Cookies are out
Data privacy regulations tighten as acquisition costs continue to climb
First-party customer data is in
Instead of looking to big data, brands are using first-party data to engage their audiences with more relevant and personalized content
Brands are working together
Collaborating with other brands and creators opens up new audiences—and customer bases
The data dilemma: ROAS worsens as consumer privacy gets better
The number of online stores doubled in 2021 compared to 2020. Competition was the biggest obstacle to achieving growth in 2022, according to the 350 global commerce decision makers we surveyed that year.** More than 26 million ecommerce sites compete for their target consumers’ limited time and attention, with more retailers joining the competition daily. But the advertising tools brands used to rely on are getting less dependable. Since the peak of lockdowns, ROAS has continued its decline as the costs per click on the biggest advertising platforms seem to be in a race for the top.
All values are in U.S. dollars
Paid search cost per click rose in every category year over year in Q3 2021
Sourced from Statista
The deprecation of third-party cookies has piled on to the advertising challenges. Apple and Mozilla have already done away with cookies, and Google is following suit in 2024. When Apple started letting its customers opt in to tracking in October 2021, advertisers lost 30% accuracy on targeting algorithms overnight, costing an estimated $10 billion USD in ad revenue. Big tech’s move toward more consumer privacy is making it harder for brands to reach their target audiences, generate traffic, and measure the effectiveness of their efforts.
But these companies are just responding to what people are asking for: more privacy. Only 33% of customers believe brands use their data responsibly, and regional governments are stepping up to protect their citizens. New and updated legislation around the world, such as in California, China, Brazil, and the EU, is adding to the growing number of privacy laws coming into effect.
There’s no denying that privacy regulations are strangling marketers’ ability to target potential customers. Boston Consulting group found that 95% of marketers have already experienced the downsides of these data privacy trends or expect to in the coming year.
For brands that depend on third-party data in their marketing, personalization at scale is one of the many downsides. But 71% of consumers still expect a personal touch, and 81% of brands agree that unique, personalized experiences play an important role in future commerce growth.* So the challenge is finding new ways to replace the role of third-party data in marketing.
Can first-party data solve the data crisis?
Many brands are collecting their own customer data to fill the void left by third-party cookies. In some ways, this is an upgrade. Third-party data is getting more expensive, often only available for a limited period of time, and the accuracy is questionable at best. Some studies say businesses overestimate ad effectiveness upwards of 4,000%.
In contrast, businesses have total control over their own customer data. They know exactly when, how, and why the data was collected, and it belongs to the business forever. And because this data comes from consumers who directly interact with the brand, the information is more likely to be relevant. What’s more, customers want an integrated, transparent, human experience, which third-party cookies are not cut out to give.
Some good news for customer acquisition out of the disruption is that more people are open to trying new brands. It didn’t look like consumers were willing to buy from new brands in 2020, when 38% of customers increased their spending with an individual retailer. But once the strictest lockdowns eased up and more options hit the market, 41% of consumers switched brands.
Whether new stores, new products, or new buying methods, 75% of consumers tried something different during the pandemic. And now, thanks to inflation, consumers are on the hunt for the best value, making them even more open to change. Two out of three shoppers abandon brands for better deals, and 58% switch in search of higher quality products.
But there’s still one big question first-party data can’t answer alone: How do brands find and attract these new customers? The answer that’s emerging for forward-thinking brands is collaboration.
Brands collaborate to win the marketing competition
Businesses are rethinking their paradigms around brand and fan building by turning competitors into collaborators.
Although collaboration is largely untapped in the digital world, the world of commerce has always been collaborative. Concerts showcase multiple bands to tap into each other's fan bases. Car dealerships live on the same street to bring more of the target market to one space, increasing the odds of a transaction.
Collaborations give brands access to new audiences while crushing conversion costs. Like meeting someone through a mutual friend versus a cold call, the customers that brands reach through collabs are potentially more willing to start the sales conversation.
Asa Whillock, former director of product management at Adobe, says, “We also expect a greater focus on making the right business alliances or data partnerships both internally and externally. Companies across industries will partner up to share audiences with explicit permission from their customers.” He predicts the next trend will be “companies working closely together, brand to brand, to exchange resolved first-party audiences (with consumer consent, of course) in a secure, neutral environment."
Alex Danco Director of Blockchain and Systems Thinking, Shopify
The biggest opportunity flying under the radar is collaboration. It’s the best way to increase the number of buyers who know and care about you in a way that turns you into not competitors but cooperators, perhaps even allies and friends. It’s the best way to have fan bases come into contact with new kinds of brands.
Collaboration is truly the win-win way for brands to find new audiences in a way that doesn’t dilute your brands.
How to bring collabs to life in 2023
1. Collaborate with other brands
The buzz around a collab creates new excitement for long-time customers and ripples into hard-to-reach markets. Brands get new eyes on their products and a fresh take on their brand.
