It’s hard to believe, but February is here. The holidays are a distant memory, and most brands and retailers are laser-focused on what they can do to attract, convert, and retain more customers in 2023 despite what Gartner is referring to as the “triple squeeze” of inflation, scarce or expensive talent, and supply chain issues.
It won’t be an easy feat. The entire globe is facing economic uncertainty, and it seems mass layoffs have become the norm. In times like these, we see a shift in consumers’ behavior. According to McKinsey and Company, 74% of consumers have taken action to “trade down,” including:
- Purchasing smaller sizes
- Delaying purchases
- Switched to a retailer or brand that offered lower prices
In addition, consumers are thinking longer and harder about the money they do spend.
The strategies and tactics that have been effective in the past may not serve you well in the coming year.
That’s not to say it’s all doom and gloom. There are brands that will thrive in these challenging times. And it’ll be the ones that keep a pulse on consumer behaviors and trends – and adapt their strategies accordingly.
Now that we’re about six weeks into the new year, we’ve already seen a few trends with staying power. These are the ones you simply can’t afford to ignore.
#1 DTC Continues to Grow
The phrase “direct to consumer” often conjures images of digital-native brands such as Warby Parker, Birchbox, and Casper, among others. But there’s a new class of DTC brands. It’s those established brands that traditionally sold through retailers – but have decided to sell directly to consumers, too.
In the past decade, DTC sales experienced steady growth. According to an article for EY, prior to the pandemic, CPG companies were seeing around 70% of their growth coming from direct-to-consumer channels.
Then, the pandemic hit – which sent DTC growth into overdrive. Consumers got comfortable purchasing products directly from brands. And brands saw this as an opportunity to shift the way they do business.
The shift to D2C isn’t going to slow down. Insider Intelligence predicts that DTC will account for one in seven eCommerce dollars. And it’s the established brands that’ll drive the majority of growth. Per Insider Intelligence, established brands are expected to account for more than 75% of DTC eCommerce sales in the US.
There’s a big opportunity for brands that make the shift to DTC. But it’s not as simple as spinning up an eCommerce site and hoping for the best. Instead, these brands must have a strong strategy in place to meet customers’ lofty expectations throughout the purchase journey.
A big part of this is the ability to deliver personalized experiences throughout the purchase journey. While many brands fear the (slow) death of the third party cookie will impair their ability to deliver such experiences, this doesn’t have to be the case. It simply requires brands to start prioritizing first party data. The good news is, many consumers are willing to share such data – if the circumstances are right. A survey from Yotpo found that 82% of shoppers are willing to share their data with a brand in exchange for personalized products, recommendations, discounts or services.
In addition, DTC brands must have a deep understanding of the ways consumers want to interact with them. Increasingly, consumers prefer messaging channels – not only to seek service but also to make purchases. In fact, according to Meta, three-quarters of consumers will message a business to make a purchase or reservation. It’s imperative to have a strong conversational commerce strategy.
Though digital is growing, that doesn’t mean in-person DTC is dead. In fact, a growing number of digitally native DTC brands are establishing (or expanding) their IRL presence via brick-and-mortar stores. The pressure’s on to deliver seamless experiences across channels, which we’ll explore in more detail later on.
#2 Gen Z is Gaining More Purchasing Power – and Brands Can’t Afford to Ignore Their Expectations
Brands and retailers have spent years trying to figure out Millennials. But the next generation of shoppers – Gen Z – is gaining purchasing power.
Brands and retailers can’t afford to ignore Gen Z shoppers. Not even luxury brands. According to a report from Bain & Company, in 2022, Gen Z (along with Millennials) accounted for all of the luxury market’s growth. According to the research, Gen Z consumers started buying luxury items at age 15 – compared to age 18-20 for Millennials.
Gen Z consumers have characteristics, values, habits, and preferences that vary from those of previous generations. For starters, Gen Z is the most ethnically diverse generation in US history. And, more than any other generation, it embraces diversity and inclusion.
Gen Z cares about environmental and social issues – and they make purchase decisions based on how a brand’s values align (or don’t align) with theirs. According to BigCommerce, more than three quarters (77%) of Gen Z consumers have taken some form of action for a cause they believe in. And almost a quarter (23%) have boycotted a brand.
On the flip side, Gen Z’ers are willing to pay more for a brand that aligns with their values. According to a report from First Insight, nearly three-quarters of Gen Z shoppers are willing to pay 10% more for sustainable products.
