Welcome to Episode 39 of the Sustainable Ecommerce Podcast!
Hello and a triple welcome to the Sustainable Ecommerce Podcast, the show dedicated to helping you build your brand for a healthier planet. It’s a welcome to 2023 of course, a welcome to Season 3 of the show, and a welcome to the new time slot for Episode release, going forward we’re going to be publishing on Monday mornings instead of the Friday afternoon slot we’re been using to date.
Given this is the first show of the year it seems like a good time to have a bit of fun and make some predictions for the year ahead, but more importantly chat about what you can and should do get prepare your business for success. So for each of today’s predictions, I’m going to strive to give you some practical things to be thinking, planning for and taking action on so that you stay one step ahead.
The Economy in 2023 Will Continue to Slide Before it Gets Better
We really have to start the predictions section by looking at the state of the global economy, and especially the economies in Australia / NZ, US, UK and EU the regions where most of my clients as well as the guests on the show typically sell into. There are obviously regional differences from place to place, but by and large the huge scare of runaway inflation has been put to rest. But if you go an do a quick google for economic predictions for 2023, that’s about the end of the good news.
We’re almost certain to see sustained elevated inflation through the whole of this year, and accordingly we’ll see continued rising interest rates to combat that in the first half of the year, maybe into Q3. Most economists seem to be predicting that the interest rate rises will tail off in Q3 and be static in Q4, but almost no-one is predicting interest rate drops this year. There’s a lot of spin around whether various territories are or aren’t in a recession, which is technically 2 consecutive quarters of negative growth), but most economists are suggesting that for most people, 2023 is going to feel like one, even if inflation helps us avoid a technical recession, and you’re likely to get sick of hearing the phrase the cost of living crisis.
What Does the State of The Economy in 2023 Mean for Your Brand?
In short, I feel like economically things got a lot worse in 2022, and we’ll see the slide slow down and bottom out in 2023 before improving in 2024. So I feel pretty confident with that with 3 major caveats. If the war in the Ukraine escalates, all bets are off. If China decides to make good on reclaiming Taiwan, all bets are off. And if you’ve been following the reversal of the Zero Covid policy in China through December, the sheer scale of the fresh epidemic there has the ability to impact the world with new variants. Whether it will, and what impact that might have on future lockdowns and domestic economic activity in Australia is anyone’s guess.
All the being said, what does the economic prediction mean for your business? Well, firstly it means that financing is going to be harder to come by this year, or at least more expensive. In other words if you’ve been using inventory financing, a creditcard or some kind of variable rate debt arrangement to purchase inventory, your interest payments are going to increase again in 2023. Given that inventory purchasing is usually the biggest dent in your cashflow month to month, I highly recommend spending some time asap to work through a cashflow forecast for this year, and figuring out sooner rather than later what your financing approach is going to be.
It also means most likely that your Cost Of Goods is going to go up too. By now you’re probably used to that and you’ve made some decisions already about whether you’re going to continue to wear that, whether you need to source elsewhere or whether you’re going to pass those price rises onto your customers. I don’t see that changing in 2023, its going to continue. If you’ve taken the approach of living with narrower margins and you’ve been nervous about putting up prices, now might be a good time to take another look at your pricing. The world needs your sustainable brand to thrive, and no matter which way you cut it, narrowing margins are not sustainable.
Of course the economic conditions have an impact on consumer behaviour too. Higher interest rates and higher inflation mean your customers have less disposable income. That means we’ll likely see a higher degree of price sensitivity in 2023, certainly than in 2020 & 2021, and similarly we’ll see likely see less spontaneous purchasing.
For us as sustainable brands, honestly this is a very good thing. One of the first tenets of living sustainably is that people don’t purchase stuff they don’t actually need on whim, because they’ve seen a glossy Facebook ad and followed the seen it -want it -buy it mindless consumption pathway. If people are slowing down and being more considered about what they buy, that is great news for sustainable brands.
2023 is going to see a continuation of semi-apocolyptic weather events. Just over the Christmas break we’ve seen extraordinary cold hit the East Coast of the US, and very recently extreme water events in California. We’ve seen uncharacteristically cold snaps and snow in the UK, while ski resorts have been unable to open in the Alps, alpine valleys that have had continuous snow cover for 2000 years are now exposed bare earth.
