It’s a new year. Dave and I are taking a look back at the biggest topics of 2022 and offer our views on how these shaped ecommerce and online marketplaces last year.
Dave: We can’t talk about 2022 without mentioning inflation. On a global scale, countries have felt the pressure of rising prices across the board with much of Europe especially being hit with an energy crisis largely caused by sanctions on Russia and the ongoing Ukraine conflict.
While the direct impact on the US hasn’t been as bad, the knock-on effect for global supply chains and rising prices in logistics have certainly hit our borders. The effects have been getting steadily worse throughout the year as even larger companies such as Shopify and more recently BigCommerce have announced mass layoffs to try and remain profitable.
The flip side of this though is as consumers are being more price sensitive they are being much more considered with their buying behaviors. Despite inflation and the rise in the cost of living 2022 still saw a record breaking Black Friday sales period which was certainly welcome news for many ecommerce business owners.
We are certainly not out of the woods yet, and it looks like inflation worries will continue into 2023, however, if ecommerce business owners can remain calm, adapt to challenges, and pivot as necessary to the ebb and flow of the market, then they will make it through the other side.
Richard: Inflation was one of the biggest stories globally in 2022. While people often blamed their government for not doing enough to combat rising prices, the reality is that the higher-than-normal inflation resulted from pent-up consumer demand, supply chain disruptions, a tight labor market, and energy prices skyrocketing as a result of sanctions placed on Russia after its unlawful invasion of Ukraine.
The US actually has faired a lot better than Europe as a whole, especially when compared to major European economies such as the UK, Germany, and Italy.
I think one of the shining examples in 2022 of how inflation affected online businesses was when Amazon introduced policy changes for Amazon FBA and its related logistics services.
The company added its first-ever fuel surcharges in April, slapped its first-ever peak season surcharges on FBA shipments in October, and in December announced a massive 2023 price increase for its 3PL solution, Amazon MCF.
However, there is some slightly positive news. We’ve been tracking online inflation via the Adobe Digital Price Index and over the last quarter in 2022, there has been significant easing in the US. It will still take some time before it’s back to “normal,” but there is a glimmer of hope now for 2023.
Richard: When Congress changed the law requiring third-party settlement organizations (or payment processors) as well as most marketplaces that manage their own payment processing, to issue a 1099-K to sellers on gross revenue of $600 or more, it opened a can of worms.
The media often focused more on PayPal and Venmo, which were equally affected by the regulation, versus eBay, Etsy, and other marketplaces. But the impact on marketplaces meant this new lower threshold was making many casual sellers rethink selling on them.
While there was interest in Congress to fix this problem, in nine months nothing happened, requiring the IRS to step in at the last moment, and at least provide a one-year relief on the issue.
But the problem is that without clarity on the 1099-K situation, many sellers that would be selling personal items out of their attic or garage will likely continue to sit on the sidelines because they are not sure what will happen next.
Those types of sales are typically not taxable, and the IRS has provided no guidance on how such casual sellers should declare the 1099-K form on their tax returns. At least a higher threshold would give folks who want to turn unwanted stuff into cash some breathing room before they have to worry about tax return implications.
I fear Congress will continue to punt on this issue, and all the IRS has done is kick the can down the road, which is the only thing they can do under the law. There needs to be clarity for casual or hobby sellers who just want to declutter and make a little extra money.
And for those sellers that are selling goods at a profit (running a business, even if very small), their whining about the low 1099-K threshold is absurd. The tax law is clear, make a profit, and pay income tax on the profit (after reasonable allowable deductions on expenses). Failing to do so, regardless of one’s frustration with the fairness of our tax system is tax evasion.
Having said that, maybe an interesting solution could be to offer a cumulative threshold that if revenue from all received 1099-Ks in one year fall below a threshold (say $5K or $10K), it would be considered a micro business or side hustle that would receive a tax exemption (no burdensome accounting). This could be further limited by offering this solution only to taxpayers at lower income levels.
