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E-Commerce Trends Summary of E-commerce Status for 2022 and Predictions for 2023_part 2

Registration dateMAY 03, 2023

Summary of E-commerce Status for 2022 and Predictions for 2023_part 2
1. Global E-Commerce Forecast and Trends for 2023 1) Global E-Commerce Growth Forecast Data for 2023
While the growth rate has been somewhat slowed down, global e-commerce in 2022 has not been as sluggish as many experts have expected. In 2023, the e-commerce business is predicted to reach $6,310 trillion in sales, a 10.4% growth from 2022, accounting for 20.8% of the total retail market.
[Global Retail E-commerce Sales (2021-2026)] Global Retail E-commerce Sales (2021-2026) Global Retail E-commerce Sales (2021-2026) (Source: Retail ecommerce sales worldwide, 2021-2026[01] )
In particular, the region with the fastest e-commerce business growth is expected in 2023 is Southeast Asia, where 18.6% growth is expected, as seen from the fact that as many as five Southeast Asian countries are included in the world’s top 10 fastest-growing e-commerce countries in 2023.
[Global E-Commerce Sales Growth by Region (% change)] Global E-Commerce Sales Growth by Region (% change) Global E-Commerce Sales Growth by Region (% change) (Source: Retail ecommerce sales growth worldwide[02])
[2023 Top 10 Countries Ranked by E-commerce Sales Growth (% change)] 2023 Top 10 Countries Ranked by E-commerce Sales Growth (% change) 2023 Top 10 Countries Ranked by E-commerce Sales Growth (% change) (Source: Top 10 countries, ranked by retail ecommerce sales growth 2023[03])
2) 2023 E-Commerce Trends
Then, what will be the trends of rapidly evolving e-commerce business for 2023?

Some key topics of e-commerce in 2023 include the following: expansion of mobile commerce, growth of social commerce, enhancement of live commerce and customer service, adoption of omni-channel marketing strategy, expansion of AI-based shopping experiences (metabus, voice shopping, augmented reality, chatbots), convenient payment methods, ESG shopping, and expansion of subscription economy. All of these various trends can be narrowed down to ‘diversification of sales channels and customer satisfaction’. In other words, these trends can be best represented by adoption of multi-channel and omni-channel.

Multi-channel
Multi-channel is a concept illustrating that sellers must operate various channels to make impression to customers and increase sales by exposing products through different types of sales channels including mobile shopping, social commerce (Facebook, Instagram, TikTok, etc.) and live commerce. The trend of multi-channel will become ever more significant in 2023.

Many sellers are not yet familiar with mobile shopping and social commerce using social media, and others do not realize the necessity to operate multi-channel because sales from Amazon or Shopee alone are satisfactory at the moment. However, the importance of these channels has been addressed even before the COVID-19 pandemic, and has become more prominent throughout the pandemic.
Multichannel related illustrations (Source: Multi channel[04])
Omni-channel
With the development of technology, consumer behavior is also changing. In line with these changes, various advertising technologies and marketing strategies keep evolving.

Expansion of AI-based shopping experiences such as metabus, voice shopping, augmented reality and chatbots, and enhancement of customer service are all aimed at increasing customer satisfaction.
Illustration related to omnichannel (Source: Omni channel[05])
This is where the importance of omni-channel is highlighted.
Omni-channel is a newly coined term that added ‘channel’ to the Latin word ‘Omni’, which means ‘all’, and has become a popular keyword with the spread of contactless culture since the pandemic began. Omni-channel strategy aims to increase purchase conversion rate by offering consistent brand purchase experience for customers, regardless of platforms and devices used by customers as well as marketing strategies employed by companies.

Have you ever heard of words such as ‘Showrooming’ or ‘Webrooming’?
Showrooming refers to an act of exploring product information at offline stores and making a purchase at online websites that offer the product at a cheap price. The term is a combination of ‘Showroom’ – offline shelves where products are displayed – and the suffix ‘-ing’, meaning offline shelves are turning into online shelves.

On the other hand, Webrooming refers to an act of searching for product information on the open web and then physically check the product at offline stores before making a purchase.
Showrooming, Webrooming-related illustrations (Source: Webrooming and Showrooming[06])
As such, customers engage in shopping activities by making use of various channels. Therefore, omni-channel that allows customers to purchase products conveniently regardless of their location and values customers’ shopping experience is undeniably an important marketing strategy.

When conducting omni-channel marketing, ‘consistency’ and ‘detailed analysis’ are the most important factors. Before hastily rushing into omni-channel marketing, sellers must build up a systematic strategy and take an integrated approach based on solid database.