While these events vary from alarming to tragic, the point is that mainstream consumers are seeing and experiencing these things first hand, and so climate change and sustainability is absolutely more front of mind than ever. Every report I’ve been able to find on consumer behaviour that was conducted post-pandemic suggests that increasingly consumers are choosing to buy from brands that align with their values, choosing to buy from brands that are taking positive action in sustainability, and choosing to buy from brands that help them and make it easy for them to live more sustainably.
So coming back to the economic conditions, more considered purchasing is great for sustainable brands, but only if your message is clear. If you fail to quickly, clearly and convincingly communicate how your products are made sustainably, and how the customer can have an impact when they choose to buy from you, you’re going to find yourself in a competitive struggle with non-sustainable, and potentially cheaper alternatives.
Coming back to pricing again, plenty of pundits say that consumers are willing to pay a little more for sustainable products. I think that’s going to stay true to a degree in 2023, but I think it’s too general a statement. Assuming you’re telling your story well, yes I think that’s true for eco warriors and impact buyers. Aspirational Ecocetrics though are likely to be looking more carefully at the full value proposition. Aspirational Ecocentrics probably still account for more than half of all mainstream consumers, so while you may need to look at pricing to fix any margin decay, you’ll also need to look at how you can position products to deliver more value, and take a fresh look at the hierarchy of benefits that you’re presenting in the sales process.
For example, can you bundle highly related products together to increase their total perceived value? If you’ve been leading with the sustainability benefits of your product based on the material, and can you reposition that to showing how it will save the consumer money in the long run due to higher quality?
Ecommerce Logistics Predictions for 2023
So enough about economics, what about supply chains? Well, unknowns around the impact of China’s Covid resurgence aside, we should see a continuation of the trends from 2022, that being improved reliability of shipping and container prices continuing to get a bit cheaper. A couple of things to bear in mind though – the shipping industry is rightly under increasing pressure to improve its environmental footprint. In 2022 we already saw some innovation in electric light delivery vehicles, and I think in 2023 we’ll see some moves there in electric HGVs, boats and maybe even aircraft. All of that innovation costs money, and for that reason I don’t think we’ll see container prices returning back to their cheapest pre-covid levels.
This year also sees the introduction of environmental legislation on shipping under rule IMO2023, which basically forces shipping lines to improve the fuel efficiency of their vessels. It’s quite hard to make an existing vessel more fuel efficient because they are hugely expensive assets that needs to be kept in service, so what that likely means is a they’ll simply slow down the vessels, a fuel-saving technique known as slow-steaming. What all this means for you is better container prices, more reliability of delivery, but also longer transit times, so plan that in for your inventory purchasing accordingly, especially well ahead of peak times.
And just to round out logistics by looking at last mile, I’m going to be watching this space closely in 2023. I think we’ll see a significant rise in innovation and acceleration in EV and maybe even ebike delivery. Amazon’s been working in an E Van delivery fleet in the US for a couple of years, and here in Australia, most of the last mile bike delivery is ebike based already.
There’s a huge structural tension building around how to handle container returns in a circular & reuse economy. The tension of course is that as more and more brands adopt circular models, there is growing demand for reverse logistics. I think we’ll see more and more big brand adopting circular models. That could be things like recapturing containers and primary packaging or end of life take back schemes, but I also think we’ll see more and more big brands implementing re-use and second hand marketplaces to try and recapture some of the brand presence they lost over the past 18 months through the explosion of recommerce platforms like Reluv Rntr and Releaseit. Reverse Logistics service needed to get items back to the brand has typically been delivered by existing logistics providers who classically operate hub & spoke models of distribution centres, optimized for outbound delivery, not collection. There are a few services starting to emerge that specialise in this in Europe, and I think and hope we’ll see some this gather pace through 2023 and into 2024.