Dave: As a total beginner when it comes to the US tax system…the whole thing scares and confuses me. Thankfully Richard has been doing his best to bring me up to speed on what I need to know and this whole 1099-K fiasco.
While I understand the reasoning behind the government wanting to do what they have proposed, the impact for many ecommerce sellers is huge. This, coupled with the many questions surrounding hobby sellers making a profit on an item that has been in the attic for 5 years, seems unreasonable.
In my opinion, these new requirements are going to turn many hobbyists and smaller businesses away from selling online or trying to grow their business as the tax burden becomes “not worth the hassle” for many.
eBay CEO Jamie Iannone just recently launched a new bid to congress to try and fix some of the problems surrounding the proposed changes and I remain hopeful that someone somewhere with an ounce of sense will see that in the current climate we should be encouraging entrepreneurial behavior, and not making life more difficult for those to earn some more money when times are hard.
Good news for sellers was granted however at the final hour as on the 23rd of December the IRS announced they were postponing the proposed changes for another year. While this doesn’t solve the problem…only delay it, this is good news for sellers who won’t be hit with a flurry of 1099-K’s come January, and hopefully, Congress can propose something a little less disruptive to small businesses for tax year 2023.
Return to Retail
Dave: Throughout the Covid pandemic in both 2020 and 2021 ecommerce saw a huge boom as physical retail stores across the world were forced to close. In order to meet demand this led to many businesses investing heavily in their online operations. While some businesses were cautious with their predictions, others invested heavily predicting that this influx of ecommerce was going to become the new normal.
What we have witnessed throughout 2022 however is actually closer to a return to the old normal. As stores reopened, more shoppers returned to their physical buying habits, much to the dismay of some large ecommerce platforms. As noted above both Shopify and BigCommerce have announced drastic cuts to their workforce after an overzealous hiring spree through the pandemic.
For sellers, this means that throughout 2023 if you have a physical retail location, you should not be looking at closing it if you don’t have to. There is still a decent audience that enjoys the physical experience and your focus should truly encompass an omnichannel approach. Use your physical store presence to really focus on what the website can’t, a truly personal experience for the customer.
Richard: At the end of 2020, PayPal CEO Dan Schulman said, “it won’t go back to the way it was,” referencing the dramatic shift from in-store shopping to online shopping due to the Covid pandemic.
Forward to the middle of 2022, ecommerce companies had to adjust their growth forecasts as consumers increasingly came back to shopping in retail stores as the physical shopping experience still matters to many.
I think larger retailers will continue to expand their buy online, pick up in-store (BOPIS) offering. In many ways, this offers consumers the best of both worlds, online shopping at retail brands they trust with the convenience to “shop ahead” when time is short or they don’t want to deal with crowds.
BOPIS has not been embraced as much by smaller independent retailers but as consumers get accustomed to this way of online shopping, it’s something even very small retailers should consider.
Today’s Point of Sale systems can easily track online and in-store inventory, as well as manage orders from multiple sales channels (web store, physical store, marketplace, etc.).
There is some capital investment required to implement such an omnichannel approach, but the cost may be more reasonable than many small retailers think. Even popular online commerce platforms such as Shopify and BigCommerce now offer omnichannel solutions to small businesses.
Unions – Organized Labor
Dave: Another common side effect of inflation is union disputes and strike action. This is being seen on a huge scale across the UK right now. Not only are Royal Mail workers on strike but in recent weeks nurses, train drivers and even border patrol have all announced strike action taking place throughout December.
Often the disputes are pay related as the pay rises offered in these sectors does not keep up with inflation meaning that many workers end up worse off. The counterargument is that when inflation goes away and things return to normal, I imagine not many of these workers would be too willing to take a pay cut.
Amazon has faced a number of battles in the US this year as it has desperately tried to avoid the unionization of its warehouse workers. 2023 could be the year when Amazon unions take hold. The international brotherhood of teamsters set up a dedicated Amazon division, and leaked internal memos from Amazon noted a worry that they were going to run out of people to employ in New York due to high turnover rates of workers.
