Huboo eCommerce experts Mark Elward and Peter Edgar explore how recent industry developments will likely shape the future of retail.
By Mark Elward – CMILT, Vice President of Enterprise Sales at Huboo, and Peter Edgar, Chief Financial Officer at Huboo.
The retail industry’s cautiously optimistic outlook going into 2022 has been eroded by strong economic headwinds, geopolitical instability, soaring inflation and plummeting consumer confidence. But for online retailers, there are still opportunities to ride out the downturn and grow their businesses. So let’s reflect on the lessons of a turbulent 2022 and consider how eCommerce can win in the year ahead…
Consumers have already begun cutting down on larger expenses and trading down to cheaper products. In 2022, we’ve seen bundle deals – complementary products bundled together at a discounted rate – become a popular and effective way for retailers to incentivise consumers to increase basket size, while at the same time making them feel they’ve gotten great value for money. This is a tactic Amazon uses to great effect, but we’re now seeing it applied across a range of marketplaces and D2C brand stores.
There has also been significant growth in retailers offering subscription models – where customers commit to regular purchases of products such as alcohol, pet food or contact lenses for a discounted price. This is an astute way for eCommerce brands to secure repeat custom and smooth out sales highs and lows, while having the added benefit of drawing customers away from the big online marketplaces and onto their own websites, where profit margins are higher.
As the market continues to contract into 2023, eCommerce brands need to be extra sensitive to costs and focus on conveying value for money to their customers. Designing effective promotions is more than just slapping discounts on products or holding flash sales. Online retailers need to use sales bundles and subscriptions creatively, actively increasing product sales without devaluing their products or brand.
During the height of Covid, many eCommerce brands were able to adapt their communications to reflect the sombre climate. The most effective pandemic adverts were more restrained and less exuberant, often demonstrating support for broader societal causes. It’s a tactic worth repeating whenever times are tough for the population at large. The 2022 John Lewis Christmas ad is a great example of how retailers can modify their tone to reflect the mood of the nation.
But it doesn’t just apply to grandstand advertising moments. In 2023, everyday brands of all shapes and sizes must pay close attention to the tone of all ongoing marketing efforts – from digital ads to newsletters – to make sure communication is sensitive to their customers’ situation.
The popularity of buy now pay later (BNPL) schemes exploded during the pandemic. To drum up sales at a moment of widespread uncertainty, retailers large and small partnered up with BNPL companies like Klarna to offer flexible payment options and help customers to spread the cost of purchases.
Of course, traditional BNPL – i.e. credit – was a mainstay of retail prior to COVID. The difference is that now retailers recognise these schemes have the ability to influence sales decisions, and so are moving to highlight flexible payment options earlier in the customer journey, rather than at checkout.
As the impact of the cost of living continues to be felt, offering flexible payment terms can be a competitive advantage – particularly on higher-cost items. We expect BNPL to become commonplace across the eCommerce arena, and retailers that see success will be those that think creatively about how to use these schemes to both attract customers and encourage them to spend more.