Every year, leading brands, retailers, tech companies, analysts, investors, and agencies of all sizes convene in Las Vegas at ShopTalk to discuss all the latest topics affecting commerce and retail, ranging from supply chain to recession to headless to TikTok. The goal of the conference is to understand and influence how consumers shop, discover, and buy goods.
This year’s ShopTalk featured over 10,000 attendees, 275 speakers, and over 50,000 meetups (ShopTalk’s best-in-class meeting format) with sponsors such as Meta, Google, Walmart, and J.P. Morgan. The sessions were led by industry experts from brands and retailers ranging from small start-ups to enterprises. The result — 4 content-rich days leading to fruitful knowledge-sharing and collaboration amongst commerce professionals.
Here are the top 6 trends and insights that are shaping the future of commerce:
1. In-store matters.
Gone are the days of a direct-to-consumer only business. Brands are quickly learning that “DTC is just a channel and not a business model,” as Simeon Siegel so succinctly and boldly summarized at the conference on Day 1. Over the following days, we would indeed find out that one of the most underlying buzzwords and key strategies that brands are adopting this year is wholesale.
We’ve seen large, established, digitally native brands like Allbirds embrace in-store by opening their own stores in the past few years, while also selling wholesale through retailers like Nordstrom, REI, etc. We spoke to a few smaller, emerging brands that are adopting this strategy early in their growth stage and are seeing great results.
—Shai Eisenman, Founder & CEO, Bubble Skincare
So why in-store? Retail bounced back after the pandemic not only because consumers wanted to get out and about but also due to their need to experience brands and products in real life. A single brand can reach hundreds of thousands in traffic on any given day but retailers, especially big box retailers or shopping malls, can see almost 10x that amount of traffic! Additionally, buy online pick-up in store options have seen huge success/growing numbers after the pandemic due to the heightened convenience it offers.
The story here is not that brands should stop selling online and only sell through retailers. The true takeaway is that brands need to adopt an omni-channel strategy to fully balance and complete their business models. Interestingly enough, the wholesale brands we talked to are looking looking the opposite way — to expand upon their DTC channels.
2. Partnerships are growing in presence.
More and more, and especially during tough financial times, it seems that businesses are realizing that they can’t do it all themselves and that partnering with another entity that shares a similar audience can lessen the financial burden and generate positive ROI for both parties. Here’s breakdown of the popular partnerships we’ve seen and can expect to see more of this year:
- Store within a store (SWAS)
- Mini-Sephora stores within Kohls.
- Happy Returns drop-off locations inside Ulta Beauty locations.
- Mini-Apple stores located inside specific Target locations.
- Co-branded loyalty programs
- Target and Ulta Beauty operate a SWAS program, but they also allow their co-shared customers to earn and use their rewards points and perks at either retailer.
- Dick’s Sporting Goods and Nike have also come together to extend rewards program benefits across both, so users can feel enabled to purchase at either retailer based on their preference/needs.
- Enhanced retailer & brand synergies
- While brands and retailers have always created partnerships, there is a growing number of exclusive products and lines that brands provide for large retailers. Lily Pulitzer for Target, Asos/TopShop at Nordstrom, and Nike at Footlocker are all great examples of this type of partnership. Last year startup beauty brand, Winky Lux, also collaborated with Applebee’s to create a BBQ sauce-flavored lip gloss (you’re welcome, foodies) generating a lot of buzz and virality.
- Additionally, a few brands hinted at increases in co-marketing/advertising spend between retailers and brands in both traditional media and digital media.
These partnerships along with classic brand-to-brand collaborations (Louis Vuitton and Supreme, Lego and Stranger Things, Uber and Spotify) and influencer-to-brand partnerships will continue to be a primary focus for acquisition efforts — a brilliant way to combat rising advertising costs.
3. AI (Artificial Intelligence) is… here to stay.
The hottest topic at ShopTalk this year was undoubtedly generative AI. While there were some large debates around the way this technology would be adopted, one thing was clear: almost every merchant has some interest in using it. The operational cost savings of time and money are important to every business, which unlocks having more time to focus on strategy.
