Those first-quarter sales figures suggest 2023 could be another record-setting year for ecommerce. In February, Digital Commerce 360 reported that total 2022 ecommerce sales reached $1.03 trillion — the first time ecommerce revenue had topped the $1 trillion level.

Ecommerce penetration was steady at 21.7% in Q1 2023 compared to 21.2% in the year-earlier quarter, according to a Digital Commerce 360 analysis of the Commerce Department data.

While the record online sales spikes of the pandemic have faded, quarterly ecommerce sales have continued to grow, albeit at a slower pace.

In 2021 and 2022, ecommerce had its slowest share of total retail growth on record for two consecutive years. That’s an indication that offline sales are catching up with digital commerce after COVID lockdowns.

How do we calculate ecommerce penetration? 

Digital Commerce 360 studies non-seasonally adjusted Commerce Department data and excludes spending in segments that don’t typically sell online.

These segments include:

• Restaurants
• Bars
• Automobile dealers
• Gas stations and fuel dealers

U.S. ecommerce penetration reflects the share of dollars consumers could potentially spend online.

The Commerce Department defines ecommerce sales as the sales of goods and services where an order is placed by the buyer or price and terms of sales are negotiated over an internet, extranet, Electronic Data Interchange (EDI) network, electronic mail, or other online system. The customer may or may not make the payment online. The Commerce Department publishes estimates it has adjusted for seasonal variation and holiday and trading-day differences, but not for price changes.

Percentage changes may not align exactly with dollar figures due to rounding.

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While some retailers like Kohl’s Corp. discontinued its curbside pickup service in August 2022, and book retail chain Barnes & Noble removed designated parking spots for curbside, others are ramping up services.

Tractor Supply Co. (No. 102 in the Top 500) is investing more in BOPIS and curbside. The retailer’s conversion rate for these omnichannel services is 60% higher compared with home delivery. Men’s big and tall apparel retailer Destination XL Group Inc., (No. 458 in the Top 500) prefers to use its stores as additional fulfillment locations “as a last resort.” And home improvement merchant The Home Depot Inc. (No. 4 in the Top 500) is investing in its mobile app to give shoppers the flexibility to research products while in store as well as navigate BOPIS and curbside.

Omnichannel report findings

US ecommerce growth falls as shoppers opt for in store

Retail chains are giving Amazon a run for market share. Amazon and its third-party marketplace sellers represented 35.7% of digital spending in the U.S. in 2022. That’s down from 36.9% in 2021. While the web giant accounted for a fifth — 20.7% — of all gains in U.S. ecommerce in 2022, according to Digital Commerce 360, that’s a big drop compared with 34.4% in 2021 and 35.1% during the pandemic-fueled ecommerce boom of 2020. There’s ground to be gained by retailers able to leverage technology and strategy — like omnichannel services — to convert a shopper who wants convenience and dependability online and in store.

Digital Commerce 360 projects U.S. retail sales will grow 4.2% in 2023 to $5.08 trillion. Online retail sales will increase 5.8% to $1.08 trillion — the slowest growth for total retail since 2019 and for e-retail since the banking crisis of 2008-2009.

Ecommerce growth has slowed, but it continues to take market share from brick-and-mortar stores. U.S. ecommerce grew 7.7% in 2022. That’s less than half of 2021’s 17.8% and still lower than pre-pandemic 2019 with 12.5% growth.

BOPIS and curbside availability shifts in the Top 500

Retail chains in the Top 500 in 2023 reflect a consumer more comfortable returning to in-store shopping while leveraging online buying capabilities. BOPIS for retail chains in the Top 500 reached 82.7% penetration in 2023, up from 76.3% in 2022.

Curbside for retail chains in the Top 500 declined to 47.5% adoption in 2023, down from 61.2% in 2022. The ability to schedule an in-store appointment also dropped, to 16.5% in 2023 from 24.5% in 2022. This suggests that consumers are returning to impromptu shopping as pandemic-related fears subside and people are no longer fearful of gathering in public.

2023 Omnichannel Report

Analysis of omnichannel trends in today’s evolving retail world. Includes over 25 charts, data on the Top U.S. retail chains, consumer survey results on omnichannel shopping habits, and new developments in the race to fulfill online orders.

