CommerceIQ, the leading retail e-commerce management (“REM”) platform, today released its annual State of Retail E-commerce Report for 2023, which found that retail media advertising spending on Amazon soared 31% versus 2022, with steady gains seen throughout the year.
In addition, the report found that ordered revenue increased 7.2% year-over-year, even though ordered units slipped slightly (0.5%) during the same period. This was due to a 7.7% increase in average selling price (ASP), partly driven by double-digit pricing increases in the grocery category (up 16.4%).
Among other findings in the 2023 State of Retail E-commerce Report:
- Overall, brands are facing incredible headwinds. The degradation in return on ad spend (ROAS) correlates with a consistent decrease in gross margins month-over-month, which started with a gross margin decline of 1.4% in January 2023 versus 2022 and spiked at 10.5% in December 2023 versus 2022. The gross margin decline correlates with an increase in ASP, and a minor increase in discount frequency. This likely indicates that the cost of goods sold (COGS) has increased dramatically, either due to increased unit costs or consumer behavior shifting spend to less profitable items such as bundle deals and large format packs.
- Sponsored Display and Sponsored Product advertising were the formats that saw the largest growth in 2023. For example, in June (leading into Prime Day 2023), brands increased sponsored display advertising by 116% compared to 2022. Sponsored Brand ad spending didn’t fare as well, showing decreases in each of the first eight months of the year, although it rebounded with double-digit gains in the year’s final four months.
- Tools & Home Improvement, Patio Lawn & Garden, Health & Personal Care, and Pet Products are the most competitive categories entering 2024, with brands in these categories increasing ad spending while glance views (traffic to product detail pages) declined year over year.
- Brands benefited heavily from Amazon’s Subscribe & Save feature, with ordered revenue jumping 50% versus 2022. Amazon Prime Day and back-to-school shopping helped generate huge Subscribe & Save gains during the summer months, with revenue up 85% in June and 95% in July.
Data in the State of Retail E-commerce Report is based on a compilation of anonymized data from the CommerceIQ REM Platform, which handles tens of billions of sales from global consumer brands that sell on retail e-commerce channels such as Amazon, Walmart, and Instacart.