Stories were shared at ShopTalk of businesses creating moving videos from still images, developing foundations for new products, as well as building entire websites in a matter of minutes using generative AI! The trick? Garbage in, garbage out. The technology is only as good as the content that feeds it — the better the input of data by a human, the better the output of the machine.
The additional general consensus around generative AI was that there should be some sort of ethical guidelines and governance around the technology itself and tools like ChatGPT-4 or Bard. Last week, a large group of well-known innovators called for a summer break in furthering the development of AI technologies.
We’ll be watching the progression of generative AI adoption unfold over the coming months. The technology is set to change the way the world, and in doing so, it will help offset rising operational costs for businesses — that is what technology is for, after all.
4. Customer experience reigns supreme.
Today’s consumer is hyper-educated and savvy – they are tech-enabled and have had more options to choose from than ever. What the end user thinks is most important as it determines demand which then determines adoption.
Every merchant we talked to mentioned the customer experience being their main focus in 2023, and some even admit that it should have always been the focus. This means that brands are indeed shifting their investments to conversion and retention this year. This shift from quantity to quality will help offset rising advertising and acquisition costs, leading to higher return on ad spend (ROAS).
Many merchants at ShopTalk are reaching out to their consumers regularly via surveys or reviews/ratings, executing upon those insights, and are seeing increased results. Why guess what your customers think? Just ask them or get their input, and grow your first-party and zero-party data sources to fuel successful new features and programs for your customers. Hearing and seeing directly from consumers not only creates brand trust but it also creates communities of like-preferenced people.
Working with hundreds of brands over the last decade, the one thing we know for sure is that a brand with a community is unstoppable.
5. Advertising strategy must be hyper-optimized.
The power of digital advertising used to be the ability to reach millions of eyeballs at a low cost with minimal effort. That changed drastically as the market became hyper competitive as well as privacy changes like iOS 14 in 2021.
Today’s marketers are becoming much more targeted with their approaches and truly understand the art of segmentation. Through super targeted audiences and content, brands are making the most out of their advertising channels and innovating new ways to keep Customer Acquisition Cost (CAC) low but also grow Lifetime Value (LTV). Here are tried and true advertising strategies we learned from both startup and established brands:
- Channel insights:
- Gen Z is on TikTok and YouTube.
- Millennials are on Instagram and YouTube.
- Gen X is on Facebook and Instagram.
- SMS is successful for all ages.
- Social advertising is considered a top of funnel effort, and ideally should lead a customer in-store to experience the products IRL.
- Your website is the place for returning customers and brand loyalists.
- Content strategy:
- Short form, promotional video content is best for TikTok and OTT.
- Long form, educational video content is best for YouTube.
- Instagram is the place for brand story-telling.
- Email and SMS marketing should be extremely targeted, relevant products and offers only.
- Timing is the most important factor in all advertising success, meaning the convenience of the offer/promotion is likely to lead to greater conversion.
It’s clear that successful advertising requires a much more strategic and defined approach in 2023. Make your advertising dollars work smarter and not harder by ensuring that your media plan includes creating specific content types for each channel, and also includes distinct targeting towards specific consumer groups.
6. Brands are not tech companies.
The last common thread we heard from the larger brands we met with at ShopTalk is that their current tech stacks are complicated and antiquated leading to an increased overhead in maintainability and slower time-to-market.
In today’s ever changing digital landscape, merchants must adapt quickly to consumers’ needs — when a system is custom built, it can be hard to do this.
—Scott Friend, Partner, Bain Capital Ventures
Technology’s purpose is to do one thing: make our human lives easier and more convenient, so we can spend time doing more of what we want to do versus what we have to do. Commerce technology is quickly accelerating to do just that, especially with the announcement of Commerce Components by Shopify earlier this year. Along with Shopify’s fully headless offering, Hydrogen, Commerce Components ushers in a new era of technology for direct-to-consumer businesses to completely customize their tech stack to their needs while also taking advantage of the robust functionality inherent within Shopify’s all-in-one platform.
Leaving technology to the techies will enable brands and merchants to spend more time on their core business — developing/selling new goods and creating elevated customer experiences.
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