The one thing that remains constant with the ecommerce industry is that the landscape is always changing – and this year has been no exception. 2022 has seen businesses forced to navigate an economic downturn along with the changes in consumer’s spending behavior that come with that.
The ecommerce industry has also welcomed shoppers back into brick and mortar stores, while simultaneously working hard to meet the new post-Covid demands of polished omnichannel shopping experiences. Other ecommerce trends we’ve seen this year include exciting developments around sustainability and the environment, as we’re witnessing more consumers raising their expectations of brands to meet their own values and moral standards.
While these expectations may be high, the stakes are even higher – as 78% of consumers say they’ll stop shopping with a company after only two poor experiences. And with rising customer acquisition costs having a huge impact on the ecommerce industry as a whole, businesses need to continue prioritizing retention and driving up customer lifetime value (CLTV). So how can you keep your customers shopping with you in 2023?
Read the top ecommerce trends our experts are predicting and get a head start on making 2023 a success.
– Recession-proofing with retention
– The impact of Gen Z consumers
– Conversion rate won’t be the key metric for ecommerce stores
– Optimising the customer experience
– Aiding the discovery of sustainable options with personalization
– Companies shift their focus from discounts to value
– Loyalty programs becoming a central part of the user-journey
– Social commerce & community boom for 2023
– Building a conscious network in 2023
– Online goes offline
– The post-purchase experience becomes even more important
– Final thoughts
Recession-proofing with retention
2022 feels a little bit like one of those awful movies you don’t want to watch but can’t pull away from. As the bizarre storyline continues to unfold on screen, you think “Surely it can’t get worse?”… until it does. Things are pretty unsettled for most of us right now, and with inflation at a 40 year high, it looks like we’re heading into a recession-like period of economic downturn.
Interestingly though, the landscape looks a lot different to the last time we were approaching a recession, and ecommerce is still hitting record highs in terms of annual ecommerce sales. Why is this? Well, if we look back to 2008, Shopify was just 2 years old and growing its customer base from scratch. Jump to today there are several million active Shopify stores! Put simply, ecommerce has boomed – and with it so has the competition. This means it’s more expensive to acquire customers, and stores need to work harder to retain them and differentiate their unique offering.
So when faced with a looming recession AND progressively fierce competition, how can brands possibly win in 2023? Simple – it’s all about retention. All you have to do is look at the luxury market to see that people will still save up over time to make a purchase they’re particularly passionate about. The only difference now is that they’re going to be more picky. But by focusing on retention and using a loyalty program, you can make sure you’re the one they save up to spend with. You’ll also reduce your acquisition costs, drive organic growth and create genuine lasting relationships that will survive these uncertain times. Here are our 4 top tips for doing just that.
1. Build customer lifetime value (CLTV)
Build CLTV by opting customers into your loyalty program as early as possible, engaging with them in between visits to speed up time to purchase, and re-engaging customers when they become ‘at risk’.
2. Acquisition through advocacy
Use your most engaged customers to help you acquire new ones more cost effectively. You can do this by incentivizing customers to leave reviews, and giving loyalty points for referring your brand to family and friends.
3. Driving differentiation
Use your loyalty program to build emotional connections and demonstrate to shoppers that you care about the same things. Allow customers to earn points via activities that do good, such as recycling packaging, or redeem those points in the form of charitable rewards such as tree planting or donations to doggy shelters.
4. Integrated technologies
Finally, costs might have to be cut if a recession is on the horizon, so make sure that you’re driving every cent of ROI that you can from your technologies. Segment your data to identify your highest value customers, use automations to trigger your email flows, and ensure your data is moving seamlessly between systems.
The impact of Gen Z consumers
In 2023, I think we’ll see a distinct shift in the way ecommerce brands market their products as a result of Gen Z’s buying habits and preferences. This can be broken down into 3 key areas.
Firstly, I think brands will place more of a focus on social commerce. Younger generations want to see real opinions from real people. As a result, I think we’re going to see an influx of brands harnessing the power of micro- and nano-influencers to engage with this demographic.
