2023 predictions for E-commerce

10 events that could occur next year.

Inside.com Part of   Network December 30, 2022

Dear Insiders, I hope everyone is having a wonderful holiday season! Yesterday, I recapped the 10 biggest e-commerce stories of the year, and today I'll be sharing my predictions for 2023.  I also wanted to take this opportunity to let you know that today is my last day here at Inside and thank you for reading my writing over the past two years! I've really enjoyed interacting with all of you and working alongside some of the most knowledgeable individuals in their respective fields. My colleague Martin will be replacing me, and I have no doubts that he'll do an amazing job. If you'd like to stay in touch, a link to my Twitter account is available here. Feel free to reach out anytime, as my DMs will remain open. Finally, I wanted to wish everyone a happy and healthy new year! Regards, Jigney

Amazon will roll out its own buy now, pay later (BNPL) option and end its partnership with Affirm. Amazon first partnered with Affirm in August 2021 to let U.S. customers split purchases of at least $50 across multiple installments. As part of the deal, Affirm became Amazon's only U.S. BNPL; however, this exclusivity agreement will expire on Jan. 31, 2023. More: More consumers are likely to turn to BNPL in 2023 amid rising interest rates and concerns about a recession. Launching an internal option would give Amazon greater control of its BNPL operation and reduce its dependence on third parties. In December, The Information said that Walmart, which also has a partnership with Affirm, would launch an internal BNPL option next year.

Kohl's will get acquired in 2023. Kohl's received multiple takeover bids in 2022, including one that valued it at $60/share from Franchise Group; however, they were all rejected. Kohl's turned down the offers citing the weak retail environment, but the challenges the company faces are unlikely to disappear in 2023. More: In February, Kohl's implemented a shareholder rights plan to ensure there isn't a hostile takeover; however, it's only active for a year. Early this year, activist investors Macellum Advisors and Ancora Holdings urged the company to fire CEO Michelle Gass and chairman Peter Boneparth. Gass left to become the CEO of Levi's in December. Kohl's revenue declined by 7% YoY in Q3 to $4.3B. Kohl's stock is down 49.2% year-to-date, and it has a market cap of $2.7B.

E-commerce and fintech companies will delay going public until Q4 2023 at the earliest. The total number of IPOs globally declined by 44% YoY in the first nine months to 992 due to worsening macroeconomic conditions, according to EY. Collectively they raised $146B, down 57% YoY. More: Nasdaq CEO Adena Friedman said she expects the IPO market to be "quiet" in H1 2023 and is "hopeful" more companies will start going public in H2. In November, The Information said that e-commerce technology firm Rokt was looking to go public in "late 2023 or early 2024." Instacart was looking to go public this year but, in October, decided to postpone its IPO until 2023 at the earliest. Stripe first signaled its intent to go public in July 2021, and while it lowered its internal valuation in 2022, the payments giants could go public next year.

Amazon aggregator funding will fall from $12B in 2021 to $3B-4B in 2023. As e-commerce sales growth continues to normalize following two years of accelerated growth in 2020-2021, investors will become more reluctant to back companies in the space. More: There will be increased consolidation in the sector as smaller, unprofitable players will be unable to raise funding and will get acquired by larger aggregators. Aggregators slowed down their acquisition pace in 2022 by 10%-20%, and this trend will continue into next year as they focus on growing existing brands in their portfolio. Some aggregators will sell off certain brands in their portfolio as they prioritize 2-3 product categories. Aggregators that are unable to raise additional funding will be forced to shut down.

An increasing number of Chinese technology and e-commerce companies will expand to the U.S. in 2023. In November, TikTok rolled out TikTok Shop, which enables merchants to sell products from within the app. At the time of its launch, TikTok Shop was only available for a limited number of merchants on an invite-only basis. More: In September, the WSJ said that Chinese fast fashion retailer Shein was looking to ramp up hiring and open warehouses in the U.S. as part of its expansion plans. The U.S. accounts for 25% of Shein's GMV, making it one of the company's largest markets. In September, Chinese e-commerce giant Pinduoduo launched its Temu shopping app in the U.S. In November, TechCrunch noted that the U.S. made up 97% of its 5.2 million global downloads.

