Global Commerce Trends in 2023.

In this article The rise of Performance Commerce  Ad-assisted commerce: making the data leap Striking a balance between DTC and retail Endless possibilities in social media Retail Media Networks: emerging players and new metrics Download the trends report

The rise of Performance Commerce 

Predicting the future is never easy, some of what you’ll read in this article simply won’t happen, some you could argue already has. However, if you’ve ever wondered what gives agencies the right to even try to spot trends, consider the fortunate position we sit in. We don’t just work with one client; we work with hundreds, and on top of that we get access to Request for Proposals (RFPs) from many more brands. This gives us a unique insight into global brands’ strategies.

While of course all this insight is confidential and cannot be shared, it does allow us to spot, and comment upon, the general direction of travel. One clear trend is the move to performance commerce. Very few brands are calling it that yet, and they very well may not, but the ask of many of our existing and prospective clients is clear.

Only a few years back, most RFPs that landed with IPG Mediabrands (where Reprise Commerce sits) were almost solely focused on brand awareness. Performance, if it was mentioned at all, was an add-on. Last year, and most certainly this year, we’ve seen performance take the center stage in most briefs we’ve received.

Opening statements have changed from, “Make me famous” to “Hit $Xm revenue target”.

In the latter part of this year, we’ve also seen commerce and performance merging, or at least the language used in RFP’s doing so. Pre and during COVID there were Commerce only briefs, now commerce is included in the wider media and performance marketing briefs and the expectation, quite rightly, is that brand awareness, performance and commerce all work as one.

So, performance and commerce are increasingly going to mean the same thing, at least for brands whose goal is to make a sale. This is of course a good thing. You want the people that manage the PPC campaigns that drive to your DTC site to also fully understand the activity on Amazon, Walmart, Mercado Libre, Shopee, etc. You also want the brand awareness team to work hand in glove with those responsible for Retail Media Network activation.

Performance Commerce is more than just joining two words together, it’s a new and better way of organizing your sales and marketing strategies and teams, both in agencies and in-house. In short, make sure those teams are at the very least well linked, ideally under the same roof.

Ad-assisted commerce: making the data leap

As digital marketers, when we think of commerce we think of Ads of all shapes and sizes, the data they produce, and the conclusions we draw from them.

We should also think about sales and profit because without a sale at the end of the Ad journey, we can’t call it commerce. The goal for brands is for advertising data to inform sales, and for sales data to inform advertising. The connection – or joining together – of Ad data and Sales data is our industry’s Everest, the mountain that sits in the middle, drawing the eye of media and marketplace giants who hope to make it to the summit and plant their company flag.

For Ad-assisted commerce to succeed, there must be a data connection of some kind. More of these connections are hitting the market every day, and we’ll continue to hear about them throughout 2023. The challenge is that each one takes a new route, forging a new pathway to the top of the mountain. Some of them lead to dead ends, and some will prove good enough for now but will eventually be superseded.

Facebook Collab Ads solved the data measurement piece using the Facebook pixel. Last year, Google wound up its Shopping Campaigns with Partners solution because it was too complex. TikTok are creating TikTok shops, which start with an Ad on the TikTok platform, drive to an immersed shop and pull directly from their owned warehouse – that’s a brand-new model for the West taking place inside a walled garden.

The truth is that for marketers, it’s not getting any easier. At Reprise Commerce, our remit is to be an expert in every data connection, as well as the hundred or more unique tasks that sit behind each one. There are myriad dependencies and checkpoints that we didn’t have to think about before. Does this tag work? Does it tell me how much stock is left? Is my strategy working to a hard goal?

Because these systems are constantly in flux, they don’t necessarily have a stop button, but if stock is out, the shelf is empty – so of course the ad shouldn’t be running. Yet even in highly commerce-enabled 2022, ads promoting out-of-stock products were commonplace.

Ultimately, our systems need to change, as will the way we budget and make ad-buying decisions. Nothing is industry standard yet, and companies are making the data leap in any way they can. If 2022 was the year we learnt to catch up on the post-COVID commerce boom perhaps 2023 will be the year that we have the data, tools and systems to exploit it more effectively.

Striking a balance between DTC and retail

In light of the worsening economic outlook for 2023, consumers will inevitably be more cautious with their spending. On the first Amazon Prime Day in 2022 (they later added a second), 28% of shoppers admitted they passed on an item that was a great deal but didn’t feel it was necessary.[1]

For brands, this reinforces the importance of making the customer journey as frictionless as possible. In recent years, we’ve seen brands flooding to Amazon to quickly scale their audiences, but increasingly we are asked by clients to increase focus on their DTC websites. However, while this is commonplace in the West there are regional differences, for example in Latin America, more than 90% of consumers prefer to transact with retailers over DTC sites.