View Details

This article is based on Digital Commerce 360’s 2023 Omnichannel Report. Digital Commerce 360 Gold and Platinum Members receive a complimentary copy of this report as part of their membership. Non-members can purchase a downloadable PDF of this report for $399. View the table of contents here.

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Evite’s user activity plummeted roughly 95%, says Evite’s current CEO David Yeom, down to consumers sending about 1,000 invites a day. This is compared to normal pre-pandemic activity, with consumers sending 20,000 invites every day to 30-plus people, he says.

When the pandemic began, publicly traded media conglomerate Liberty Media Corp. owned Evite. As 2020 wore on and the COVID-19 pandemic raged, Yeom decided to buy out Evite with business partner George Ruan for an undisclosed sum in September 2020. As the new CEO and without public investors to please on a quarterly basis, Yeom used the lull in events as an opportunity to do a major rehaul of Evite’s customer experience and change its business model.

“What’s there to risk? User activity is down in the dumps,” Yeom says. “When you don’t have much to lose, in many ways, that gave us the opportunity to finally make the changes we’ve always wanted to make and get the business back on the path to greatness that it should be on.”

Evite pivots to revenue from premium upgrades from advertisements

Instead of relying on revenue from ads, Evite’s primary revenue stream now is from users upgrading to a premium invitation, which costs $15.99-$89.99. With premium, users have access to enhanced features, like hiding the guest list for an event, no ads on the invitation and access to premium designs, such as ones with a Disney character, premium fonts, animation, envelopes and a design-your-own feature. About 10% of its users pay for premium invitations and this accounts for roughly half of Evite’s revenue, Yeom says.

A third of its revenue is now from affiliate marketing. Evite showcases products that would be relevant to a party, such as paper plates or balloons for the host, or gift ideas for an attendee, from other retailers including Amazon.com Inc., Target Corp., Walmart Inc. and Etsy Inc.

That leaves the remaining roughly 17% of the revenue from advertising, which is now an automated program. Advertising used to be the primary source of its revenue. But the ads were getting in the way of the user experience, Yeom says. Typically, users saw an advertisement at each step in creating the invitation or RSVPing to an event.

“It was too much and everywhere,” Yeom says. “Basically 90% of all those ads are gone now.”

Evite’s move to generate revenue from premium features instead of ads is smart, says Paula Rosenblum, co-founder and managing partner at retail consulting firm RSR Research.

“Websites that are so filled with ads — mostly re-targeted, to boot — are incredibly annoying,” she says. “I’d gladly pay a little to stop the endless parade so I could take my time and peruse the products and/or services.”

But, Evite has to tread lightly with how it showcases its affiliate products, as those can appear just like an ad to a consumer. For example, in an email about a party, Evite will have a link to buy the host a gift from one of its affiliated retailers.

Or, after an invitee RSVPs to an event, Evite shows a pop-up to send the person a gift from one of its affiliates. Yeom says party-throwers have the option to turn this off and about a quarter of consumers elect to do so, he says.

Evite prompts party-goers to buy a gift from one of its affiliate retailers.

“We want to have good balance, and not fall back in the traps of what we used to be as a business,” Yeom says.

Yeom says the affiliate product links are meant to be helpful to planning or attending an event, whereas a banner ad may not be. RSR’s Rosenblum says many affiliates have successfully provided links to other merchants without annoying users.

This overhaul in revenue, however, was a tough change, as half of Evite’s employees were either on the sales team or supported the sales team. At the end of 2020, Evite eliminated its sales team and those employees were let go or received a new role.

Many employees had an “if it’s not broke don’t fix it” mentality about the ads, Yeom says. But that attitude had to go, he says.

“There’s a better way, and you don’t have to compromise the experience for guest or host,” Yeom says.

The new Evite launches

The rebranded Evite launched in April 2022, when many U.S. consumers had already resumed their normal pre-pandemic activities. And that includes going to events, celebrating milestones and going to parties. Meaning, Evite has regained its 100,000 annual active users, who send and receive Evites.

