E-commerce Trends in 2023 / Summary
We are approaching the end of the year, and it is invariably a time for taking stock. Looking back, 2023 in retail presented unique challenges for companies, which had to confront dynamic changes in economic, social and technological conditions. Let’s find out how these developments have affected the e-commerce industry in Poland and how the landscape of online commerce has changed.
Online Retail Situation
The past year in the e-commerce industry proved to be an extremely dynamic and challenging period for entrepreneurs, who had to react quickly to changing economic conditions, namely rising inflation, as well as labor, fuel and energy prices.
Black Friday, the annual sales holiday, is a good barometer of consumer sentiment. While the bargains associated with Black Friday and Cyber Monday have caught the attention of online promotion hunters, in Poland, where we’re operating with many companies, Black Friday sales were up 116% compared to typical shopping for the month, but it nonetheless represented a drop of 2 percentage points compared to the same period in 2022, and 44 percentage points less than in 2021.
New Technology Trends
The year 2023 saw the continued development of technology, especially in regards to systems and platforms that support online sales. We have seen not only a change in the approach to building our own digital sales channels, but also the dynamic development of shopping platforms, which are an opportunity for manufacturers and distributors to quickly enter digital sales. Let’s take a look at which solutions have had an impact on shaping the e-commerce landscape and influenced the business strategies of entrepreneurs.
The Rise of Shopping Platforms
In 2023, we saw a rapid growth in the popularity of marketplace platforms (shopping platforms). On the Polish market, major players such as Allegro, OLX, and Empik invested in marketing to strengthen their brand, increase traffic to the site, and take care of a wide portfolio of products and services, encouraging new business partners with benefit packages. They are constantly developing online advertising opportunities on their platforms such as Allegro Ads. The biggest players on the Polish market are “chasing” industry shopping platforms such as BRW or Douglas, as well as global player Amazon.com, which invested in Poland in the last quarter of 2023 with a wide-ranging image campaign.
In recent years, the increase in interest in this business model has been particularly evident in the context of rising capital costs and the search for new sales strategies. Shopping platforms offer a ready-made environment for sales – including overseas. This makes it easy for entrepreneurs to expand their business without investing large amounts of resources to build and maintain their own website or online store. Therefore, platforms present in European markets, such as DACH, are a way for Polish manufacturers and trading companies to attract a wider range of customers and the opportunity to enter new markets. From the perspective of companies in the home furnishings industry, platforms known on the DACH market, such as Wayfair.com, Home24, otto.de and, of course, Amazon.com, are of great interest.
Flexibility of Creation – Composable Business
With the fast-growing e-commerce market and the need to personalize the experience, store owners are opting for “tailor-made” solutions. This approach to e-commerce store development and architecture requires anticipating future business needs, where software architecture supports business decisions. Composable Commerce is a concept developed by Gartner that enables companies to build scalable and customizable e-commerce platforms that best fit their unique needs.
The size of the global composable applications market is expected to reach $13.1 billion by 2029, growing the market at a 17.4% CAGR during the forecast period, which confirms companies’ interest in these solutions.
The first step in creating an e-commerce in the spirit of Composable Commerce is to choose a suitable headless platform, in which the presentation layer (frontend) will be completely separated from the business logic layer (backend). The result of such a solution is a very high degree of flexibility in delivering content and services to customers. The headless commerce platform is therefore a great base not only for an online store, but also for omnichannel sales, as well as various custom applications and integrations with other systems.
The Importance of Omnichannel
Omnichannel, or omni-channel sales, has been important for years and, in 2023, it is still one of the most important e-commerce trends. In my opinion, omnichannel starts with the need to improve the end-customer experience, and ends with technology and the optimization of internal processes and development of team competencies. It is quite a challenge for IT managers of retail companies to plan the e-commerce architecture and supporting systems in such a way as to ensure that the organization’s business goals are met.
In 2023, many companies faced the need to move from multichannel to omnichannel sales. For them, it was the competency of solution architects – primarily those responsible for building the development plan for IT systems – to support business decisions, often using the ESB (Enterprise Service Bus) integration bus of systems and data, that was the key to success. The close cooperation of operational teams, including responsible for the implementation of business objectives with IT departments, and technology partners will together build competitive advantages for our clients.
AI is Changing Processes
The past year has been marked by the rise in popularity of generative artificial intelligence. AI-based tools (there are currently more than 120, but new ones are still being developed) have been revolutionizing the e-commerce market for some time now, becoming key solutions in the areas of personalization, data analysis and automation.