TikTok being used more and more as a search engine will definitely contribute to this, as Gen Z are looking for more genuine reviews rather than obvious advertisements. 65% of Gen Z have purchased something based on an influencer’s recommendations, so this is something brands shouldn’t be missing out on.
As well as this, I predict that Gen Z’s reevaluation of the importance of sustainability in the ecommerce industry will guide how brands market their products. While Millennials prefer to buy a product from a brand they know than a brand that’s sustainable, Gen Z are the opposite. In fact, nearly 3 in 4 Gen Z consumers are happy to pay an extra 10% for a product if they know it’s sustainable. This shift in priorities will definitely have an impact on the ecommerce space as the pool of Gen Z consumers is only getting larger.
Lastly, an ecommerce trend I anticipate for 2023 is the continued rise of omnichannel. Over half of Gen Z say that they would prefer to shop with a brand that has both a physical and online presence. This shift is indicative of a new focus on experiential shopping experiences, with younger generations wanting more from the brands they choose to shop from. Adidas’s flagship store and IKEA’s planned store on Oxford Street represent a reimagining of the retail experience, and I think other brands will follow suit.
Conversion rate won’t be the key metric for ecommerce stores
We’ve all seen the high cost of acquisition in 2022, along with the increasing expectations of customers. Because of this, brands have realized that understanding the potential of existing customers is how they can improve the bottom line. Due to this, Customer Lifetime Value (CLTV) will change from being a ‘nice to see’ metric to a ‘must track’ metric. Specifically, CLTV will incorporate: Traffic, Conversion rate, Purchase Frequency (PF), AOV (Average Order Value), CRR (Customer Retention Rate), Customer Acquisition Cost (CAC) and Gross Margin. By using CLTV as the key metric, brands will be able to truly evaluate their success for the medium and long run.
While this doesn’t mean that conversion rate and acquisition will be ignored, it does mean that the overall importance reduces. This means that brands will now pull more levers to generate success, and not just the one dimensional thinking that’s behind CRO. Smart brands and agencies will switch to this way of thinking to take strides ahead of the competition.
Optimizing the customer experience
Optimizing customer experience (CX) will overtake paid acquisition as the new growth model, as brands shift to profitable and sustainable growth.
2022’s digital advertising costs have continued to increase to the point where growing brands are being priced out of popular ad platforms. For brands to continue to grow, focusing on optimizing the customer experience will transition from “we should do it” to “we must”. From our own research of 10k Gorgias merchants, repeat customers generate 300% more revenue than first-time customers, and the average online apparel shopper isn’t profitable until they make four purchases.
As revenue becomes harder to squeeze from paid channels, brands will rely more heavily on improving their sales performance from their owned channels. Brands will dive further into their customer data to build more robust and segmented automations across owned channels, in order to drive more revenue from customers already in their lists.
Onsite chat will become the next meaningful owned marketing channel for ecommerce brands. As every paid media dollar becomes more expensive, increasing revenue/visitor is more vital to a brand’s health. Live and automated chat is the one channel that can recreate the immediate sales opportunity of an in-person retail experience. In real time, aim to answer buying questions like:
– “Will this arrive by xxxx?”
– “What size should I get?”
– “Is this compatible with XYZ?”
– “Do you have any recommendations for ABC?
Brands that quickly respond – balancing automation and personalization – drive more sales through existing site traffic, increasing the return on their paid budgets and providing stellar customer experiences motivating customers to come back.
Aiding the discovery of sustainable options with personalization
While sustainability remains at the forefront of consumers’ minds, recent research shows that people still struggle to determine what is and isn’t sustainable when shopping online. In 2023, ecommerce brands must optimize their user experience through personalization technology to highlight their sustainability offerings—including values, products, delivery options, and more.
