2022 was a year of slower growth for e-commerce as markets reverted to pre-pandemic levels. Despite this, merchants, analysts, and investors are optimistic that online shopping will continue to grow in 2023. It has been projected that worldwide e-commerce sales will surpass US$6 trillion in valuation and make up over 22% of total retail sales, up from $3.4 trillion to 13.8% in 2019.

However, with the promise of opportunity, we can expect more market movements in the new year owing to the industry's fast-paced nature, new market entrants and consolidations, and constantly shifting business environments. Consumer behavior will continue to evolve, and the boundaries between physical and online shopping will continue to blur. 

To sustain and accelerate growth, e-commerce brands need to look inwards and optimize what’s already available - the lifetime value of loyal customers, otherwise known as CLV. Let us explore the most significant challenges the global e-commerce industry will face in 2023 and how to overcome them.

Challenge 1: Global inflation and rising costs in 2023 - is there a light at the end of the tunnel?

Global inflation is causing more problems for e-commerce businesses, often lowering the ability and readiness to spend to acquire more customers within target segments. Its most damaging side effect is rapidly rising customer acquisition costs. Also, if you and your competitors are bidding for the same segment, it will contribute to upward marketing and advertising costs. With inflationary pressures already eating into consumer spending, it will take more than ever to get them to spend with you. 

For e-commerce companies lacking a diverse customer acquisition strategy, rising online ad costs eat into bottom lines. Also, let's all agree that paying to get new customers will affect your profit margins in the long run, regardless of spending power. Think about it, acquiring new customers is five times more costly than retaining existing ones. Newly acquired customers are also less likely (5-20%) to purchase than existing customers (60-70%).

It’s no surprise that more businesses realize that retaining their loyal customers makes more financial sense. Don’t we all want to increase profits while keeping acquisition costs in check?

Challenge 2: Rising customer expectations - the Amazonification hits smaller merchants hard

Customers are never satisfied, and their expectations keep growing with each order. They expect you to know their preferences and that your business can cater to their needs. They want speed, convenience, and most importantly, they want to know they will get what they pay for – and when it will arrive. 

At the root of these expectations are anticipation and the thrill of receiving their purchases. Your customers yearn to experience hope and trust in the delivery journey. There’s a huge opportunity to use logistics data to turn these compelling emotions into a competitive advantage. We can do this by tracking the order from the warehouse and fulfillment center to the final destination by turning it into communicable touchpoints with the customer. 

Many e-commerce businesses are not yet leveraging logistics data to understand and meet customer expectations. Many have little to no visibility into what happens once the customer hits checkout and the logistics process kicks in. They leave this crucial customer experience step to external parties like fulfillment partners or carriers.

This is an opportunity left in your partner's hands and out of your control. However, when your business reclaims control over this part of the buying journey using real-time warehouse and carrier data, feeding it to customers can keep them 100% engaged and satisfied. 

Customers can and, more importantly, want to be informed about when the order is being processed, when it's ready to be sent to the carrier, when it's been picked up, whether or not it made it past customs, and when it will be delivered. They want to be kept in the loop about their order every step of the way.

When you keep your customers happy during the last leg of their journey with you, they are more likely to stay loyal to your brand. A 5% improvement in customer retention can lead to at least a 24% improvement in profits– a substantial gain for businesses of any size and industry.

Challenge 3: First-to-last-mile logistics  - Does it always have to be a hot mess?

In the past year, the global supply chain has endured severe disruptions. As a result, businesses are now adopting new strategies and technology to improve resilience and efficiency. However, as they become more intelligent and agile, the level of complexity involved increases exponentially.

For e-commerce businesses in 2023, this complexity will be mainly felt in both upstream and downstream logistics. While upstream logistics still need to be managed, downstream logistics directly impact your business. If your business offers omnichannel retail, the buying experience must be consistent, with speed and reliability being key factors. For e-commerce businesses, the risks are much higher. Major fulfillment issues could cause customers to drop off quickly.

Major players like Amazon are well-equipped to manage this complexity and offer fast fulfillment. Smaller businesses require more resources to compete on the same scale. Still, by building and investing in their data advantage, they can better solve this problem by aggregating, analyzing, and adding value to logistics data. 

Data is where the magic happens. Using a data-driven approach to standardize data sets available to e-commerce businesses to gather actionable insights, increase visibility into carrier performance, and open up new customer engagement channels. 

Go for the most sophisticated solutions that use machine learning and AI to accurately estimate delivery dates–a feature that even large e-commerce merchants struggle to provide, and that is a game-changer in checkout conversion optimization.

If you want to be truly customer-centric, you must prioritize end-to-end 

Change is constant, and we get that. Your business needs to organize, streamline, and optimize internal and customer-facing processes. The goal is to make the entire journey seamless and pleasant, from discovery to repurchase. When your customers have a great experience buying from you, they are more likely to return and spend more. 

Implementing end-to-end logistics data to increase CLV is a guaranteed way of investing in the future of your e-commerce business. It minimizes marketing costs, builds long-term customer relationships, drives end-to-end visibility, and protects your bottom line. 

At the core of it lies a commitment to customer satisfaction, a mastery of operational data, and the courage to do whatever it takes to create the best delivery experience. Businesses that keep up with these challenges will be able to seize opportunities to grow revenue and boost sales in 2023.

This article was originally published in SupplyChainBrain on 29 December 2022. You may read it HERE.