A year after this pivot, Evite turned a profit for the first time in a decade, the company says. Plus, in the birthday category specifically, user activity “has never been higher,” with users sending 25,000 birthday invites every hour, Yeom says without sharing more.

User feedback has been “phenomenal,” Yeom says, and Evite plans to continue adding upgrades to its premium service.

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In fact, if there is a single takeaway from all the data that Digital Commerce 360 collected about conversion rates in 2022, it is this: Not much changed.

No matter which merchant type, retailer size or product category we examined, the large swings we saw during the pandemic are no more. When there was change in 2022, it was incremental. And looked at in aggregate, conversion rates have held steady for three years at 2.8%.

The highest conversion rate in 2022, as in the two prior years, was among what we call “direct marketers.” There are 36 such retailers in the Digital Commerce 360 Top 1000. These are mostly retailers with roots in selling via catalogs, along with a handful that market their wares via TV shopping shows.

Looking at conversions by category, we see a similar situation: Rates remained largely unchanged no matter what a retailer sold in 2022.

However, it’s worth noting that the total conversion rate for Top 1000 retailers was higher than that of Top 2000 retailers (2.8% vs. 2.6%), suggesting that the larger players benefit from having the resources to invest in conversion-driving tactics and technologies.

This article is based on Digital Commerce 360’s 2023 Ecommerce Conversion Report. Digital Commerce 360 Gold and Platinum Members receive a complimentary copy of this report as part of their membership. Non-members can purchase a downloadable PDF of this report for $399. View the table of contents here.

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“2022 brought significant challenges for micro, small and medium enterprises (MSMEs), brought on by volatile energy prices and soaring inflation,” says Alibaba vice president Andrew Zheng.

The survey of 1,000 small business owners finds that:

• 70% of small companies surveyed said the impact of COVID-19 drove them to make greater investments in digital technologies.
• B2B online sellers will likely see greater competition in 2023 as businesses continue to adapt to the rising need for digitization.
• Businesses with the smallest number of employees were more negatively affected by last year’s challenging market.
  • 25% of survey respondents with under 10 employees shut down completely.
  • Only 13% of respondents with over 250 employees had the same results.
• Small businesses got creative to keep sales up and survive the post-pandemic pressures.
  • Using ecommerce was the top strategy for survival, with 36% of small businesses attempting ecommerce or digitalization throughout and directly following the pandemic.
  • Many flocked to B2B ecommerce marketplaces and continue to use those resources in today’s market.
  • 54% of small businesses surveyed responded that B2B ecommerce platforms remain critical to their current operations.
• To capture more sales and increase customers, over a third (32%) of small businesses took to expanding sales channels in order to survive the pandemic’s effects. Other tactics used included:
  • Cutting expenses (13%).
  • Seeking support from local governments or institutions (11%).
  • Investing in research and development to upgrade products (8%).

“Digital selling provided an opportunity for these businesses to reach customers locally and globally without stretching operating budgets,” Zheng says. “But B2B sellers must stay ahead of digital export trends in 2023 to find continued success.”

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After three years of COVID-19, consumers continue to shop online with no signs of stopping. For the full year 2022, Digital Commerce 360 projects U.S. online retail sales will top $1 trillion for the first time, reaching $1.03 trillion. That would be a 7.7% increase over $960.44 billion in 2021.

But it was a tough year for online retail. Many retailers struggled to post year-over-year online sales gains, inflation hit record highs, surplus inventory levels soared and supply chain woes persisted.

But despite these challenging macroeconomic factors, online retailers continue to innovate and provide a top online shopping experience. Brands like L’Oreal used artificial intelligence to spot trends. A number of merchants committed to greater representation and continued support of the Black community. And retailers worked to make fulfillment more sustainable.

What’s more, online holiday sales may have been strong enough that merchants can put 2022 down in the win column. Over the Cyber 5 period (Thanksgiving through Cyber Monday) online sales reached $35.27 billion, a 4% year-over-year gain.

Below are more 2022 headlines, both news and in-depth features, that were the most popular on DigitalCommerce360.com.

Thank you for your readership in 2022. We look forward to another exciting year of online retail in 2023.