Personalizing the ecommerce experience for consumers with an affinity towards sustainability will guide them to the right products, encouraging sustainable purchasing decisions while also increasing conversions and fostering loyalty. As 55% of people find it confusing to determine which items are sustainable while shopping online, it’s crucial for brands to offer more clarity around their options. Next year, we’re expecting to see more investment into the UX optimization for consumers who are looking for sustainable offerings.
There are various ways in which personalization technology can help with this, such as enabling the A/B testing of sustainability messaging to gauge interest; using affinity segmentation and merchandising to highlight relevant products and content to an audience likely looking for it; utilizing visual badging to differentiate sustainable products or services; informing shoppers of how their individual purchases can contribute to sustainable causes at check-out; and boosting eco-friendly options throughout product catalogs. Leveraging user-generated content to involve customers in sustainability messaging should also be more widely adopted, given that 68% of consumers say they’d pay more attention to what their peers say vs. the actual brand when it comes to sustainability claims.
With 57% of consumers looking at retailers to become more sustainable and 47% thinking the ecommerce industry isn’t doing enough, brands must react to this demand, such as through the initiatives described above. These initiatives can help build the sustainability profile of the brand, aid in product discovery by providing clarity around sustainable items and content, collect behavioral data to sharpen campaigns and segments for future efforts, and overall track and educate individuals about their environmental impact within a community.
Lastly, the cost of living crisis isn’t going anywhere anytime soon, and consumers will continue to comparatively shop to see who offers the most value. That means there’s an even greater need to highlight your brand’s sustainability credentials to consumers who value this, which will ultimately help differentiate you from your competition.
Companies shift their focus from discounts to value
Constant and deep discounting has been the all-too-common go-to sales tactic for many DTC merchants over the years. As the economy works its way through high inflation, back-to-normal ecommerce sales, and increased marketing costs across channels, each discount means less profit—and companies are feeling the strain.
There has also been a noticeable shift in how consumers and brands interact. Consumers want more from brands than just the lowest price and batch messaging. They want value. I fully expect brands to shift their focus from a discount-first strategy to a customer-value strategy.
I see brands making this shift in three easy-to-accomplish ways:
1. In email and message content: Expect brands to build consumer confidence by prominently promoting their value-adds and competitive differentiators in their messaging. These include friendly shipping and return policies, showcasing customer testimonials to reinforce customer service, company, and products, using product reviews to guide consumers toward a purchase, and promoting loyalty programs.
2. Through SMS adoption: SMS is now a top-tier marketing channel and a must for any DTC brand. SMS adoption continues to grow at an exceptional pace, a sign that consumers want to receive brand messages through the channels they choose to interact with. And SMS is versatile. It can be used as both a complementary channel to email and as a stand-alone channel.
3. Through automation: Delivering value to customers goes beyond a good product at a fair price. It’s about the entire brand-consumer interaction. From a messaging standpoint, that means communicating the right message at the right time on the channel they prefer at that moment. This is where automation will play a significant role in 2023.
Year after year, approximately 30% of all email orders come from automated messages and account for roughly 2% of the sends. But automation goes beyond email. Combining SMS, email, and web push messages in the same automated workflow can provide users of different channels with an omnichannel experience full of relevant and timely messages via the channels of their choice.
Expect 2023’s stand-out brands to build consumer confidence and reinforce value by promoting competitive differentiators and customer-first policies, and utilizing customer-generated UGC, customer-preferred channels, and behavior-based automation—allowing them to build stronger relationships with their customers and pivot away from the deep-discounts that are killing their margins.
Loyalty programs becoming a central part of the user-journey
The cost of living crisis, war in Ukraine and Covid-19 pandemic have resulted in consumers tightening their purse strings and being more considerate when making purchases. That’s why now, more than ever, merchants are focusing on retention over acquisition.
In 2023, we foresee more and more merchants not just implementing loyalty programs but making them a more central part of the user-journey.
We have seen these implementations become increasingly more sophisticated and personalized and imagine this ecommerce trend will continue; by signposting better and creating more targeted loyalty touch points across the customer journey, users are more likely to convert.