Predictions for Greenwashing & Regulations in 2023
I’m going to put myself out there and say that in 2023, I think we’ll see a bit of a reckoning in regards to carbon credit schemes, and I think we’ll see at least one carbon credit scandal this year. The industry has grown so rapidly, that while there are certainly awesome providers out there doing all the right things with verification, my gut tells me there’s some shifty stuff going on too. And the ease with which some brands choose to claim ‘carbon neutral’ as a thing has definitely got the attention of regulators. As I mentioned in the last episode, consumer protection agencies like the ACCC have carbon claims high on their watch list at the moment, and I fully expect to see more news related to authorities clamping down on false claims through 2023.
And in fact more broadly, I think we’ll see greenwashing and regulations attempting to deter greenwashing hitting a fever pitch this year. Let’s be honest the rise in greenwashing is simply a reflection that all major brands recognise the huge consumer demand for sustainable solutions. Everyone wants to cash in on that demand whether or not their products are truly sustainable. Regulations are definitely coming to clamps down on greenwashing, again led by Europe, and at this stage mostly focused on the Fashion industry. So I think we’ll see a lot more noise about greenwashing this year, which itself educates consumers. Together with what I think will happen in the Carbon Credits space, I think this is inevitably going to result in rising scepticism about sustainability claims. To me, that’s once again a good thing – I definitely don’t think consumers should be tricked into purchasing products because they have earthy green packaging or a leaf icon on it. But it does mean that if you haven’t already, you really should take a fresh look at your product messaging. Consumers certainly want to know about the sustainability elements of your product, and how it helps them live more sustainably. But are you being transparent about how & where the product is made, and what it’s made from. Can you support your green claims with certifications or some kind of science-backed proof?
Purpose-Driven Purchasing will Rise in 2023
And coming back to what consumers want again – the purpose-purchasing movement will continue to gain traction in 2023. That’s Purpose with a capital P – in other words, consumers will continue to gravitate towards brands that not only align with their values through content, but who are actively making an impact in the world. But, just like getting savvy around greenwashing, consumer are getting savvy around Purpose-washing too. In the same way that you need to substantiating green claims on your products, you’ll increasingly need to substantiate your impact claims too.
I think we’ll see a huge rise in brands openly providing Mission updates, but also brands inviting customers in to experience the impact for themselves, either via streamable content or in-person group activities, like clean-up days. Not only does that provide demonstrable evidence that their money is well-placed when they buy from you, it also provides you with a very rich and compelling source of content. Purpose-based business is now a tried and proven model for where entrepreneurialism and philanthropy meet, and with the prevailing economic conditions being a challenge for legacy brands, I feel confident in saying that 2023 this the year when Purpose-Driven business movement really accelerates.
Digital Media Predictions for 2023
No ecommerce predictions episode would be complete without looking at the state of digital marketing. We’ve already talked about how the cost of living crisis will change consumer behaviour this year towards more value sensitivity and a reduction in spontaneous purchasing. Both those things make it harder and more expensive to get traditional paid media advertising working for your brand. The average cost of acquisition is going to go up again this year, subject as always to the seasonal fluctuations. At the same time, while Meta – we’re talking Facebook and Instagram is still the best channel to be spending money on to increase your top of funnel sales, it’s outright dominance is going to continue to slide. Contrary to a prediction I made at the start of last year, they haven’t in fact genuinely found a solution to the IOS-induced privacy changes and third-party data pixels continue to degrade in performance. From a strategic standpoint, Zuckerberg is betting the farm on the Metaverse, and just isn’t focused on shoring up their traditional value stream.
The days of being able to smash your business plan using single channel growth are gone. Which channel, if any, rises to take Meta’s place fills the crystal ball with fog at this point. Tiktok still remains the great hope, especially with the introduction of TikTok shopping, but while I know some people get sales from the channel, and even drive profitable sales, as yet it still isn’t as scalable as Facebook once was.
But that said, native and in-app shopping continues to rise proportionally vs website sales, and that makes sense in a world where first party data rules. So if you haven’t already set up your feeds to optimize native shopping, or you haven’t yet set up our Shopify shop app channel, take the time to do that this quarter.
So if Facebook is going to continue to slide, and there are not yet any obvious alternatives, what should you do?