Most-read news stories in online retail

• Amazon plans Prime Day-like sales event in October
  The ecommerce giant will hold an October sales event similar to its annual Prime Day event, sources tell Digital Commerce 360.
• Lowe’s, Home Depot earnings show ecommerce growth, similar omnichannel paths
  Home Depot reported sales through its digital platforms grew approximately 6% for Q4 and approximately 9% for the year. That’s well below the 11.5% in Q4 and 18.4% for the fiscal year that Lowe’s reported.
• Coronavirus pandemic adds $219 billion to US ecommerce sales in 2020-2021
  The COVID-19 pandemic accelerated ecommerce growth years into the future. Other pandemic-caused shifts also have boosted ecommerce sales, such as inflation. Consumers paid $32 billion more online for the same amount of goods during the past two years, new data from Adobe finds.
• Inside the battle against ecommerce fraud
  Ecommerce fraud has gotten hard to detect and stop. More than half of fraud attempts against ecommerce retailers are now deemed “sophisticated.” That means professional criminals used state-of-the-art methods to circumvent anti-fraud systems.
• Toys R Us is opening shops in all Macy’s stores
  The in-store shops will range from as small as 1,000 square feet to 10,000 square feet for “flagship” locations in several cities. Since buying the Toys R Us brand in early 2021, WHP has worked to re-establish the brand’s physical and online presence.
• Amazon locates its warehouses near big cities
  Amazon has dramatically expanded its distribution network in the past decade, placing many new warehouses near population centers so it can deliver online orders quickly. Such major retail competitors as Walmart, Home Depot and Wayfair also have opened new distribution centers as they seek to match Amazon’s fast delivery options.
• Will Crocs Inc.’s acquisition of Hey Dude Shoes help it reach its $5 billion goal?
  A complementary union, Crocs looks to widen its reach beyond a loyal U.S. base by continuing to grow its ecommerce business worldwide with Hey Dude.

Most-read in-depth stories in 2022

The seven feature-length stories below received the most page views in 2022 on DigitalCommerce360.com. These articles, free to Digital Commerce 360 Strategy members, detail the topics our readers found most relevant this year. They include an in-depth piece on returns, how consumer brand manufactures need to remake their ecommerce playbook, True Religion’s path to profitability, how retailers can improve their marketing strategy on Amazon, how to manage customer data across platforms, the advantages of advertising on connected TV and how online retailers cater to their young, mobile shoppers.

• Retailers look for answers as returns grow more complex and costly
  Returns have become a major headache in ecommerce, cutting into profit and straining resources. The sheer volume of returns also puts additional pressure on an already overloaded supply chain pushing prices higher for shipping, warehousing and labor. Retailers are working hard to reduce the number of returns they receive. And they’re taking multiple approaches to doing so.
• What’s the state of the ecommerce market for consumer brand manufacturers?
  Brands were the fastest-growing merchant type in the Top 1000 last year. But the old playbook for digital natives isn’t producing the same explosive results as it has previously. With funding drying up as profitability takes center stage, digital natives will have to reassess their roadmap to compete.
• A peek inside True Religion’s plan to reach $250 million in ecommerce sales by 2025
  The iconic denim brand’s CEO and executive vice president of digital sit down with Digital Commerce 360 to discuss how it cut technology costs and overhauled its supply chain to get on the path to profitability. Now, it’s investing in digital tools to attract younger shoppers, such as a mobile app and buy now, pay later.
• Marketing on Amazon is all about keywords and presentation
  Retailers find different ways to stand out among competitors when selling on marketplaces.
• There is more than one way to manage customer data
  In an increasingly competitive ecommerce landscape, DTC retailers are figuring out how to reach new customers by linking up with larger merchants like Walmart or selling on marketplaces like Amazon — without losing too much control. The key is to take a step back and assess before diving into new ventures or technologies.
• The cord cutters: Retailers move to appeal to consumers on streaming devices
  As consumers cut the cord and stream entertainment, retailers are taking advantage of lower costs to reach an ever-expanding audience through CTV.
• How online retailers cater to their young, mobile shoppers
  Younger shoppers are on their phones and want to check out fast, with their preferred payment provider on-site or an app designed for their small screens. MVMT, Azazie and True Religion share how they fine tune their mobile shopping experience for young shoppers.