The teamsters also have their eyes on UPS with their contract up for renewal in 2023 they have already set the tone by stating they would not be afraid to call strike action if certain demands were not met.
2023 looks like a year where unless something changes quickly with the economy (not looking likely) then unions could cause a lot of disruption affecting ecommerce businesses.
Richard: The situation in the UK is an absolute mess. The Royal Mail postal worker’s union (CWU) has taken a hard line on their demands and Royal Mail has equally dug in, and there seems to be no solution in sight.
Without getting into the arguments or grievances from either side, I always feel that once a strike has become so bitter, and with little meaningful communication between both sides, workers often end up losing out more than the companies.
Here in the US, in 1981, the FAA and air traffic controller’s union (PATCO) ended up in such a bitter dispute that President Reagan fired all union controllers that refused a court order to return to work.
Some people believe this strike had a very chilling effect on organized labor in the United States as companies became emboldened to take a similarly hard line to replace striking workers. Organized labor actions in the US went from an average of 300 per year before the 1981 PATCO strike, to less than 20 in 2010.
Could the Royal Mail strike become this kind of defining moment in the UK labor movement as the PATCO strike had here in the US?
Online, I have seen increasing frustration among British small business owners with an online presence about the postal worker strike. While many seemed to back postal workers a couple of months ago, I believe this support has dwindled.
December saw holiday mail piling up, likely causing shoppers to shift toward buying locally and affecting online sales for many online merchants and marketplace sellers.
The two sides need to get together and solve this sooner than later. That doesn’t mean postal workers need to capitulate, instead, maybe the two sides need to be “locked in a room” until there is a resolution that both can live with.
Here in the US, it’s interesting to see a few attempts to unionize Amazon workers at fulfillment warehouses. But while that makes the news cycle for a few days, I can’t see this succeeding on any significant scale.
Amazon is vehemently anti-union and when comparing press releases about new fulfillment centers today versus 3 or 4 years ago, the same-sized facilities create way fewer jobs now.
That means robotics and automation are playing a much larger role in today’s Amazon warehouse operation, continuing to eliminate the need for workers.
I think we are only a couple of years away from a fully automated Amazon fulfillment center and while unionization talk will continue to make a headline or two, the real-world impact on Amazon is near zero.
However, this year, we do need to pay attention to the possibility of a UPS worker strike in the summer. The carrier has a significant unionized workforce, which makes them verydifferent from its competitors.
The last nationwide strike by UPS unionized workers was in 1997 and lasted 16 days, effectively shutting down the entire company. Back then, FedEx only offered express services and other carriers such as RPS were not really large enough to handle the volume of packages UPS was handling.
FedEx acquired RPS one year later, spending billions to turn the carrier into today’s FedEx Ground service, creating the first meaningful competition to UPS Ground.
That alone makes today’s carrier landscape different. In 1997, UPS owned the Ground delivery market, but with FedEx Ground, improved service offerings from USPS, and more choices in regional parcel carriers, it’s a lot easier for shippers today to shift volume to other solutions.
Still, UPS is the leading and largest parcel courier company in the US and any lengthy disruption will cause headaches and some logistics disruptions for shippers.
In December, Freightwaves reported UPS managers were told to cancel all PTO (Personal Time Off) for July and August, in an apparent bid by the carrier to be prepared for a possible strike.
The silver lining here is that a potential UPS strike in 2023 would fall into the summer months, and not impact the peak holiday season as the Royal Mail strike has in the UK.
