As Australians grapple with rising inflation and the cost of living, it’s no surprise consumer spending has started to slow. While the year may have begun strongly for online retailers with a surge in online traffic, the future is looking more uncertain, threatening to see this year’s holiday season sales momentum cut short.
So, with 2022 in the rear-view, what will be the defining retail trends of 2023? From the rising value of first-party data and owned channels to the importance of convenience and personalisation, despite uncertainty, 2023 is shaping up to be a year of opportunities for retailers to connect with their customers and drive success.
Customer experience will decide the winners and losers
While the COVID-19 pandemic significantly accelerated online shopping for both consumers and businesses, as retailers prepare for an economic recession, consumers have become more selective with their spending. Gone are the days when point-collection schemes were enough to keep customers returning; retailers must now offer a seamless digital experience from the top down, and first-party data helps marketers build these experiences.
Email and SMS marketing are two examples of where businesses can leverage first-party data to improve the customer experience. While marketers have traditionally relied on generic ‘batch and blast’ email and SMS marketing campaigns, these are typically not high-converting, and, if the messaging is irrelevant, risk potentially annoying customers. First-party data – importantly, looking at previously viewed products, categories and basket behaviour – equips marketers with the information to craft personalised, high-converting campaigns, and deliver communications through the right channels at the right time.
Brands must also be strategic in their messaging to maintain the loyalty and repeat business of their customers. Consumers are becoming more aware of their purchases’ environmental and social impact and are more likely to support brands that align with their values. Retailers can differentiate themselves by being transparent about their supply chain, sourcing materials ethically, and minimising waste.
The returns experience is changing
As consumers become more selective about what they purchase, they’ve also become more selective about the purchases they choose to keep. Online sales, of course, mean consumers can’t touch and feel the product, increasing the probability that items will be returned, with fashion shoppers, in particular, sometimes buying multiple items in different sizes or colours, with the intention to return.
Retailers can make returns as hassle-free as possible by clearly communicating their return policies, offering a simple online returns portal, and providing a range of drop-off and collection options, possibly including free returns, although this will inevitably impact margins. This eliminates barriers to purchase and makes it less risky for the consumer to engage with a brand, especially given that sectors such as fashion see almost 30-40% of clothes bought online returned.
Diversifying channel strategies will be key
Traditional customer acquisition channels are becoming less effective, and with third-party cookies being phased out by Google in 2024, retargeting potential leads will become increasingly challenging. Instead, success will rely on driving operational efficiencies across marketing channels to improve revenue generation.
To do this, it will be vital for retailers to augment their tech stacks with solutions that enable efficient customer identification across owned channels for retargeting, allowing businesses to grow their first-party, addressable audiences by effectively capturing email addresses and mobile numbers on site visit.
With a scaled-up, owned first-party database, there’s much more opportunity to drive revenue from already acquired users, giving marketers much greater control over how they engage, re-engage, and foster relationships with their customers.
The next step is using that customer intent and interest data effectively. This is an area where there’s still plenty of room for improvement, with 94% of consumers reporting that they still receive irrelevant search results on retailer websites. By ensuring customers are presented with relevant 1:1 messaging at every stage in the buying journey – both on-site and in inboxes – brands can expand their revenue generation capabilities and up their resilience during tough economic times.
Jamie Hoey is Australian general manager at Wunderkind.