The post The most popular online retail stories of 2022 appeared first on Digital Commerce 360.

“The raw [metal] materials needed to weld have gone up. One reason we’re not selling as many bigger ticket machinery items is because people are trying to fix what they have because they have to spend more on consumables,” says Robert Goodliffe, president and CEO.

Customers are buying lower-cost items, Goodliffe says. “They’re buying safety gear and some replacement parts but overall, fewer machines,” he says.

During the pandemic in 2020, Cyberweld customers purchased more consumables to keep their existing equipment running instead of buying expensive products like welding machines, Goodliffe says. Consumables include flux (welding wire) and filler metals (including aluminum, stainless steel, copper and silver). To offset this shift, Cyberweld found a new batch of shoppers in 2020 for vented masks and other respiratory safety gear to guard against COVID-19. The retailer pivoted its selling strategy to sell personal protective equipment (PPE) and, as a result, received an influx of industrial customers in 2020.

In 2021, the demand for PPE subsided and Cyberweld found selling welding equipment and consumables presented new challenges. In 2021, Cyberweld (No. 1048 in the Next 1000) ranked No. 714 in the Top 1000 after a banner 2020 year. 2021 and 2022 have proved to be more challenging.

Inflation affects equipment prices

While supply shortages weren’t problematic for Cyberweld in 2021, inflation was and continues to impact the retailer in 2022. The merchant’s top-selling piece of equipment is a good example of this — the price for this one product jumped by 28% from 2020 to 2022, Goodliffe says.

The Millermatic 211 is historically the merchant’s bestselling welder machine. In July 2020, Cyberweld paid a distributor $1,219 for each welder. Cyberweld than sold the machine to its customers for the retail price of $1,717. By July 2022, that same welder cost Cyberweld $1,689, which the merchant sold to customers for a retail price of $2,380. Overall, this piece of equipment increased its price five times between July 2021 and 2022 and 18 times since COVID-19 began in March 2020, Goodliffe says.

That cost increase has impacted demand, Goodliffe says. In 2021, Cyberweld sold 866 units, compared with 1,262 units in 2020. Through June 2022, Cyberweld had sold 245 units, which is less than the norm, he says.

Shoppers buy fewer welding machines

The types of products shoppers buy also changed in 2021. Historically, Goodliffe says the retailer’s average order value (AOV) was about $440. But in 2022, that has decreased about 25%. Customer buying behavior has shifted, and that’s reflected in what Cyberweld sells, Goodliffe says.

Web sales decreased around 10% in 2021 compared with 2020, Goodliffe says.

“2022 is on par with 2021,” he says. “And inflation makes the impact worse.”

This is an excerpt from the 2022 Next 1000 Report. The report can be downloaded now as a PDF for $499. Digital Commerce 360 Gold and Platinum Members receive a complimentary copy of this report as a part of their membership.

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Josh Brazil, vice president of supply chain insights at project44, a supply chain visibility platform, says last-mile delivery service has dramatically improved since the worst of the pandemic — when 20% or more packages arrived later than promised. But persistent labor shortages have kept delays above pre-pandemic levels during 2022. That’s likely to continue for the rest of the holiday period, Brazil says.

“Labor is an issue across all supply chains,” Brazil says. During the pandemic, numerous workers in all parts of the supply chain left the industry. And those departures — and a generally tight labor market — have put stress on last-mile delivery, he says.

The “last mile” refers to the final leg of a product’s journey. That’s when it moves from a transportation hub to its destination, generally via a common carrier like FedEx Corp., United Parcel Service Inc. (UPS), or the United States Postal Service (USPS).

A good sign for shippers is that average weekly parcel transit times during the second half of 2022 has improved since peaking at 3.01 days at the end of June, according to project44 data. For the week ending Sept. 28, transit time was down to 2.07 days.

Retailer and consumer expectations for parcel delivery

During the 2021 holiday season, consumers found themselves frustrated by out-of-stock inventory. This year, many retailers have too much stock. But merchants expect consumers to take nothing for granted.