Dave: Recommerce, secondhand, pre-loved, refurbished, whatever term you want to use the trend has been undeniable in 2020. A combination of inflation and an ever-growing sustainably conscious Gen-Z has created the perfect opportunity for second-hand products to thrive in 2022.
eBay has been largely at the front of the drive especially in the UK as they became the first ever ‘pre-loved’ fashion partner for hit TV show Love Island, which really helped showcase pre-loved fashion to the mainstream. I can’t help but feel that over the years eBay has strayed further and further away from what it was at its core and began chasing the larger brands and “brand new” products in a bid to compete with Amazon. If it would have stayed true to its roots and continued to nurture the auction and ‘fun’ side of eBay then this surge of popularity for Recommerce would have been even bigger for them.
The next obvious big winner is Poshmark. The social marketplace that specializes in preloved fashion has had a great year in 2022. This year whilst riding the wave of second-hand shopping popularity they started “Second hand Sunday” during Black Friday weekend to encourage more shoppers to look for pre-loved fashion when looking for deals over the shopping period.
I think this trend will continue into 2023, not only due to continued inflation but because many sellers who have dabbled in second-hand shopping this year have had a great experience and are surprised at the deals they have managed to get. Convenience always wins, but the price will always matter especially when people are more price-conscious than ever.
Richard: Dave said it all. Recommerce grew up in 2022 and will continue to grow in 2023. While eBay was founded on the principle of recommerce, the fleamarket label the company had for so many years is now being transformed into a new sustainable lifestyle choice.
New or newer online marketplaces joined the fray such as Poshmark and OfferUp with tremendous traction in 2022, and others have expanded categories to include “vintage” sections that may include pre-loved, pre-owned, or whatever you want to call them, items.
Everything about it makes sense. With Gen Z shoppers driving the recommerce trend, other generations are jumping on board as well as which should bring more opportunity for small sellers to take advantage of this rising trend.
Dave: I remember writing about an anticipated social commerce boom back in 2012 when Facebook had started experimenting with Facebook shops, over a decade later and I still feel nobody has managed to tap into the potential that is social commerce.
When we look to the East, many of the large ecommerce Asian countries have seen huge success with social commerce with many shopping live streams around Singles’ Day for example doing incredible numbers.
Here in the western world, however, the story is hugely different. Both Amazon and eBay have experimented with Live Shopping events but with what appears to be limited success. Facebook recently announced that they were ending support for live shopping on their platform instead seeming to favor the short-form content you find on TikTok or Instagram Reels.
There is of course the relatively new marketplace WhatNot which primarily focuses on a Live Shopping type model. Still, it may be too early to determine whether this will gain traction with customers or not.
For me, I think it all boils down to what people use different sites for. In the USA and Europe, you go to the bar or pub to be social, not to buy things, and you go to the mall or store to buy things not to be social. I’m not sure if we will ever truly see social commerce become a thing or at least a thing that should be a primary focus for a product-based business.
Richard: The lack of growth in Social Commerce has been an enigma of sorts. It works so well in China and other Asian countries, but in the “Western” world it’s been a slow process. Dave makes a good point about western shopping habits probably being so different from the East.
However, mega malls in the US have always been somewhat of a gathering place for teens through the years, even offering live shows (remember Tiffany?). And today to stay relevant, they are adding more entertainment options such as mini theme parks like New Jersey’s American Dream mall. Is that our form of social commerce?
During last year’s eBay Open, the company demonstrated a new restricted beta version of its live shopping experience. Frankly, it was very cool and intuitive, and clearly, something that could work well for sellers with the right product mix.
eBay Live is on the mobile app today (I think the US only) and there are some curated replays and occasional live shows (no, not Tiffany, more like QVC) to get a feel for what it could become.
Amazon announced Inspire in December, the company’s fourth (maybe more, I can’t keep track…) attempt at combining ecommerce with shopping. Inspire will complement Amazon Live, its live and recorded video social commerce platform.
The main problem with Amazon Live? Try to find it on the mobile app. You will have better luck finding a needle in a haystack.
Yeah, a live stream will show up if you scroll long enough on the app. Once you find it, there is a link that will, drumroll, load the Amazon.com/Live mobile adjusted web experience into the app, which on the small screen is a mess.
