It was “a phenomenal year for Shopify,” said president Harley Finkelstein in an earnings call with investors this week.

In North America, 45 of the Top 1000 online retailers use Shopify as their ecommerce platform. The Top 1000 is Digital Commerce 360’s database of the largest online retailers in the region by annual web sales. In 2022, those 45 online retailers combined for more than $8.29 billion in web sales.

Shopify revenue, profit and GMV grow in Q4 2023

In its fiscal Q4, Shopify revenue grew 24% year over year to $2.1 billion. Excluding Shopify’s logistics business, that growth rate shifts to 30%. It also marks the third consecutive quarter that growth (excluding logistics) has been greater than 25%, said Jeff Hoffmeister, chief financial officer. For the full year, Shopify revenue increased 26% over 2022 to $7.1 billion.

Of that $2.1 billion in Q4, $1.1 billion was gross profit. That’s 33% year-over-year growth in Q4 profit. Shopify gross profit in 2023 grew to $3.5 billion. That’s a 28% increase from $2.8 billion in 2022.

Meanwhile, Shopify GMV grew 23% in Q4 to reach $75.1 billion. That’s $14.2 billion more than Shopify’s GMV in Q4 2022. It’s also the largest quarterly GMV growth rate since the pandemic-driven rates in 2021, Hoffmeister said. For the full year, Shopify GMV grew 20% — or 38.7 billion — over 2022, to reach $235.9 billion in 2023.

In terms of channels, Shopify revenue from offline sources, which includes offline subscriptions and point-of-sale hardware, was $441 million. That’s more than five times what it was four years ago, Finkelstein said.

More than 70% of Shopify’s online checkouts in 2023 came from mobile devices, Finkelstein said. In Q4, the Shop App “nearly reached” $100 million in GMV in a single month, he said not specifying the exact figure.

Internationally, cross-border GMV was approximately 14% of total GMV in Q4. Europe, the Middle East and Africa represent 27% of Shopify’s total merchant base. More than $1.2 billion in Shopify revenue comes from sales in the region.

Shopify also noted growth in its B2B channel.

The biggest sales period: Black Friday through Cyber Monday

In the four days from Black Friday through Cyber Monday, Shopify merchants collectively generated $9.3 billion in sales, Finkelstein said. That’s 24% year-over-year growth. About 61 million consumers worldwide purchased from brands that use Shopify as their ecommerce platform, he said. More than 55,000 merchants had their highest-selling day ever on Shopify in that period, he added.

Part of that stemmed from scaling the platform to accommodate more traffic, Finkelstein said. Shopify handled, on average, 967,000 requests per second, he said. That’s the same as 58 million requests per minute. It’s also almost 80% higher than Shopify’s peak traffic two years ago, Finkelstein said.

Cyber Monday is still the largest online sales day in the U.S., with web sales reaching $12.4 billion in 2023, according to Adobe Analytics data. Cyber Monday 2023 online sales grew 9.6% over 2022’s $11.3 billion. Black Friday is the second largest at $9.8 billion in online sales. That represents 7.5% growth over 2022’s $9.12 billion.

Shop Pay and Shopify merchants

Finkelstein said that compared to 2022, Shopify has 35% more merchants from outside North America using its ecommerce platform. It has added brands including Dollar Shave Club, Authentic Brands Group, Buy Buy Baby, On Running and more, he said.

“In April, an external study by a big three consulting company confirmed that Shopify’s overall conversion rate surpassed the competition by up to 36% and on average is 15% higher than others,” Finkelstein said.

And when consumers use Shop Pay, conversion can grow by half, he said. More than 150 million users have signed up for Shop Pay, as of Q4 2023. For the quarter, it facilitated $18 billion in GMV. That’s up 58% year over year for the quarter and up 50% for the full year.

Shop Pay has facilitated a cumulative $127 billion since launching in 2017, according to Finkelstein.

Shopify 2023 highlights

“We cannot talk about 2023 without mentioning AI,” Finkelstein stated. “We launched our suite of AI-powered tools known as Shopify Magic, an AI shopping assistant on our Shop App and further embedded AI tools within Shopify to increase productivity and streamline administrative tasks that have saved our merchants and our team thousands of hours of work, enabling us to ship faster and make great decisions quicker.”