According to a Digital Commerce 360 survey of 70 retailers, conducted in July-September 2022, half said they expected shoppers to buy earlier this holiday season to avoid finding inventory out of stock. And 36% of retailers said they expected consumers to demand faster shipping than in years past.

A survey of 1,088 consumers conducted by Digital Commerce 360 and Bizrate Insights in September 2022 confirms that consumers remain worried about inventory levels. 57% of those surveyed said they planned to check product availability before placing an order for delivery.

Delivery speed and in-stock are important

The Digital Commerce 360/Bizrate survey also found that 32% of consumers  ranked speed of delivery among the most important factors when choosing an online retailer. More than a quarter (27%) selected “product in stock and ready to ship” as an important factor.

Having orders arrive late is always a problem, says Calvin Kim, CEO of Coverland, an online retailer of vehicle covers and other automotive, motorcycle and boat accessories. But, when delivery is slow everywhere, customers can be forgiving.

“Having my customers experience delays is indeed a major issue,” Kim says. “However, I don’t find the delay during the holiday season to be a major issue since the reason behind this delay is something justifiable and expected, and all retailers are suffering.”

“Of course we are expecting delays in shipping during the holidays; it is the same case every year, as it is a busy season,” Kim adds. “However, we expect the delay to be within the reasonable period of time and we make sure that our customers are informed about the maximum delay that could occur so we don’t shake their trust in us.”

But this year, consumers are confident and don’t expect retailers to suffer from slow shipping by parcel carriers, according to a project44 survey of 1,603 consumers in the United States, United Kingdom, France and Germany.

The project44 survey, conducted in August 2022, found 71% of consumers expect holiday gifts to arrive on time in 2022. Also, 64% of consumers polled said they still wouldn’t pay higher prices to guarantee their purchases arrive in time for the holidays.

Upgrading and diversifying parcel delivery

During the 2021 holiday season and the period before Valentine’s Day in 2022, Moriarty’s Gem Art received “a ton” of customer complaints about late parcel deliveries, said Jeff Moriarty, marketing manager of the family-run jewelry merchant. The retailer, which had always used USPS as its primary domestic carrier, decided to switch to offering free USPS express delivery on all orders, which solved the problem.

Moriarty said the switch raised the price of shipping orders to about $30 per parcel from about $10. But, because Moriarty Gem Art has an average order value of about $2,500, it was easy to cover the extra shipping costs by slightly raising prices.

“The good news is that it hasn’t affected sales, and customers are thrilled to get their packages so quickly. Almost every shipment arrives in one to two days (guaranteed) instead of five to seven. We don’t expect to see any issues this holiday season,” Moriarty said.

The retailer offers FedEx service to domestic customers who want to pay extra for it, Moriarty said. For non-U.S. orders, it uses FedEx exclusively.

Moriarty’s Gem Art sells online at MoreGems.com and operates a physical retail store in Crown Point, Indiana.

But not all retailers can upgrade their shipping services and simply work that extra cost into product prices. On average, companies that ship parcels — including e-retailers — are working with more last-mile carriers than in the past.

According to project44, the average shipper worked with four carriers in September 2019. That number grew to 5.7 in September 2022, a 42.5% increase. From August to September 2022 alone, carrier diversity grew 9.6%, up from an average of 5.2.

“This could be a sign that retailers are bulking up their carrier networks proactively in preparation for peak season starting in November,” according to a project44 report.

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Online sales surpassed Adobe’s original estimate of $9 billion, a projection Adobe shared Friday morning after reporting consumers spent a record $5.29 billion on Thanksgiving Day (Nov. 24), up 2.9% year over year. Online sales for the first three weeks of November (Nov. 1-22) suggested consumers waited for deals, as sales during this period increased only 0.1% compared with the same Nov. 1-21 period in 2021.

For the entire holiday season, Digital Commerce 360 projects online holiday sales to grow 6.1% in 2022. 

Technology provider Salesforce Inc. reported U.S. Black Friday online retail sales reached $17.2 billion. That’s a 10.2% increase year over year. Salesforce said the average discount rate online in the U.S. was 30%. In 2021, the average discount over Nov. 23-29 was 26 percent in the U.S., down 8 percent compared with 2020. 