Well, without doubt the most important thing you can do is look at your website conversion rate. Now conversion rate is a key indicator for performance no matter how you’re bringing traffic to your store, but it is impacted by a huge number of variables so it can be hard to get a consistent read on exactly what you need to fix. But, knowing you’re a sustainable brand, and knowing you need to convert a mixture of eco-warriors, impact buyers and aspirational eco-centrics this year, here are the top 5 things I think you should check out and consider investing in if you want to improve website conversion.
Firstly – make sure your home page clearly articulates your brand purpose, and make sure your brand impact is clear across the whole customer journey. You know customers prefer to choose brands that are making a difference, so make sure they know that’s you.
Make sure the eco-credentials of your product is clear, and help them understand how choosing your product is a better alternative than an equivalent solution not made with the same degree of care for our planet. Can you show certifications? Can you demonstrate how the materials you’ve chosen reduce plastic or are less carbon intensive?
Make sure you have high quality images, not just of the product, but showing how it solves the customer’s functional and sustainability problems. About half the visitors to your product pages will decide whether they want to purchase or not after scrolling through the images, and that’s especially true on mobile. You’ve got to make sure your images convey your brand message, give absolute clarity about what the customer can expect to find when they open the package and show how using your product is going to solve their problem.
Make sure you’re being clear about shipping costs, shipping times, and how sustainable your shipments will be. Do you use compostable satchels? Do you have plastic-free shipping? Are your deliveries carbon neutral? If so, make sure that information is clearly accessible from every product page as well as during the checkout process.
Last but not least – social proof. Have you invested in getting a constant stream of reviews and user generated content from your customers demonstrating the product in action and how it makes it easier to live more sustainably?
Another thing you can do is invest in a mystery shopper investigation. The reality is that 80% of brands think that the delivery a superior customer experience, but only 8% of shoppers actually agree with them. Ultimately, the only way to understand that is to see what customers have to say, but getting insights from real customers is notoriously difficult. Mystery shopping services like Humii can really help bridge that gap and give you a much clearer picture of where your customer experience is falling down. The great news is Humii are joining us on the show in a few weeks, so you can hear more about how they can help then.
Aside from site conversion, for success in 2023, you’ll need to look for other ways to drive traffic and sales beyond paid media and organic search. One area that I think is a hugely underrated opportunity for sustainable brands is partnerships. Finding other brands who share your same Purpose, and then doing collaborations with them is a win for everyone. You get to co-create and share content. You get to access each other’s lists and help each other’s customer’s discover relevant products that help them live more sustainably.
First Party and Zero Party Data will Rise in Importance in 2023
And the last area I’m going to touch on today is First Party and Zero Party Data. If you don’t know what that is, First Party data is essentially information you collect about your customers through their interaction with things like your website and email list, while Zero Party Data is information the customer explicitly give you about themselves, for example via surveys and feedback forms. This kind of data is not new, it’s just that in a world where we can’t rely on third party data points like the Facebook pixel, the data you own becomes more and more important. For that reason, I think we’ll see a huge return to things like surveys and lead magnets this year, all designed to attract new list subscribers that you brands can market to.
Now while it might seem like a long time away, now is the time to focus on building your list ready for the November & December sales season. I have a feeling that paid media is going to be eye wateringly expensive come November, but for most brands, about 60-80% of their sales through the period, especially at any sales events they may be running actually come from their existing list.
So, this quarter, focus on optimizing your lead acquisition and focusing on learning as much as you can about them via interactive surveys and the like to help segment and engage them with what your brand stands for. Now is the most cost effective time to do that, and you’ve got time to build that brand trust and relationship without being forced.
So I hope you found some of those predictions a bit of fun, and I hope the recommendations were useful. Above all 2023 is going to be another interesting year of new normals, and I for one can’t wait to see how sustainable ecommerce explodes this year, and I hope your brand is one of the success stories!
If your brand is doing great things for the health of our planet, if you’ve got an interesting journey you’d like to share on the show, or if there’s other brands you’d like to hear from on the show, hit me up on LinkedIn, and let’s see if we can make that happen!
I’ll be back next week with more stories from the world of sustainable ecommerce, so until then, keep building your brand for a healthier planet!