The ecommerce platform brought nearly a dozen AI-enabled tools to its Shopify Magic product suite in 2023.

Shopify also partnered with Amazon.com Inc. to release the “Buy with Prime” app for Shopify merchants. The deal gives merchants the choice to offer Buy with Prime directly within their Shopify Checkout. This provides Shopify merchants access to Amazon’s logistics network.

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More than 70% of Vizio’s TVs are already sold at Walmart, Reuters reported. The deal would give Walmart control over more than 20% of the U.S. TV market.

Following the report, Vizio shares jumped 36% before closing the day up 24.6%. Meanwhile, competitor Roku’s shares fell 9% on Tuesday.

Walmart is No. 2 in the Top 1000, Digital Commerce 360’s ranking of North America’s leading retailers by online sales. Vizio ranks No. 397. Walmart is also No. 9 in the Global Online Marketplaces Database, Digital Commerce 360’s ranking of the top 100 online marketplaces by gross merchandise value (GMV).

Walmart and Vizio did not respond to requests for comment.

Walmart and Vizio see an advertising opportunity

A deal with Vizio could be good for Walmart Connect, Walmart’s U.S. advertising business launched in 2021. Walmart could gain access to Vizio’s nearly 18 million active users, ad viewership data, and potentially the ability to track purchases to those ad views.

Walmart Connect generated about $3 billion in sales last year and is growing quickly. In a third-quarter earnings call, chief financial officer John David Rainey said sales increased 26% year over year. Rainey said advertising will likely continue to play a large role and drive Walmart’s profitability thanks to its higher margins as compared to groceries.

In March 2023, Walmart announced it would offer personalized ads on connected TVs through a partnership with advertising company Innovid. The ads used artificial intelligence (AI) to tailor messages to audiences.

The retailer previously partnered with Vizio’s rival Roku on shoppable ads in 2022. More recently, Walmart inked a deal with NBCUniversal in November to place shoppable ads on the streaming platform Peacock. The ads gave consumers the chance to buy Walmart items featured in select Bravo shows.

Vizio also ventured into shoppable ads with a branded content series with Home Depot last year.

Home Depot ranks No. 4 in the Top 1000.

In-store advertising

Vizio coming under the Walmart umbrella also presents an opportunity for displaying ads on TVs in Walmart stores. 

Walmart has a wider reach than the largest TV network, Ryan Mayward, senior vice president of retail media sales at Walmart Connect, said at the National Retail Federation’s Big Show in January. He explained that retailers are increasingly allocating their marketing budgets to in-store uses. Walmart is experimenting with new ways to advertise in stores, including on TV screens in the electronics section, on screens in the deli and bakery sections, and on self-checkout screens.

“Physical retail is the new TV” for advertisers in terms of scale, brand safety and reaching the right audience, said Andrew Lipsman, principal analyst of retail and ecommerce at Insider Intelligence.

Competition with Amazon

Acquiring a Smart TV manufacturer would put Walmart further in competition with Amazon. Amazon ranks No. 1 in the Top 1000, and No. 3 in the marketplaces database.

Amazon owns its own line of smart TVs, branded as Fire TV.  In 2023, Amazon crossed the threshold of 200 million Fire TV devices sold. The Fire TV stick was also the only Amazon product among the top five bestsellers on Prime Day this year, the online retailer said.

17% of connected TV operating systems are owned by Amazon, while 8% use Vizio’s OS. Roku has a larger market share than both at 25%, the WSJ reported.

Amazon also has its own advertising business, which generated $24.65 billion in the fourth fiscal quarter of 2023. Amazon’s ad sales were about 10 times the size of Walmart’s in 2023.

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Amazon’s Whole Foods working with Instacart in Canada

Instacart announced the new addition to its app and website on Feb. 7, including delivery availability for 14 Whole Foods Market stores in the Vancouver, Victoria, Toronto and Ottawa metro areas.

Amazon ranks No. 1 in the Top 1000, Digital Commerce 360’s ranking of the largest North American online retailers. Amazon is also No. 3 in Digital Commerce 360’s Global Online Marketplaces Database, which ranks the 100 largest such marketplaces by 2023 third-party gross merchandise value (GMV).