New Balance used collabs to completely transform its brand image from dad shoe to highly coveted hype shoe. After more than 100 years as a sneaker brand all about function, actors, rappers, and supermodels are now spotted rocking the footwear.
Partnerships in diverse markets, from music to acting to sports, give New Balance the clout to tell stories that resonate with more fashion-conscious audiences. In the United States, it's only behind Nike and Adidas as the top brand in the performance footwear category. The brand also taps into regional markets through collabs with apparel brands like Parisian luxury label Casablanca and Japan's WTAPS. This master of collabs is shooting for $7 billion in sales by 2023.
2. Work with creators
Consumers want to connect with people, not just businesses. Almost one-third of shoppers say influencer recommendations are more important than recommendations from friends and family, and 71% of businesses expect online influencers to become even more important in the future.*
Content that customers create packs even more of a punch: User-generated content is 8.7 times more impactful than influencer content. Reviews, photos, videos, blog posts, comments, shares, and likes are seen as three times more authentic than brand-created content, and almost six times more authentic than official influencer content. Customers love to feel part of brands, and 30–40% of adult consumers under 35 years old already consider themselves content creators.
To capture Gen Z users, short-video platforms are the most popular places to partner with collaborators. Almost 40% of Gen Z use TikTok and Instagram for search over Google, and 61% say they're even more influenced by user-generated content since COVID. Gucci is making bold strides to attract younger, eclectic audiences through social media. Train enthusiast and TikTok star Francis Bourgeois is one of the newest faces of the Gucci x The North Face] collection, and social media is loving the collaboration.
3. Rethink loyalty programs
Experience-driven, customer-centered loyalty programs aren't yet the norm, but they're likely to be within a few years. Almost 72% of the global brands surveyed by loyalty tech provider Antavo are already planning to revamp their existing programs. To get ahead of the trend, brands are putting their customers at the center of loyalty programs, instead of transactions.
Customer engagement, satisfaction, and relevancy go through the roof when customers get to shop for perks anywhere in a brand's network, not just in one store.
Brand loyalty takes a hit in times of economic crisis, which is why more loyalty programs show up across industries when spending is down. Six out of 10 companies had loyalty programs to thank for keeping customers engaged during the pandemic. But loyalty programs take many forms. It's more important than ever to choose a model that meets current customer needs while paving the way for the future of brand-customer relationships.
Alex Danco Director of Blockchain and Systems Thinking, Shopify
How do I invite another brand's fans into an offer or special discount or early access to a drop or a collab? What's really amazing is if you can say, 'Prove that you're a fan of that merchant and I will give you something,' customers can get something in their purchase from one merchant that has meaning in another store.
How Doe Lashes taps into influencers and other brands to grow
Doe Lashes, an everyday lash brand based in California, “built their brand on the backs of creators,” according to CEO and founder Jason Wong. When the company was founded in 2019 with $500, they gifted their products to influencers to get in front of as many people as possible at virtually no cost.
Today, they have the attention of 36 million hashtag views on TikTok, and their business has grown exponentially, with 60% of their revenue coming from organic social and influencers.
What started as two social media marketers manually project managing their influencer relationships in multiple tools has now led them to automate many of their processes with Shopify Collabs.
Shopify Collabs cut effort in half: Six hours in a day could now be spent reaching out to 200 influencers instead of 100. While staff used to have to hop into PayPal to pay their partners, then into a spreadsheet to update the numbers, Shopify Collabs has acted as a single command center to discover new creators, create coupon codes, track results in their CRM software, or communicate with and pay creators.
“Saving time means saving money,” says Wong. “Being able to do more with a small team was top priority for us.”
Jason Wong CEO and Founder, Doe Lashes
The early stage of our business was trying to get as many eyeballs as we could. Now, we’re looking for conversions and are very much revenue driven.
How Shopify can help
Reach more buyers through influencers
Shopify Collabs is an all-in-one creator marketing app that helps brands recruit, collaborate with, and manage creators—and it’s free to install. Review applicants to your creator community, send gifts, assign affiliate links and codes, track performance, and send payments right from the Shopify admin.
Get your ads in front of people more likely to buy
Powered by unique insights from commerce data, Shopify Audiences provides custom audience lists for your digital ads to connect you with relevant buyers.
- Reach your audiences where they are: Connect with buyers across the marketing funnel, whether your campaign objective is to drive brand awareness, consideration, or sales. With multi-platform integrations, Shopify Audiences supports ad campaigns across the Meta and Google ad networks.
- Find buyers who want your products: Shopify Audiences uses a merchant-powered audience network to help you find new buyers.
- Get accurate reporting on audience performance: Running your business on Shopify means Shopify Audiences can accurately attribute and measure conversions from your audience lists.
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Powered by data from millions of Shopify brands, our proprietary report provides the tools and insights businesses need to drive growth in the next year.Commerce Trends 2023p. 13, Overview
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