However, there is no need to take this too seriously. Global e-commerce sellers who prioritize customer satisfaction will find it familiar to carry out omni-channel strategies. First, create various communication channels such as websites and social media channels, and send e-mails to customers that deliver the same message to encourage their participation. Remember that everything starts with taking a first step, and omni-channel is a slow process that requires time. 2. Basic Plans for Global Sellers’ Sales Increase in 2023 In its “2023 Economic Outlook”[07], the Korea Institute of Finance forecasted a somewhat negative outlook of the Korean economy, stating that the growth rate is expected to slow down from 2.6% in 2022 to 1.7% in 2023.

The “2023 Global Economic Outlook”[08] released by the Korea Institute for International Economic Policy is even bleaker.
In 2023, the world economy is expected to record a growth rate of 2.4% (PPP exchange rate basis), which is 0.7% lower than in 2022, as the recovery is suppressed amid tightening and fragmentation, with geopolitical risks such as △spillover of sharp rise in interest rates and private debt burden to real economy △dilemma of fiscal policies △Russia-Ukraine situation △strategic competition between the U.S. and China continue to act as additional downside factors for global economic growth.
Would it be possible to maintain an optimistic outlook on the e-commerce business?

Personally, I would say NO. E-commerce business requires more effort due to low entry barriers and it is definitely not easy to succeed in this business. Furthermore, the ongoing endemic and global low-growth trends of 2023 will likely have a negative impact on e-commerce. Most sellers perhaps should focus more on holding out rather than on achieving growth.

As a brief example, many Amazon sellers would have been surprised to see Amazon’s increase in FBA fees in 2023. Amazon spends operating expenses in various items, such as platform usage fees, advertising expenses, and logistics expenses incurred by international shipping, even after deducting product costs. In this situation, FBA fees could increase significantly, thereby reducing profits.

Shopee is also seeing an increase in VAT by country as well as rising fees. The products that I am currently selling on Shopee weigh about 1kg. When one product is sold, its sales commissions, transaction fees, CCB+FSP service fees, and actual shipping costs account for about 40% of the total costs. When additional advertising costs are added, the market-related costs take about 60% of the total cost, and the total cost can even record negative if a seller participates in giveaways or deal events. Therefore, Shopee certainly requires considerable general expenses, and sales revenue will inevitably decrease along with the rising fees.

Such falling profits relative to sales is undeniably the biggest threat to sellers. Therefore, sellers need to think carefully about strategies to control variable costs such as advertising fees and logistics fees, while at the same time developing a strategy to prevent customers from losing interest in their brands. The survival of brands depend on whether customers stay or not – which is the biggest reason why sellers must continue to focus on increasing customer satisfaction.

<Three ways that sellers can increase sales>

1) Greater exposure of brands
2) Larger sales volume
3) Higher customer transaction

To increase exposure, it is important to focus on increasing external traffic such as Off-Amazon / Off-Shopee traffic, instead of focusing on CPC (Cost Per Click) ads. To generate more traffic, optimizing advertisements, collaborating with influencers, exposing products on multiple channels, and understanding and applying various omni-channel strategies will be the key points.

In particular, partnering with influencers can be one of the effective ways to quickly spread the words about products and thus is considered important by platforms.

To increase sales volume, sellers are recommended to focus on internal advertising, listing optimization, image enhancement, and marketing techniques such as bundling that can increase the product quantity in the customer’s shopping cart with a single purchase. No matter how many ads you run and how much traffic you attract, if your product detail page is unorganized and is not appealing to customers, it will be a waste of money.

Lastly, in my opinion, increasing customer transaction will likely be somewhat challenging. According to NielsenIQ’s 2023 Consumer Outlook Survey, as many consumers experience social and anxiety factors such as inflation, they tend to spend more on essential items such as education, groceries, transportation, rent, while reducing spending on variable factors such as health, sports, traveling, and dining out. 77% of the respondents said that their purchasing power is restrained due to economic instability.
[Spending Intentions for Next 12 Months] Spending Intentions for Next 12 Months (Source: Spending intentions for next 12 months [09])
[Impact of Current Events on Overall Household Financial Situation] Impact of Current Events on Overall Household Financial Situation (Source: How have current events impacted your overall household financial situation[10])
Furthermore, a survey carried out by JungleScout revealed that consumers are making purchases by placing focus in the order of ‘free delivery, low prices, and convenience’, unlike the past.

This trend shows that consumers generally prefer to buy high quality products at lower price, which has become more pronounced recently as more and more consumers are dealing with unstable economic situation. Therefore, a new brand that has positioned itself with extremely high prices may face limitations in winning customers’ heart.
[Reasons of Making Purchases Online] Reasons of Making Purchases Online (Source: How have current events impacted your overall household financial situation[11])
E-commerce is undoubtedly one of the most prominent and fastest-growing industries in the world, meaning that competition will inevitably become fiercer and everything will change rapidly. However, as seen in the above, the outlook for e-commerce business in 2023 is not very bright. Therefore, sellers need to come up with innovative ideas and new strategies to capture customers’ heart, going beyond the traditional ways and means of marketing they have employed thus far.

CEO Ju Young SeoCEO Ju Young Seo