“Our mission at Instacart is to create a world where everyone has access to the food they love, and working with beloved retailers like Whole Foods Market helps us make that mission a reality,” said Chris Rogers, chief business officer at Instacart, in a released statement. “With this launch, we’re proud to welcome Whole Foods Market Canada to the Instacart marketplace, making same-day delivery in as fast as 30 minutes available to their loyal Canadian customers.”

Whole Foods on Instacart availability

Whole Foods, meanwhile embraced the delivery option, framing it as a win for customers.

“We strive to create the best shopping experience for our customers both in stores and online, including finding ways to provide convenience without sacrificing quality,” said Rick Bonin, senior vice president of operations at Whole Foods Market. “We’re excited to work with Instacart in Canada to provide our shoppers with a quick and easy way to get their favorite high-quality foods and products delivered directly to their doorstep.”

The chain will look to benefit from access to tens of thousands of Instacart users in Canada as the deliveries begin, according to Instacart’s press release.

“Both companies are incredibly passionate about providing an exceptional experience to customers, and we’re excited to help Whole Foods Market make its fresh produce, pantry staples, and so much more available to millions of Canadians through Instacart,” said Rogers.

Participating locations

Initially, 11 Whole Foods stores will participate, and three more will follow. Instacart promotes delivery in as little as 30 minutes in some circumstances. Delivery for Whole Foods orders over 35 Canadian dollars will be free for Instacart+ subscribers.

In addition, Instacart touted the use of its recently announced artificial intelligence-based features for order recommendations, recently announced at CES. The app serves orders for groceries, as well as alcohol and prescriptions.

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Parentheses indicate the merchant’s ranking in the Top 1000.

Amazon.com Inc. (No. 1)

Amazon beat expectations with earnings for its fiscal fourth quarter ended Dec. 31, 2023. Its net sales in the quarter grew 14% year over year to $170.0 billion. 

Full-year sales grew 12% to $574.8 billion in 2023, up from $514.0 billion in 2022.

Read more about Amazon’s earnings here.

Boot Barn Inc. (No. 366)

Boot Barn reported that net sales grew 1.1% to $520.4 million in its fiscal third quarter ended Dec. 30. Ecommerce same-store sales declined 11.5%, and retail same-store sales declined 9.4%.

“Our online channel has felt pressure due to less efficient online marketing spend, partly caused by an increase in digital spend by a handful of vendors and competitors,” CEO Jim Conroy said. “Our objective continues to be to maximize profitability for our online business, so we will remain disciplined with our digital spend so as not to erode earnings and our desire to grow the top-line sales,” he said. The retailer expects further ecommerce declines next quarter.

Columbia Sportswear Co. (No. 149)

Columbia reported net sales declined 9% to $1.1 billion in its fiscal fourth quarter ended Dec. 31. Net sales declined 1% for the full year. U.S. net ecommerce sales declined by a high single-digit percent, the retailer said without specifying further.

“Softer consumer traffic and weather weighed on results. Our DTC business performed well during peak sales windows like Black Friday and Cyber Monday, but fell off during non-peak periods,” CEO Tim Boyle said.

Costco Wholesale Corp. (No. 6)

Costco said net sales grew 6.1% to $56.72 billion in its first fiscal quarter of 2024 ended Nov. 26, 2023. Ecommerce comparable sales grew 6.3% in the same period. E-gift cards, snacks and pet items were all strong in the ecommerce channel, the retailer said.

Read more on Costco’s earnings here.

Deckers Brands (No. 74)

Deckers reported revenue grew 16% to a record $1.56 billion in the fiscal third quarter ended Dec. 31.

“Our brands delivered Deckers’ largest quarter in history, with record revenue and earnings as both HOKA and UGG drove exceptional performance in the quarter, led by our DTC channel and high levels of full-price selling,” CEO Dave Powers said in a statement.

Pitney Bowes (shipping carrier to the Top 1000)

Pitney Bowes announced revenue declined 4% to $872 million in its fiscal fourth quarter ended Dec. 31. Full-year revenue declined 8% to $3.3 billion. Revenue from global ecommerce declined 7% in the fourth quarter to $381 million and was down 14% for the full year. Meanwhile, domestic parcel volume grew, it said. 