NFT sales will remain below $1B in every month of 2023. NFTs declined from $7B in January to $394M in November. The macroeconomic conditions that have resulted in a decline in speculative asset sales are expected to remain in place next year. More: The Federal Reserve has raised interest rates seven times in 2022, and more hikes are expected next year. The Federal Funds rate range is between 4.25%-4.5%, the most since 2007, and it's expected to reach 5%-5.5% next year, with cuts not expected until 2024. The continuous decline in NFT sales and the ongoing "crypto winter" will lead to more marketplaces initiating layoffs. In July, NFT marketplace OpenSea, which raised $300M at a $13.3B valuation earlier this year, reduced its workforce by 20%.

Concerns about a recession will lead to a slowdown in unionization efforts among Amazon warehouse workers. Four Amazon union elections have been held this year, with only the JFK8 fulfillment center in Staten Island, New York, voting to unionize. More: Over 50% of economists believe the U.S. will enter a recession in 2023. Companies usually scale back hiring and implement layoffs during recessions, which could lead to a slowdown in unionization efforts due to concerns about job stability. Amazon is challenging the result of the JKF8 election, and a lengthy court battle could dissuade union organizers. Regardless of the economic situation, Amazon warehouses have high turnover rates, which makes it difficult for organizers to secure the 30% of signatures needed to hold an election.

Mobile commerce will make up 8% of U.S. retail sales in 2023, up from 6.9% in 2022. Mobile devices play an increasingly important role in e-commerce, as 187.5 million of the 292 million Americans that will own a smartphone by 2024 are expected to use them to make purchases. More: Mobile commerce sales will increase from $359.3B in 2021 to $728.3B in 2025 and make up 44.2% of all e-commerce sales. 51% of U.S. online purchases during Cyber Week (the five-day period between Thanksgiving and Cyber Monday) occurred via mobile devices, a 5% increase from 2021, according to Adobe. 2022 marked the first time that the majority of e-commerce sales during Cyber Week happened via mobile devices. 55% of online purchases on Thanksgiving took place on mobile devices, a 4% increase YoY.

Inflation will fall below 3%. According to Goldman Sachs, inflation will drop significantly in 2023 as supply constraints ease, the cost of housing goes down, and the labor market cools.   More: Low inflation could also end the aggressive interest rate hikes from the Federal Reserve. Goldman Sachs expects that by December 2023, inflation will be 2.9%. One of the main factors behind a more stable inflation rate will be the reduction of supply chain disruptions and shipping congestion. Even globally, factory gate prices, shipping rates, commodity prices, and inflation expectations have begun to decrease. Global inflation hit a record of 12.1% in October 2022. However, inflation has already peaked in some emerging markets, like Brazil, Thailand, and Chile.

Governments worldwide will begin to regulate buy now, pay later (BNPL) finance schemes. Leading the way is New Zealand, which will require providers of BNPL to conduct an affordability check on consumers before granting them a loan. More: The government of New Zealand wants to ensure that borrowers receive the same protections they get on credit cards and personal loans. The measure will apply to loans above NZ$600 ($350) with the purpose of preventing people from acquiring significant amounts of debt. BNPLs will have to have hardship processes in place and a dispute resolution scheme. Australia is also formulating regulations to treat the BNPL industry in the same way it treats loan products or credit cards. BNPL is booming in Australia. In 2021 2% of credit card purchases were done through that scheme adding up to $16B. The government is considering bringing BNPL under the Credit Act, making these companies get an Australian credit license and obey responsible lending standards that credit companies already do.

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Jigney Pathak is a Business Researcher at Inside who loves technology, finance & sports. He has a Bachelor of Business Administration with a finance specialization & has previously worked at Salesforce. Martin is a writer focused on tech and social impact. He has a BA in International Relations from El Colegio de Mexico and a MS in Foreign Service, Global Business and Finance from Georgetown University. He has worked at HSBC, the World Bank and for one of the Big 3/MBB consulting firms. He enjoys historical podcasts and learning languages. Editor Aaron Crutchfield is based in the high desert of California. Over the last two decades, he has spent time writing and editing at various local newspapers and defense contractors in California. When he's not working, he can often be found looking at the latest memes with his kids or working on his 1962 and 1972 Fords.

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