Mobile also played a big role in consumer shopping, accounting for 78% of web traffic, according to Salesforce. Social platforms accounted for 12% of all mobile traffic referrals in the U.S. and globally, up 22% in 2022 compared with 2021.

Salesforce said its estimate is based on an analysis of 1 billion transactions that passed through its ecommerce and digital marketing software.

Adobe Analytics also reported that U.S. consumers are increasingly comfortable shopping from their phones. Black Friday mobile shoppers accounted for 48% of online sales compared with 44% in 2021.

Despite inflation, online consumers are still spending

This year, more retailers have a surplus of goods and are using higher discounts to entice shoppers to purchase, said Vivek Pandya, lead insights analyst at Adobe. 

“Black Friday this year stands out from the past as higher discounts drove larger spend,” Pandya says. “Consumers are using different payment methods, such as smartphones, for transactions.”

Adobe Analytics’ figures are not adjusted for inflation.

“But even if you factor [inflation] in, ecommerce inflation has been nearly flat in recent months, down 0.7% year over year in October, for example,” Pandya says. Online prices were up 7.7% year over year in October, according to the Consumer Price Index.

Budget-conscious consumers opt for buy now, pay later

Higher prices have also resulted in consumers changing how they pay Pandya says. Buy now, pay later (BNPL) orders have increased 78% on Black Friday when compared with the previous week (Nov. 19-Nov. 25), according to Adobe. 

Cautious consumers are embracing flexible payment options to manage their budgets in an uncertain economic environment, Pandya says.

Buy now, pay later is an attractive proposition for many shoppers watching how they spend this holiday season, says Ted Rossman, senior industry analyst at consumer financial services company Bankrate.com. 

“These plans are pushed aggressively online [at checkout],” Rossman says. “BNPL [companies] often don’t charge interest, especially ‘four payments over six week’ plans.” 

Meanwhile, the average credit card is charging 19.2%, according to Bankrate.com data. That’s “the highest since we started measuring this in 1985,” Rossman said. 

Electronics, smart home items, audio equipment and toys sell well

According to Adobe Analytics, categories that drove online retail sales growth on Black Friday compared to an average day in October include:

• Electronics online sales increased 221% 
• Smart home items increased 271%
• Audio equipment increased 230%
• Exercise equipment increased 218%
• Toys increased 285%

Hot sellers included Fortnite, Roblox, Bluey, Funko Pop!, and Disney’s  Encanto toys. The gaming category stood out as online shoppers purchased Xbox Series X and PlayStation 5 gaming systems, along with games FIFA 23, NBA 2k23, and Pokémon Scarlet & Violet. Other top sellers included Apple MacBooks, and Dyson airwrap and vacuum products, according to Adobe. 

More shoppers visited stores on Black Friday 2022

While online retail shoppers spent record amounts online, consumers also ventured out to stores in 2022. In-store traffic increased 2.9% on Black Friday compared with 2021, according to Sensormatic Solutions, a unit of Johnson Controls that monitors retail store traffic. 

Plus, more shoppers ventured inside the stores, as fewer online shoppers opted for curbside pickup, according to Adobe. Online orders picked up curbside accounted for 13% of all online Black Friday orders for retailers that offer the service, according to Adobe. That’s down from 21% in 2021.

Total retail sales, both in-store and online, grew 12% year over year on Black Friday, according to Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payment and is not adjusted for inflation. In-store sales increased 12% and ecommerce retail sales increased 14%, according to Mastercard.

Shopify Inc. announced a record-breaking $3.36 billion in sales on Black Friday, a 17% increase from 2021.  

Shopify is the ecommerce platform provider for 45 of the retailers in the 2022 Digital Commerce 360 Top 1000, an annual ranking of North America’s leading retailers by online sales. Adobe Commerce is the base ecommerce software 82 of the Top 1000 retailers use, and Salesforce has 65 retailer clients in the Top 1000.

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2022 Ecommerce Fulfillment Report

Analysis of the latest trends in ecommerce fulfillment. Includes over 30 charts, shipping policies of Top 1000 retailers, Amazon’s fulfillment practices, the state of the worldwide supply chain, and updates on in-warehouse automation and delivery robotics. 

