RetailX End of Year Review 2022
We’ve partnered with RetailX for their latest release: a retrospective analysis of 2022. The Year in Data Report 2022 contains infographics from all 80 reports published during 2022 and offers retailers a great chance to increase their understanding of the retail trends that emerged last year.
In this blog, we’ll offer some highlights from RetailX’s Year in Data Report 2022, such as highly relevant retail statistics and expert analysis. We’ll also include insights from our own Sacha Wilson and Matt Harrison, both of whom offered an in-depth partner perspective that can be found in the RetailX report.
Retail trends of 2022
International expansion via ecommerce
As the Covid-19 pandemic worsened throughout 2020 and 2021, social distancing and national lockdowns meant that commerce moved almost entirely online. While pandemic measures loosened in 2022, consumers continued to prefer online shopping.
In response to this shift in consumer behaviour, retail businesses increased their focus on online commerce. The RetailX UK Top 500 report highlighted a continuing trend of businesses, (specifically brands) steadily expanding their online presence. While most modern businesses will have some level of online presence, expanding that presence means optimising their website for ecommerce or decreasing their investment in brick-and-mortar stores.
More recently, brands are specifically launching websites to sell in international markets. Ecommerce retailer The Hut Group (THG), noted a staggering 40% increase in the number of websites it runs for its clients, primarily driven by “enterprise-scale corporates across a diverse range of categories with over 75% of live sites in major international territories (U.K., U.S., France, EU, China, etc).”
While companies are trending towards international growth, it still takes significant investment to break into foreign markets. For instance, the RetailX Global Elite 1000 shows an overwhelming preference among American consumers to shop with American brands — 98.6% of retail web traffic is directed to businesses with U.S headquarters.
Our Senior Director, Matt Harrison, specified that 2023 will likely see companies doubling down on their cross-border endeavours because of the increase in simplified compliance rules. These are regulations that allow businesses to use a much more streamlined tax compliance process when trading abroad. Without needing to account for complicated tax systems, international trade will become significantly more accessible.
The use of online marketplaces
International growth doesn’t happen overnight, especially for small and medium enterprises. While larger businesses can afford to sell their products across borders directly, SMEs have needed to find alternative ways of establishing themselves internationally. Their efforts can be seen in the significant use of online marketplaces during 2022.
Online marketplaces can be used as a kind of springboard for international growth — businesses can use them to “test the waters” of a new market before investing in it fully. Additionally, online marketplaces have less complicated tax and customs requirements. Finally, while all marketplaces allow sellers to utilise their online presence, some go a step further and offer their sellers logistical support.
When discussing the increased use of online marketplaces, it’s inevitable that Amazon will be mentioned. RetailX’s USA 2021 Ecommerce report (published in January 2022) shows that Amazon holds a 40% share of the U.S. market. This represents a huge market opportunity, as it means an easy entry for retailers outside of the U.S. wanting to gain a foothold in the country.
Amazon’s size also poses a challenge for those wanting to operate outside of its operations. However, the logistical benefits of Amazon FBA (the service where Amazon stores, packages and ships a seller’s items) are considerable, so it’s unlikely we’ll see the retail giant shrink in 2023.
What to expect in 2023
Retail companies entering an efficiency stage
The retail statistics offered by RetailX show significant international growth in 2022. In the latter half of the year, we’ve seen a slowdown in that growth. While this is partially due to the current economic conditions (which indicate an imminent recession), it’s also because these retail companies are trying to hold onto the growth they’ve achieved.
To avoid revenue returning to pre-expansion levels, companies are looking to technology to help them become as cost-effective and efficient as possible, so they can maintain their new scale and adapt to changing consumer behaviours. Our senior director Sacha Wilson referred to this period of reducing expansion and increased internal focus as the “efficiency stage”.
Automated solutions and digitisation will be a huge part of the efficiency stage in 2023. Some larger retailers have already used efficiency-focused tactics to adapt to changing consumer behaviour, as discussed in the RetailX UK 2022 Ecommerce report. For example, British retailer M&S introduced self-service returns machines in 78 stores at the end of 2021 as a way of bringing consumers’ preference for digital commerce into their physical stores.
According to the retailer, the machines were used around 70,000 times between mid-December and the end of January 2022, implying that even in physical stores, customers appreciate an integrated digital experience.
Sacha Wilson also noted a related retail trend that’s likely to continue in 2023: the move into the subscription-based economy. Retail companies are finding that it’s significantly more cost-effective to maintain revenue through a subscription model than to invest heavily in finding new business. For more information on the subscription-based economy, such as how to implement a subscription model and the associated tax obligations, check out our dedicated guide.
How Avalara can support your future success
Whether you’re just beginning to grow your company or are seeking to maintain a new international market, Avalara can help you. We offer a variety of automated solutions that make navigating international tax laws simple, and we are always available to provide our clients with expert tax advice.
Here are just a few of our solutions, each of which are proven to be immensely helpful for companies trading abroad:
Do you find yourself paying huge sums on customs duties? It may be that you’re applying incorrect HS Codes and are being charged higher duties as a result. Our item classification tool can help you apply the right codes for your goods.
As we’ve discussed, online marketplaces are a great place to start your international expansion. However, keep your tax obligations in mind, or you may receive significant financial penalties. We have a range of solutions for marketplace sellers seeking tax advice.
Trading into the EU? You’ll want to use the Import One Stop Shop (IOSS) to simplify your tax registration and reporting. However, you may need some assistance registering for the program: our IOSS solution can help.
The RetailX Year in Review report doesn’t just help analyse past developments — it can help you predict the future of the retail sector, by providing key data on how market trends change and develop. If you’re interested in finding out more, you can read the report here.
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