If, for example, a user doesn’t have an account, their call to action should be different from a user who does but who isn’t logged in. The former should be made aware of the benefits of creating an account (points for signing up, free shipping etc), while the latter should be reminded of their loyalty status – how many more points they have to earn before reaching the next tier, for example.
Similarly, if a potential customer regularly browses a specific product or category but hasn’t yet converted, merchants could target them with a personalized incentive to purchase – say unlocking a certain reward or offering an exclusive discount on their next purchase.
You can also engage customers by asking them to write reviews, follow your brand on social media, sign up to newsletters or refer friends and family as well as exchange points for vouchers, gift cards or custom rewards such as free products or shipping.
Adding a points slider to the checkout page is a great way to increase the effectiveness of the programme, as is the use of loyalty emails, SMS messages and real-time on-site notifications featuring unique data.
Other stages of the customer journey that are worth adding loyalty touch points to include the homepage, product and category pages, pop-ups, push bag and cart page.
Consumer behavior has changed significantly since the start of the COVID-19 pandemic over two years ago. While digital sales enjoyed a nice surge thanks to stay-at-home orders, things have shifted now that people are resuming more of what we consider a “normal” routine, and that includes spending more time shopping at brick-and-mortar stores. As a result, ecommerce growth has slowed a bit this year since its peak during the pandemic. Couple that with rising inflation, supply chain kinks, shifts in advertising strategies, and whispers of a global recession, and things are bound to change in the ecommerce landscape.
So what’s ahead for the ecommerce industry in 2023? With budgets being slashed, it’s no secret that brands are spending less on new customer acquisition and honing in on their existing customers to weather the storm. Brands need solutions to both, which is why we predict that community and – and by extension, social commerce – are going to be key for 2023. Each of these helps to drive customer loyalty at relatively low cost to the merchant. And ultimately, customer loyalty leads to growth!
Building community – whether an army of advocates or a formal ambassador program – out of your individual prospects and customers keeps them more sticky: not only will they be more actively engaged with your brand, it will drive them to purchase more. But it’s important to meet them where they already are: social media platforms, specifically Instagram and TikTok. Inspiring and rewarding your customers for sharing about your brand on social media is an effective way to build community, and mechanisms that help facilitate this are going to be key. That’s where the Gatsby x LoyaltyLion integration comes into play: using our tools together, you can identify and connect with your customers on Instagram and TikTok and build loyalty by driving social engagement.
All of that leads us to social commerce: while it’s been around for a couple years, we predict that it’s going to take center stage in 2023 as customers have become more comfortable using their favorite social media platforms to not only discover products, but purchase them as well. And as your community base becomes more engaged with your brand on social media, it ensures that their friends and followers will discover your products, too. Think of it like people watching meets window shopping!
Building a conscious network in 2023
We believe that 2023 is going to be all about building a Conscious Network, building on the foundations of conscious consumerism. Change doesn’t happen overnight, but if this isn’t something your business has thought about before, 2023 is the year to start.
The demand for sustainable and ethical credentials from the brands that consumers buy from has exploded over the last few years, and with this, ecommerce brands need to focus on more than just their own green credentials. Brands need to highlight more than just their own environmental impact, but demonstrate that they also care about the impact of those that they do business with – from their packaging providers to their website hosting company.
Building a Conscious Network is all about partnering with the right people, asking the right questions of your existing partners, and having open and honest conversations internally with the longer term goal of making planet-positive decisions.
With customers being much more focused on who they’re spending their money with, it’s vitally important that brands shout loud about their proposition, network and brand values. Offering consumers a compelling reason to choose your brand over another (especially in the current financial climate) is crucial for longer term customer engagement and repeat sales. This is particularly important for the type of sustainable, planet-conscious brands that we partner with.
Online goes offline
In previous years we saw a rise in brick and mortar stores moving online. However, in 2023 we expect to see a reverse of this trend with online-first brands looking to expand into physical stores. Despite many people migrating out of cities due to the COVID-19 pandemic, rent levels are back on the rise with people choosing city life again. This results in a resurgence of the high street.