The ways in which Gen Z’ers browse and buy differ from previous generations, too. For starters, Gen Z does a vast majority – 73% – of their shopping via a mobile device. Most – 83% – say that at least some of their shopping starts with social media. And, Gen Z’ers are gravitating toward messaging channels as a way to connect with brands.
The strategies you developed to attract and convert Millennials may not work for the youngest generation of shoppers. In 2023, any brand looking to attract Gen Z must pay attention to their preferences, priorities, and expectations – and adapt accordingly.
#3 An Omnichannel Strategy is Essential
ECommerce experienced explosive growth at the height of the pandemic. And it continues to grow. CBRE predicts eCommerce will account for more than 23% of total retail sales this year.
But eCommerce is no longer limited to consumers visiting a brand’s website and making a purchase. Instead, brands are offering new ways of making purchases – including conversational commerce, social commerce, augmented reality, and visual experiences – among others. And consumers are embracing them. Per Salesforce research, 68% of consumers have purchased products in a new way in the last two years.
The growth of eCommerce doesn’t mean stores are a thing of the past. In fact, there’s still tremendous value in brick-and-mortar. Physical store locations provide brands with opportunities to deliver unique, engaging in-person experiences that foster connections with consumers. Even those consumers who prefer online shopping may opt to visit stores to get their hands on purchases more quickly. Consider the fact that 60% of consumers have used curbside pickup (also referred to as “buy online, pickup in store” or BOPIS) in the past. And over half expect to use BOPIS more within the next three years.
Regardless of channel (or channels, as 78% of consumers have used more than one to start and complete a transaction), consumers expect seamless, connected experiences. Per Salesforce, 85% of consumers expect consistent interactions across departments.
But most brands are failing – and they know it. A survey from Forrester and Bluecore found that just three in 10 retailers feel they’re effective at driving seamless, consistent omnichannel experiences across channels. The remaining seven in 10 are failing short – and they’re well aware of their failure.
Instead of pitting channels against each other, brands must focus on how to deliver seamless experiences across all channels. Brands that are successful will set themselves apart from the pack.
While there’s a lot that goes into delivering omnichannel experiences, there are three components that must be in place.
- Comprehensive, centralized data: Data drives great, personalized experiences. Brands must collect and house data in a central system of record so they have a 360 degree view of each customer.
- The right technology: Brands must take an honest look at their tech stack to look for gaps and opportunities for consolidation.
- An engaged workforce: Great employee experiences lead to great customer experiences.
We delved into each of these components in more detail in a recent blog.
Of course, human-powered experiences will continue to be key to omnichannel experiences. However, the most successful brands will also leverage artificial intelligence (AI) to deliver the frictionless experiences consumers crave. It seems the potential impact of AI is well understood. The 2023 Gartner CIO and Technology Executive Survey found that 92% of organizations indicate they’re most likely to implement artificial intelligence or machine learning by the year 2025.
#4 The Right Tools are More Important Than Ever
Lately, it seems like there’s news of another tech company layoff just about every week. It’s easy to feel discouraged.
In order to thrive, companies need to rethink the way they do business and, as Gartner puts it:
“balance both short-term planning with long-term strategy to stay ahead of the immediate shocks to the economy and the underlying forces shaping their business.”
Retail will always have a need for great tools that empower them to deliver better experiences throughout the customer journey. In fact, headcount reductions will mean brands rely even more on technology.
Building one of those tools ironically takes headcount. That’s why it’s often a wise choice to partner with tools that are already in place. These types of tech solutions work out of the box and can often be tailored to your business needs. Our CEO Jon Jessup wrote an article about this topic just recently for SalesforceBen, titled: Build vs. Buy.
For those choosing to find solutions via apps, partner marketplaces – including the Salesforce AppExchange, where you’ll find 1440’s suite of Salesforce Native apps – will be crucial to support sales, delivery and support in 2023 and beyond.
Get Ready to Thrive in the Year Ahead
The year ahead will certainly bring challenges. But it’ll also bring big opportunities for great brands.
Agility is key to overcoming big challenges – and thriving. Brands must keep a constant pulse on the shifts in the marketplace and be ready to adapt accordingly. By doing so, you’ll be well-equipped to attract, convert, and retain customers in any economic climate.
Ready to see how 1440’s suite of solutions can empower your brand to deliver seamless experiences across the purchase journey? Contact us to learn more.