Brands and merchants are constantly adapting to the ever-changing forces that shape the retail landscape. From product conceptualisation to returns, retailers and brands with DTC ecommerce channels create and implement strategies that will help ensure success and profitability.
In light of recent uncertainty regarding the economic outlook for 2023, many retailers will focus on customer experience, improving process efficiencies and reducing costs. In order to accomplish this, retailers must balance customer loyalty with operational efficiency, and humanise the digital experience by leveraging technology.
Sustainability is at the Forefront
2023 is expected to be a pivotal year for sustainability as brands and retailers make it a strategic imperative. Consumers are increasingly adopting more sustainable behaviours including looking at product impact and choosing brands that align with their values. Consumers now expect businesses to do the same. According to the findings of the EY Future Consumer Index, 55% of consumers think businesses should drive better company behaviours, and 72% feel organisations should be driving better social and environmental outcomes. As social and environmental problems related to sustainability become more prominent, we are fast approaching a tipping point where scaled action will be required. Good intentions will no longer satisfy consumers.
Circular fashion is gaining traction in the retail landscape as a necessary concept for the industry. According to consultancy McKinsey, one in five garments will need to be traded through circular business models by 2030 if the fashion industry is to meet the 1.5°C limit on global warming set out in the Paris Climate Agreement. Globally, the second-hand market is expected to have grown by 24% in 2022. That report estimates that the US second-hand market will more than double by 2026, reaching $82 billion.
Circularity covers rental, repair, resale and recycling and presents retailers with additional revenue at an uncertain time for the industry. Resale in particular is presenting an opportunity that is increasingly hard to ignore. Adding second-hand DTC channels and storefronts to a retailer’s offer doesn’t just open a new revenue opportunity. It also helps drive traffic to a brand’s brick-and-mortar locations as well as to the brand’s flagship ecommerce site.
From a consumer perspective, the impact of inflation is driving increased interest in used goods. And many, particularly younger consumers, appreciate that circular fashion is widely seen as a more sustainable form of consumption. Given the benefits of sustainable responsibility, revenue opportunity and consumer demand, brands’ acceleration of resale adoption is only set to continue in 2023.
Omnichannel is King
Omnichannel investments are top of mind for retailers in 2023. According to a recent Deloitte survey nearly eight in 10 retail executives foresee enhancing the omnichannel experience as a top growth opportunity in 2023.
The terms omnichannel and seamless experience have become synonymous in today’s retail landscape. From site to store, consumers expect a seamless experience, and retailers are continually striving to meet this demand. Retailers are turning to a variety of strategies to cultivate this omnichannel presence. They are employing everything from clever branding to smart third-party partnerships to high-tech fulfilment.
To run smoothly, omnichannel operations require a strong fulfilment network. Fulfilling the inventory closer to the consumer enables a more efficient, seamless delivery experience, while reducing the need for costly last-mile delivery. Retailers should revisit their distribution strategies. Merchants should look to optimise by expanding stores’ roles as fulfilment centers and utilising local warehouses and distribution centres. Furthermore, businesses can streamline the purchase journey by offering multiple delivery options including BOPIS (buy online, pickup in store). BOPIS has proven to increase conversion while giving the consumer a convenient delivery option.
Simply put, an omnichannel local-fulfilment strategy blends the best of both physical and online retail, with undeniable bottom-line and environmental benefits.
Returns will Impact Customer Retention
Returns are another top priority for retailers this year. It is expected in 2023 that return volumes will grow by 4.2% to over $200 billion total value. As the economic downturn continues in 2023, returns will become an even more pressing concern in the retail landscape. Consumers will continue to practice bracketing and are set to become more selective with their purchases due to budget concerns.
Convenience is key for consumers this year and retailer return policies will play a big part in customer loyalty. Many retailers have changed their approaches by charging for returns for online orders due to the pressure of tightening margins. Consumers are willing to pay for returns if the retailer provides a more convenient and premium customer experience. However, retailers will need to thread this needle carefully as this may impact customer loyalty in the long run.
Consumers continue to have high demands and expect retailers to provide simple and convenient return processes. To address demands, retailers with DTC ecommerce channels will continue to develop strategies by leveraging partnerships and investing in returns. Examples of the developments in return processes include scheduled return pickups at home and curbside returns. Some luxury retailers have introduced premium services that allow consumers to try on at home while they wait for confirmation or take back returns.
Technology will also play a huge part in the coming years by improving retailer selling platforms. Augmented Reality (AR) virtual try-on technology is gaining traction and will help to personalise size recommendations for the end consumer. That, in turn, will help reduce the practise of bracketing and improving the overall customer experience. This technology is still in the initial development stages. But more and more retailers have begun launching their own virtual try-on services so this is a trend to watch.
The Future of Ecommerce Payment is Bright
The payments landscape is another area of focus for retailers in 2023. A faltering global economy will put an emphasis on efficient, convenient and secure payment methods.
Brands can improve the customer experience through technology like Buy Now Pay Later (BNPL) and digital payment solutions that address customer preferences. It is expected that consumer spending on BNPL platforms will increase over the coming years reaching $437 billion globally by 2027. In response, several Big Tech companies continue to adjust their strategies and move into financial services to meet consumer demands.
The global economy as well as new and developing technology will continue to shape payments strategies in the retail landscape. Retailers and brands with DTC ecommerce channels that embrace this change and adjust strategies will find themselves ahead of the competition.
The last several years have proved that there is no sure way to truly know the future. However merchants and brands must understand the retail landscape and make investments that will get them as close as possible.
For more insights into global market opportunities, download the latest ESW Global Voices Report. ESW surveyed more than 16,000 shoppers in 16 countries and compiled the results to help brands make data-driven decisions. Download now.
If you’re looking to expand your DTC ecommerce channel globally, it is essential to understand the consumer demand in your target market. Don’t go it alone. Contact ESW and learn how the right partner can help you achieve your goal.