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According to second-quarter earnings reports, some of the nation’s largest retailers resorted to offering promotions to sell off all their slow-moving products. The discounting has hurt retailers’ bottom lines and caused many to scale back their sales and earnings projections for the rest of 2022. With the holiday season approaching, retailers ended the first half of 2022 in need of space — in fulfillment centers, warehouses, and stores — for their peak-season inventories.

Walmart Inc. (No. 2 in the 2022 Digital Commerce 360 Top 1000 database) saw shifts in consumer demand coming and canceled billions of dollars’ worth of orders from suppliers late in 2021. But it still had a glut of inventory during Q1 and Q2 of the current fiscal year, the retailer reported.

Like rivals including Target Corp. (No. 5), Macy’s Inc. (No. 16) and Nordstrom (No. 20), Walmart offered promotional pricing to move its slow-moving inventory. But some retailers took another route. The Gap Inc. (No. 19) and Kohl’s Corp. (No. 21), announced plans to “pack and hold” some inventory to sell later.

At Kohl’s, that strategy contributed to a 48% year-over-year increase in the retailer’s inventory in the second quarter. The Gap reported inventory was up 37% year-over-year in Q2 of 2022.

Free shipping is still king

But despite rising costs, most top online retailers keep offering free shipping. And the reason is clear: shoppers love it.

Numerous Digital Commerce 360 consumer surveys show that free shipping is always popular with consumers. For example, in an August 2022 survey of 1,116 online shoppers by Digital Commerce 360 and Bizrate Insights, 70% of respondents listed the availability of free shipping as one of the three top criteria for selecting online retailers. In a similar survey conducted in May 2021, when COVID-19 vaccines were still rolling out, 82% cited free shipping as a top-three criterion.

But that doesn’t mean retailers can afford to offer it to everyone on every order.

Allison McGuire, vice president of marketing at Paper Mart, a packaging supplies retailer, believes free shipping should evolve into an earned perk retailers offer to high-value customers and prospects.

“Making free shipping exclusive to your loyalty program or newsletter subscribers creates customer loyalty and ‘fans’ of your brand,” McGuire says. “Unless companies’ margins are extremely high, most cannot afford to offer free shipping to everyone — or free returns for that matter — and still remain profitable.”

Free shipping offers in 2021

Among retailers in Digital Commerce 360’s Top 1000, nearly three out of four offered free shipping on at least some orders in 2021. However, retailers usually offer free shipping with strings attached, such as a minimum order threshold, or membership in a paid loyalty program, such as Amazon Prime. 45.1% of those require a minimum dollar amount to receive the free shipping.

Among the Top 1000, that minimum threshold averaged $65.27. Meanwhile, 4% of Top 1000 retailers offered free return shipping in 2021.

The Top 1000 ranks the largest e-retailers in North America by online sales.

2022 Ecommerce Fulfillment Report

This article contains information featured in Digital Commerce 360’s 2022 Ecommerce Fulfillment Report.

The report analyzes how retailers are adjusting to yet another “new normal.” For many merchants with stores, omnichannel services were the key to digital growth in 2021. In that year, customers took advantage of opportunities to pick up orders and get them delivered the same day.  

The 2022 Ecommerce Fulfillment Report includes: 

• Exclusive consumer survey results that reveal what customers value most, their evolving shopping habits and ever-changing expectations. 
• Real-life case studies of retailers are adapting to change.
• Breakout sections on the fulfillment operations at Amazon, Target and Walmart.  
• Results of Digital Commerce 360’s “mystery shopper” experience with same-day delivery. 
• An update on logistics and supply chain issues. 
• 20+ charts and graphs detailing fulfillment, consumer shopping behavior and more. 

More about the 2022 Ecommerce Fulfillment Report is available to Digital Commerce 360 Gold and Platinum members as part of their paid memberships. Single-copy sales are available for $399. Get the report now.

 To access this analysis and other exclusive ecommerce research and data, learn more about Digital Commerce 360 Memberships.

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The post Order fulfillment challenges change, but don’t go away appeared first on Digital Commerce 360.