A common client challenge in 2023 will be helping to strike the right balance between directing consumers to their website and giving them the freedom to shop where they want to shop. Experience will play a huge part in this; Amazon Prime members will defer to the platform because the experience is frictionless. Free delivery, next-day delivery, one-click buys, and scheduled deliveries all play their part in encouraging purchases. Paying for deliveries or not offering next day delivery will increasingly become barriers to conversion.

Many of the brands getting DTC right are subscription services. Billie in the US is a razor company with an incredibly user-friendly website. They offer free delivery over $15 – which customers will nearly always spend – and for subscriptions, delivery is always free. They offer bundles as a primary product, recommendations at checkout to increase Average Order Value (AOV), options to adjust the subscription frequency and even customizable products (like colored razors).

Another means of keeping bottom lines stable amid financial insecurity is to offer budget-conscious options and consumer-friendly policies. Netflix has introduced a lower price point product that includes ads; basic subscription packages allow customers to continue engaging when they may have otherwise canceled or considered a competitor’s product.

Brands should also review their store policies – particularly their returns policy, as 67% of shoppers check the return policy before buying online.[2] A policy that makes returns difficult or expensive will not prevent a customer from returning an item, but it will discourage them from coming back. Brands are at greater risk of losing competitive share versus less turbulent economic times because consumers are more willing to shop across platforms and browse competitors.

Endless possibilities in social media

Social media is fizzing with potential right now. New platforms are appearing, and social commerce is diversifying into live streaming, social shops, shoppable content, virtual worlds, and many other interesting tributaries. Social commerce isn’t diminishing with younger generations either, 97% of Gen Z consumers use social media as their top source of shopping inspiration, but they are our most savvy generation of shoppers yet.

Gazing East: live commerce remains untapped potential 

Has live commerce been overhyped in the west? Perhaps so, but we still see huge potential. 2023 may not be the year, but the year will come. Anyone over 35 will recall that we had several, “year of the mobile” before it actually arrived. The format has already exploded in China. In 2021, the value of the live-streaming eCommerce market in China reached about 2.27 trillion yuan and is expected to reach 4.9 trillion yuan by 2023.[3]

Brands are understandably keen for this to catch fire in the rest of the world, but the reality is that we’ve been a little bit slower on the uptake, particularly in Europe and the US.

So far, social platforms have mostly taken a drag-and-drop approach to live commerce, lifting the model from the East and dropping it into the West, without much appreciation for the cultural differences between the two. We live in a richly connected world, but regional differences can be vast

It makes sense that the West is slower to follow the East. The US primarily learned eCommerce on desktop computers, using multiple tabs to do price comparisons, while in the East eCommerce rose with mobile and they’ve learned a sleeker, faster form of shopping as a result.

Now, however, some brands in the West are getting excited about live commerce, especially impulse-driven brands. That’s where live commerce is going to see most traction. It’s going to be the brands that used to own the checkout aisle in supermarkets; candy brands, snacks, the things that people grab on their way out that maybe they’re not looking for but can be enticed into making a purchase.

It will be fascinating to see how social companies approach live shopping – TikTok, for example, is looking at Amazon’s ownership of the end-to-end commerce experience and wondering why they should just be the front end of a purchase. We’re going to see TikTok compete for fulfillment in the West in 2023, and other social companies are sure to follow suit.

There are two elements in China that we know are working. Firstly, the influencer or subject matter expert – someone who is an ambassador for a brand or product and has the authority to bring in viewers. Second, competitions or discounts incentivize and encourage people to engage and stay with live shopping broadcasts.

In the rest of Asia, as in China, we expect to see a rise in influencers who specialize in live selling, and the emergence of agencies who manage these talents, such as the Qianxun Group in China which has evolved alongside the market.

For this model to succeed in the US and Europe, brands and agencies need to recognize that the heavily monitored, scripted, or tightly controlled approach they are familiar with will not work with live commerce – its value is in the authenticity that comes from an influencer talking to their audience as they would a friend or family member.

Consumers will very easily sniff out inauthentic messaging. Gen Z is better than any generation has ever been at this – they’re the generation that’s on TikTok, trained in mobile-first, and the ones that are adopting live commerce first.

How the large retailers and marketplaces step up to head off the charge from TikTok will be fascinating. Amazon has some live capabilities with its own QVC-style show that runs on certain tentpole events, but brands haven’t figured out exactly when to use it and where it lives. Customers haven’t really figured it out either, possibly because Amazon is still in Beta mode, or perhaps because Amazon doesn’t view live as a viable option for the West right now.

The questions to be answered are where will live commerce take off – be that on YouTube, Twitch, Instagram, TikTok, or somewhere else – and what kind of content will resonate enough for people to stay engaged and make a purchase? The most valuable live commerce content will be geared towards evergreen material, with scope to be watched live as well as reused and amplified post-event.