The web version of Amazon Live is better, but consumers are consuming video on the small screen, so not sure why they chose to have this poor mobile experience. Clearly, they should be able to do better.
As far as Inspire is concerned, do you remember Amazon Spark? Exactly! Amazon needs to get some spark into Inspire for it to get traction, otherwise, it will be gone just as quickly as Spark was.
Poshmark, often considered one of the trailblazing “social commerce” online marketplaces hasn’t offered a live experience until now. The company started beta testing a live shopping experience called Posh Shows in 2022.
Part of the problem with social commerce in the West seems to be, what is it? Must it be live?
I think for social commerce to work best, it must be a live video presentation with real-time interaction between the seller and potential buyers. But here in the West, we seem to have placed that label on shopping experiences that start out on social media platforms with links on posts to ecommerce platforms.
While Amazon may have been dabbling with live streams for a few years, its experiences have been average at best and other major marketplaces just got started with theirs in 2022.
In addition, startups like WhatNot, which are only a few years old, are still working to build a sizeable audience to become major social commerce destinations. But maybe it will take a marketplace born from the ground up as a live-stream social commerce experience to get the breakthrough in the West.
Either way, 2022 brought social commerce forward a bit in the West, but I think there is still a long way to go to catch up to the success in the East.
Fail: eBay Continued to Bleed Active Buyers
Dave: How do you solve a problem like eBay? That really is the question that the eBay board continues to battle with, and despite what appears to be their best efforts they are still leaking buyers on the platform.
This year they have really doubled down on their key verticals. They launched the eBay vault initially for the trading card market, and further expanded their authentication service into sneakers, handbags, and jewelry. Lowering the barrier to entry and appealing to more and more products.
Still, with all of these updates and more features added throughout the year, the site has struggled to retain its buyers.
From my point of view, I think eBay needs to do a better job of connecting with both its sellers and buyers, especially the younger crowd. Their latest edgy Gen Z campaign might be a good step in the right direction but only time will tell.
On a personal note, I am getting tired of seeing their quarterly financial releases labeled as “Better than Expected” when that clearly cannot be the case. I also don’t like the constant moving of goalposts in their results making it next to impossible to actually see what the numbers are saying comparatively. These kinds of tricks make it seem like eBay is purposely trying to hide the truth which is not a good look.
I don’t know what the answer is, but I’ll be supporting them all the way to turn it around.
Richard: I fully share Dave’s frustration with eBay. There have been 10 consecutive quarters of “eBay Inc. Reports Better Than Expected” press releases now. Time to get the dictionary out and find some new words.
As Dave said, last year, eBay introduced a lot of new features and expanded its Authenticity Guarantee program to more categories and more markets.
Much of what they have done over the past year or two is catch up to other niche marketplaces defending their position in the online space. But that’s okay because, under the previous management, it seemed they were trying too hard to compete with Amazon, not niche categories that are a better fit for the company.
If you go on the eBay Community Forum you would think no one sells anything, all buyers are frauds, and the platform is always broken. Certainly, there are problems, like on any digital marketplace or ecommerce platform. But when I read through some of the posts, I do wonder how many of the problems are self-inflicted by sellers.
I’ve been there. I got angry with some buyers, but ultimately, I learned to move on and fixed what may have caused the problem in the first place (if there was a fix). It’s the cost of running a business.
And frankly, I belong to several larger eBay-focused Facebook groups, and while there are complaints here and there, there is a far more positive vibe among most members. In other words, sellers are finding success on eBay!
Here is something to digest that may surprise some people. eBay is still the second most visited marketplace and #14 overall in the US (November 2022), according to Similarweb.
Walmart is creeping up, but I consider Walmart’s marketplace operation as still being relatively small. Its primary online business is groceries and everyday staples from its own inventory.
Etsy is fourth (#30 overall in the US), showing how much of a force in ecommere it has become, especially over the past two years.