In 2023, we saw the development of advanced e-commerce recommendation systems. Using artificial intelligence and real-time data analysis, these innovative solutions contributed to a more personalized shopping experience, increasing customer loyalty, as well as influencing a rise in shopping cart value and conversion value. Artificial intelligence also played an important role in the area of customer service – the development of chatbots and virtual assistants ensured fast and efficient communication. In turn, visual search enabled customers to discover products in an even more convenient way.
AI also supported price optimization, adjusting prices dynamically to changing market conditions. Predicting product demand, inventory management and customer segmentation were other areas where artificial intelligence played a key role, supporting companies’ operational efficiency.
We predict that, in the next few years, generative AI tools will be a business partner, not a competitor. Given that up to 25% of tasks in the labor market can be automated, we see huge potential for freeing up employee time and the ability to focus on more creative and strategic tasks.
Proactive Price Management
Dynamically changing macroeconomic factors such as inflation, interest rates, economic growth, as well as declining consumer sentiment have influenced customers in many industries to become more price sensitive. Therefore, for many companies, especially those working on low margins, proper price management has become a priority in 2023.
Dynamic Pricing strategy and the implementation of solutions to improve its implementation, i.e. adjusting product prices to various factors such as demand, supply, seasonality, or real-time customer behavior, have become an opportunity to remain competitive. The decision to implement such a solution is most often preceded by a data collection audit, which will answer the question of whether we have sufficient data to infer appropriate price levels.
It is also crucial to integrate data from multiple channels, and in the next step to continuously monitor and analyze the data. The collected data becomes the basis for Machine Learning algorithms, which can automatically extract conclusions from the data about the possibilities and potential effects of price changes, which will help realize the company’s business objectives.
Performance Above All
Slow loading of the website results in lost traffic, decreasing both the level of conversions, and the return of customers to the online store. In such a case, a possible solution becomes a change of provider, moving to a VPS on a dedicated server or moving to cloud solutions.
The latter solution is gaining popularity. In 2023 47% of respondents used Amazon Web Services (AWS), and the second quarter of 2023 saw global spending on cloud infrastructure services increase by $10 billion compared to the same period in 2022.
The cloud allows businesses to easily adjust computing power to meet current needs. As business grows, companies can seamlessly increase or decrease the resources they use, allowing them to scale their business effectively. As a result, it is possible to maintain the high performance of an e-commerce system even during sales peaks, such as during seasonal sales or Black Friday.
Changing Consumer Priorities
In 2023, we have also seen changes in customer behavior, such as increased price sensitivity and the way people shop. According to the European E-commerce 2023 report, more than 99% of consumers have changed the way they shop online in the last 12 months. Customers are more price-conscious, with about 54% saying they buy products at the lowest possible price. Nearly half (47%) also said they did in-depth research before buying a product.
Increasing Public Awareness
Focusing attention on sustainable business practices is becoming an inevitable aspect of development strategies. In January 2023, the long-awaited EU Corporate Sustainability Reporting Directive (CSRD) came into force, expanding reporting obligations on the impact of companies on people and the environment. The result is the introduction of a uniform standard for ESG reporting by companies. Starting in January 2024, listed companies with 500 employees or more, and starting in 2026, all regulated market companies with more than 10 employees, will be required to report their activities in accordance with ESG standards, covering environmental, social, and governance and management areas.
Implementing these solutions in accordance with EU regulations and the expectations of consumers, especially Generation Z, is a challenge. This is particularly true for the fashion industry, which has been the first to adapt. Consumers are becoming more and more involved in environmental efforts, supported by tools to track the ecological impact of their purchases. There is growing interest in reverse commerce, also known as re-commerce and re-sale, which is simply the secondary trading of previously owned items (new or used). Nowadays, this sales model includes products from almost every category, not only clothing, including the likes of furniture, electronics, jewelry, machinery, and luxury goods.
Promoting Conscious Consumption
Consumers’ growing appreciation and desire for re-sale shopping is influenced not only by the promotion of conscious consumption, but also by savings and a smaller wallet – as many as 62% of consumers believe they are living in a recession, and 48% suppose this situation will not change for the next 12 months.
From the point of view of retail companies present in online sales, the year 2023 was full of challenges: market changes, changes in customer behavior and regarding the development of technology, especially artificial intelligence, which affects many processes. We have also seen how important it is to build business resilience, the value of which manifests itself not only in the ability to cope with crises, but also in the ability to continuously innovate.
We are convinced that in the next few years, the most important trend in e-commerce will be the consistent cooperation between business and technology and the extensive use of artificial intelligence in the processes supporting the conduct and development of e-commerce.