Pitney Bowes is a shipping carrier to 104 retailers in the Top 1000.

Sally Beauty Supply LLC (No. 523)

Sally Beauty said consolidated net sales declined 2.7% to $931 million in its fiscal first quarter ended Dec. 31. Comparable sales declined 0.8% during the period. Online sales remained flat with the year-ago period, comprising $91 million in sales.

The beauty retailer reported some improvements in demand, with a return to normalcy among customers over the holiday season.

Skechers USA Inc. (No. 302)

Skechers said sales for the fiscal fourth quarter ended Dec. 31 grew 4.4% to $1.96 billion. Annual sales grew 7.5% to a record $8.0 billion. Direct-to-consumer sales, which encompass ecommerce, grew 20.3% in Q4 and 24.3% for the whole year. Meanwhile, wholesale sales declined 8% for both the fourth quarter and full year.

Online DTC sales recorded double-digit growth, Skechers said.

“The momentum in our direct-to-consumer segment is indicative of strong consumer demand driven by the combination of our fresh and innovative product paired with effective brand marketing. We are excited about our omnichannel growth opportunities as we continue to deliver on our strategy to expand our direct-to-consumer presence worldwide,” said John Vandemore, chief financial officer. 

United Parcel Service Inc. (shipping carrier to the Top 1000)

UPS consolidated revenue declined 7.8% to $24.9 billion in its fiscal fourth quarter ended Dec. 31. Consolidated operating profit declined 22.5% during the same time period to $2.5 billion. The carrier said it will eliminate 12,000 jobs this year as a plan to generate $1 billion in cost savings as revenue and package volume decline.

532 online retailers in the Digital Commerce 360 Top 1000 use UPS for their fulfillment — either exclusively or in combination with other carriers.

Read more about UPS’ earnings here.

Target Corp. (No. 5)

Third-quarter sales declined 4.9% for the mass merchant, to $25 billion from $26.12 billion in its fiscal third quarter ended Oct. 28. Meanwhile, Target online sales decreased 6% year over year. Moreover, Target’s online sales declined 6.7% year over year for the first nine months of its fiscal year.

Read more about Target’s earnings here.

Tractor Supply Co. (No. 99)

Tractor Supply reported net sales declined 8.6% to $3.66 billion in its fiscal fourth quarter ended Dec. 30. The retailer did not share ecommerce sales for the quarter but said annual online sales topped $1 billion for the first time in 2023. It also reached 7 million mobile app downloads, with 2 million of those downloads in 2023.

“We continue to capitalize on opportunities to accelerate our growth,” CEO Hal Lawton told investors. “Between our website and our mobile app, we have more visitors online now than we do in our stores. These digital assets are essentially the front door to Tractor Supply. We’ll be focused this year on improving our digital customer experience and capability as we look to accelerate conversion rate.”

Lawton cited poor weather, high interest rates and inflation as headwinds facing Tractor Supply and impacting consumer demand.

Walmart Inc. (No. 2)

Walmart reported that U.S. online sales grew 24% for its fiscal 2024 third quarter ended Oct. 27. Global ecommerce sales grew 15% over the same period, while international ecommerce declined 3%.

U.S. comparable sales grew 4.9%, and total revenue grew 5.2% to $160.8 billion.

Read more about Walmart’s earnings here.

1-800-Flowers.com Inc. (No. 47)

1-800-Flowers revenue declined 8.4% to $822.1 million in the second fiscal quarter ended Dec. 31. Ecommerce revenue declined, but slightly more slowly. It was down 6.6% to $738.4 million. Average order value grew 3% year over year as higher-income consumers became a larger percentage of the customer base and tended toward more expensive gifting purchases, the retailer said. Meanwhile, lower-income consumers continued to be impacted by macroeconomic pressure and cut back spending. 

During the first half of our fiscal year, we have been prudent with our marketing spend in a challenging consumer environment in which we didn’t see an adequate return on investment,” president Thomas Hartnett said.

So what does it mean?