So, for eBay, the traffic is there which makes it so perplexing why active buyer numbers keep declining. The company has been blaming dropoffs from the pandemic highs as late as the last earnings call, but let’s be real here, that already happened in 2021.
Active buyers are a trailing 12-month metric and like other online platforms, the biggest bump in buyers came during the second quarter of 2020. So by the end of 2021, all those buyers buying overpriced toilet paper and hand sanitizer had already washed out of that metric.
And that brings me to the question, what could be the problem?
A few months ago I had a conversation with a few friends about eBay and the one primary complaint I kept hearing is the inconsistency in the buying and customer service experience.
Buying on Amazon is simpler, almost always the same experience, and when something goes wrong, returns and credits are pretty easy.
While eBay tries to entice sellers to offer good buying experiences, there are still many differences between sellers.
And I think what happens is that some buyers have great experiences for a few orders and then get one really horrible one, and that one turns them off and they leave.
So, how do you fix this? Is it too easy to be an eBay seller? Should eBay sellers be required to pass a “customer service” test? Or does eBay need to further tighten selling policies?
When the numbers are heading in the wrong direction quarter after quarter, eBay needs to transparently acknowledge this problem and discuss it with its selling community on how to turn around this decline.
Unfortunately, transparently addressing negativity has always been a problem at eBay and it is continuing under Jamie Iannone’s leadership, which is a shame. Let’s make that a corporate goal in 2023!
Win: OnBuy Growth Reaches New Highs
Dave: When looking at the winners of 2022 you can’t ignore the continued rise of the UK marketplace OnBuy. We have been covering OnBuy for a number of years and while many have speculated a limit to their success, the growth has continued throughout 2022 despite tough market conditions.
OnBuy has bolstered its leadership team throughout the year, most recently with the appointment of a new Head of Sales.
OnBuy also has been awarded the UK Technology Fast 50 award where they placed 11th in the whole of the UK. Over the last four years, OnBuy has experienced a huge 3402% growth.
According to Cas Patton the CEO of OnBuy, this is still just the beginning for the marketplace with many big developments planned for 2023.
While many in the industry have been cautious and looking to curb excess spending in 2022, OnBuy moved to a brand new headquarters and continued hiring and adding to their team throughout the year to help meet the growing demand for their marketplace.
We are big supporters of OnBuy here at eSeller365 and look forward to seeing what 2023 has in store for them.
Richard: I am excited to see where OnBuy will head in 2023. Last year, they moved into a new building, grew their executive-level roles, added more staff overall, and continued to break sales records as Dave noted.
When they come to the US, they will face a different environment from the UK. The US is much larger which brings new challenges on how to offer fast delivery, something they didn’t have to deal with in the UK. I assume they will be working with a third-party logistics partner here when they enter the market.
OnBuy has shaken up the UK ecommerce market a bit, so I am hopeful they can do the same here in the US and in other countries around the globe.
I follow OnBuy founder and CEO Cas Paton on LinkedIn. When he posts updates, he is very genuine and there appears to be a solid direction and strategy. He doesn’t offer the fake, had to run it through the PR department first, posts I see from other CEOs in this industry.
But what matters most is success and no one can doubt OnBuy’s success in 2022. The marketplace looks poised to continue its growth in the UK and I am hoping to see them officially enter the US in 2023.
Karma: Porch Pirate Breaks Leg
Richard: We post a few funny, inspirational, and delivery fail videos throughout the year. TikTok and front door cams make for interesting entertainment on a slow news day. A porch pirate breaking a leg while trying to get away with the loot just keeps sticking out to me as the best video we featured in 2022.
Dave: Ha ha ha…Good.
We thank you for following and reading eSeller365.com and hope you will have a successful year selling online. Plus wish you and your family the best throughout the year.
Let’s make it a great one!
Richard and Dave, co-founders of eSeller365
P.S. Don’t forget to read our largest ecommerce predictions post ever featuring 33 industry insiders offering their views on what to expect in 2023. Check it out here.
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