Ethical consumption and authenticity

Another trend that is now shaping social commerce in the West, particularly amongst Gen Z, concerns authenticity and ethical consumption.

Startup platform BeReal encourages users to post once a day, showing exactly what they’re doing at that given moment, and functioning as an anti-curation, pro-authenticity platform. Another new entrant, WeAre8, has a zero-tolerance policy on hate, whilst supporting charities and climate solutions and sharing advertising profits with users.

These more authentic, ethical approaches to social media pose a new challenge to brands because obvious sales pitches and brand pushes will stand out as inauthentic and likely make a poor impression on discerning Gen Z audiences.

The social landscape is in a state of flux as we enter 2023, with new platforms, privacy policies and content features cropping up and competing on a weekly basis. Ultimately, however, brands should avoid doing things just because they’re popular. Instead, they should try to understand their high value audiences (HVAs) as deeply as possible to identify which trends might resonate with them.

Retail Media Networks: emerging players and new metrics

Retail Media Networks (RMNs) will continue to be the hottest property in commerce in 2023 and beyond, with expectations that the medium will be worth $100 billion worldwide by 2024.[4]

The space is becoming more crowded as more retailers develop their own RMNs or launch with partner platforms like CitrusAd or Criteo. In the US and China, Retail Media is dominated by the big eCommerce players Amazon (US), Alibaba, and JD.com (China), but a long tail of region or vertical-specific networks is emerging.

In Europe, a broad range of languages and cultures has resulted in a diverse landscape of RMNs with retailers taking different approaches. In the UK, health and beauty retailer Boots has partnered with data collaboration platform InfoSum, whilst the grocery juggernaut Tesco has developed its own solution using its in-house data science company Dunnhumby. In APAC, a similar group of smaller RMNs, including platforms like Shopee, Lazada, Zalora, and Qoo10, cater to regional differences.

Offline-to-offline measurement

For years, the Holy Grail of Retail media has been to understand what happens offline based on offline purchase data. Walmart was one of the first to launch methods to track this behavior, and grocery stores often do an excellent job with this because they have a loyalty card scheme to track purchases. Some retailers bring in panel data, but it’s often not as one-to-one as brands really want.

Amazon is now bringing in its own panel data, and that’s powerful because they have 300,000 active users between the US and the UK who send them their receipts when they go shopping.

This data will show Amazon whether a consumer who was served an ad for perfume through Amazon six days ago, went out and bought that perfume at Nordstrom (US) or John Lewis (UK) for example. Sure, it was at another store, but based on the sample size it’s now possible to extrapolate that behavior and give an accurate picture of the connection between ads that are running through Amazon’s Retail Media Network (RMN) to sales that are happening much more broadly.

Previously, RMNs could give an extremely specific ROAS, but were often penalized because they were lower than other more traditional forms of digital marketing. Now, Amazon and other retailers will be able to capture the halo effect of RMN ads – when people see an ad and then buy in-store or at a different retailer.

Other retailers have been working on this and have unlocked it in different ways, but often brands are quicker to adapt when something comes to Amazon. In Canada, retail media has been dominated by Amazon and Criteo, which covers a suite of important retailers including Best Buy, Canadian Tire, Costco, Walmart, and a growing list of CPG brands.

However, Loblaw, the largest Canadian food retailer, will make a serious step in the digital advertising industry in 2023 with the release of its DSP (Demand Side Platform) – Media Aisle. Why does this matter? Through its PC Optimum loyalty program, considered to be the most complete loyalty program in the Canadian market, Loblaw will be able to offer a new take on offline-online sales attribution metrics that will likely drive more attention in 2023.

They will be able to provide 200+ exclusive first-party audience segments, generated through real transactional data, to empower ads to reach real customers with high relevance to brands and categories, whether they’re shopping in-store or online.

What Amazon is doing directly, however, instead of through a partnership, may enable them to provide greater insight than its competitors. Amazon knows, for example, that online, a consumer is buying mascara and a certain type of skin cream. This will show Amazon if the consumers are acting the same way at other in-store retailers as they are on Amazon. Are they building the baskets the same way? How is it different in a store?

That kind of information is incredibly valuable and could really help brands start to figure out how they might change their messaging, or how they should be building their bundles online. It can also be a huge retail merchandising breakthrough.

Essentially, it’s about having more data, building the right ways to explore it, and then understanding the changes that should come from it. It’s going to be a brave new world.

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References

[1] https://www.statista.com/statistics/1281104/inflation-impact-on-amazon-prime-day-united-states/

[2] https://parcellab.com/en/blog/what-do-customers-expect-from-an-online-retail-returns-policy

[3] https://www.statista.com/statistics/1127635/china-market-size-of-live-commerce/

[4] https://skai.io/wp-content/uploads/2022/04/Retail_Media_Survey_Report.pdf

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