The new Gymshark store on Regent Street demonstrates an ecommerce brand that is now experimenting with traditional retail, showcasing the trend on a large scale. However, lots of ecom-only brands have diversified to opening physical spaces, both permanent and temporary.
Footfall is often an effective and forgotten-about marketing channel. But, when the correct location is chosen, having a physical presence can help brands reach more of their target audience outside of paid channels.
Astrid & Miyu is a great example of a digital-first brand that has since turned its attention to physical stores. The integration with LoyaltyLion runs seamlessly across both offline and online. This helps create more experiences between customer and brand, and therefore more conversion opportunities.
With brands that are yet to launch a retail store, an initial place to start is opting for a more limited retail solution in the form of a pop-up store. The pop-up concept is a great way to test your brand in a new format with less commitment. It can also form the basis of marketing campaigns. P&Co have created tiers as part of their ‘Loyalty Department’ program which gives their most dedicated customers exclusive invites to pop-up stores and sample sales. This in turn gives a more experience-driven incentive to engage with the brand.
Far from a new concept, the in-person experience gives brand owners the opportunity to learn more about what customers want first-hand. This ultimately helps build a personal connection with the brand and drives advocacy. When the offline and online experience is seamless there is much more value to be gained and this an ecommerce trend we expect to see in 2023.
The post-purchase experience becomes even more important
Retention is getting more and more attention. And this will not stop in 2023. One element in particular you should watch out for in 2023 is the post-purchase experience. You will see that more and more of the leading D2C brands are heavily focusing on improving the experience after the customers have placed the purchase. This is nothing new – improving the post-purchase experience has always been a crucial part of running a successful online store. But with so many tools at your disposal, it has never been easier to provide your customers with an outstanding experience. Here are the top 6 drivers that will help you bring your post-purchase experience to the next level, turning one-time buyers into long lasting loyal brand advocates:
1. Delivery timings: Improving your delivery time is a great way to surprise and amaze your customers. A faster delivery results in higher satisfaction, higher likelihood of repurchase rate but also positive side effects such as more positive reviews.
2. Packaging experience: Receiving the parcel is the first physical touch point between the customer and your brand. Make it memorable. Custom packaging, personalized flyers or a personal note – there are so many options to stay in mind and have your customers talk about the unboxing moment.
3. Personalized communication: Keep in touch with your customer after the order has been placed. Let them know about the status of your order, or share how-to guides or further inspiration that adds value. Email has been the go to channel so far but conversational commerce via whatsapp and other channels will increase in importance throughout 2023.
4. Customer support: The key to successful support is easy: be there, show that you care, and try to find solutions. Even if it might seem trivial, good support will grow further in importance in 2023 as a key driver for retention.
5. Creating a returns experience: Stop seeing returns as a cost center and start seeing it as a vehicle to drive happiness and retention – this is a trend that has already started and will further expand in 2023.
6. Relationship building: Invest into building strong customer relationships. Through club memberships, special perks for your VIP customers, or bringing like-minded people together in offline events or activities. Be creative, your customers are waiting to engage with you in 2023.
Investing in your post-purchase experience will be a key driver for retention in 2023, and it’s your chance to turn one-time customers into loyal brand advocates!
With retention dominating the ecommerce landscape like never before in 2023, now is the time to start making the necessary changes that will give you a head start! To sum up, here are some of the goals you need to be shooting for:
- A slicker than ever omnichannel experience
- Improved personalization capabilities
- A dedicated strategy for social commerce and community
- Increased loyalty touchpoints through the customer journey
- Rethinking metrics and prioritizing Customer Lifetime Value
Want to hear more from our ecommerce trends contributors in a live panel event? Click here to learn about the webinar and register your attendance! You’ll come away with even more actionable insights that will help to remove the guesswork from Q1 and beyond.