping is provided gratis.
- Discounts can come in many forms with the common goal being increased cash flow combined with customer benefit. Products may be bundled and time-sensitive sales can be marketed as personalized recommendations. In addition, store credit or coupons added to a product/gift card purchase can encourage additional shopping beyond the value of the discount.
- Subscriptions allow brands to engage with and “lock in” customers while providing them with longer-term price breaks (e.g. Receive 15% off for 12 months paid in advance, etc.). These have become extremely popular in niche DTC markets like pet food and cosmetics.
- Membership-driven, gated digital communities are also surging in popularity due to their exclusivity, with perks ranging from front-of-line access to easier returns. Going further, paid memberships can give customers all manner of creative services and benefits to strengthen their brand loyalty.
6. Companies Will Further Automate to Reduce Overhead Costs
A tight labor market and the inability to find employees for key roles throughout warehouse and fulfillment operations are fueling an explosion in automation — software, wearable technology, and robotics. Thanks to their accuracy, efficiency, and long-term cost benefits, these will become permanent solutions.
7. Social Media is Taking Over eCommerce
What began as a revolutionary vehicle for advertising evolved into a search engine and is quickly becoming a dominant quadrant of eCommerce channels to the tune of a projected $2.9T globally by 2026. The range of what social media encompasses has expanded far beyond the “traditional” to include the burgeoning metaverse and a massive worldwide gaming community. Seamless connectivity throughout these virtual spaces will ensure cohesive engagement in the same way it has in standard eCommerce. According to an overwhelming 84% of businesses polled by Shopify, this connected brand experience across channels will become more important to the future of commerce.
8. Communicating with Customers is Changing in the Digital Landscape
The trends that have been building in recent years are only accelerating as social media expands its reach. Businesses need to meet customers wherever they are, provide support and personalized information, and extend their brand’s experience as shoppers move between different channels. Multiple tools can help them achieve this.
- Real-time chat provides a powerful means of engagement, and it goes far beyond the chatbot on a website. Consumers are now using WhatsApp, Messenger, and Instagram to ask for support or interact with stories. China’s most popular app, WeChat, is similar to Facebook Messenger, but brand posts come directly to the consumer as opposed to a general timeline.
- Automated chat via a merchant’s website is far-from-defunct, however, and 43% of shoppers say they like the ability to ask simple questions of a bot without having to wait for a live person to interact.
- eCommerce integrations with social media are gaining in popularity, as well. The incorporation of live shopping into a brand’s Instagram and TikTok videos has proven to be wildly successful in Asia and is rapidly gathering steam in the United States and Europe in recent years.
A common denominator for all of these trends is accurate, free-flowing data. The ability to sync vendor, warehouse, inventory, order, fulfillment, shipping, and customer information across all channels and touchpoints in real time is crucial to well-functioning supply chains, brand experience and the fundamental integrity of eCommerce.
At SkuNexus, our management software solutions integrate with eCommerce platforms like Shopify as well as hundreds of others to empower merchants with the tools they need to optimize, grow, and scale their operations. If you would like to know more about what we can do for your business, please schedule a demo.
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