• UPS and Pitney Bowes both recorded declining revenue during the peak holiday season. UPS is still grappling with the fallout of its near strike last year and recovering volume it lost during that period.
• Footwear retailers Skechers and Deckers both recorded significant growth in their most recent quarters, with major gains in DTC sales. Other apparel retailers did not report the same gains in consumer demand.

Ecommerce earnings calendar

Here’s when other ecommerce earnings are scheduled to report this quarter:

• Amazon.com Inc.: Feb. 1
• Best Buy Co Inc.: Feb. 29.
• Costco Wholesale Corp.: Dec. 14
• The Home Depot Inc.: Feb. 20
• Lowe’s Cos Inc.: Feb. 27
• Target Corp.: March 5
• Walmart Inc.: Feb. 20

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The retailer will pay iRobot a termination fee of $94 million.

Amazon ranks No. 1 in the Digital Commerce 360 Top 1000. The Top 1000 is a ranking of North America’s leading retailers by online sales. iRobot Corp. ranks No. 396.

Amazon also ranks No. 3 in Digital Commerce 360’s Global Online Marketplaces database. The database ranks the 100 largest such marketplaces by third-party gross merchandise volume (GMV). Digital Commerce 360’s 2023 Global Online Marketplaces Report includes key insights into the biggest players in the database.

Terms of the deal

Amazon previously agreed to acquire iRobot in August 2022 for $1.65 billion. The deal would have brought iRobot’s Roomba vacuum under Amazon’s umbrella, alongside Amazon’s devices including the Echo, Ring and Kindle.

Had the deal gone through, it also would have been Amazon’s fourth-largest acquisition to date, The Wall Street Journal reported.

“We’re disappointed that Amazon’s acquisition of iRobot could not proceed,” Amazon senior vice president and general counsel David Zapolsky said in a statement. “We’re believers in the future of consumer robotics in the home and have always been fans of iRobot’s products, which delight consumers and solve problems in ways that improve their lives. Amazon and iRobot were excited to see what our teams could build together, and we’re deeply grateful to everyone who worked tirelessly to try and make this collaboration a reality.”

Regulatory roadblocks

The European Commission opened an investigation into Amazon’s proposed acquisition of iRobot in July 2023. In November, the body released its findings that if the deal went through, Amazon might restrict competition for robot vacuum cleaners. 

“Amazon may have the ability and the incentive to foreclose iRobot’s rivals by engaging in several foreclosing strategies aimed at preventing rivals from selling RVCs (robot vacuum cleaners) on Amazon’s online marketplace and/or at degrading their access to it,” the European Commission wrote. It noted that Amazon’s marketplace was a particularly important channel for consumers to find and purchase robot vacuum cleaners in France, Germany, Italy and Spain.

The Federal Trade Commission (FTC) also planned to sue to block the acquisition, the WSJ reported.

Amazon criticized regulators’ decisions.

“This outcome will deny consumers faster innovation and more competitive prices, which we’re confident would have made their lives easier and more enjoyable. Mergers and acquisitions like this help companies like iRobot better compete in the global marketplace, particularly against companies, and from countries, that aren’t subject to the same regulatory requirements in fast-moving technology segments like robotics,” Zapolsky said. “Undue and disproportionate regulatory hurdles discourage entrepreneurs, who should be able to see acquisition as one path to success, and that hurts both consumers and competition — the very things that regulators say they’re trying to protect.” 

What’s next for iRobot?

Following the announcement, iRobot plans to cut 350 jobs by the end of March. That amounts to 31% of the company’s workforce as part of a restructuring plan.

CEO and Chairman Colin Angle also stepped down from both roles, effective immediately. He was replaced by executive vice president and chief legal officer Glen Weinstein as interim CEO. 

“The termination of the agreement with Amazon is disappointing, but iRobot now turns toward the future with a focus and commitment to continue building thoughtful robots and intelligent home innovations that make life better, and that our customers around the world love,” Angle said.

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Online retailers added buy-now-pay-later payment (BNPL) methods in 2023, continuing a trend that boomed in 2022. U.S. consumers used BNPL for $8.3 billion in online orders between Nov. 1 and Nov. 27, according to Adobe Analytics, up 17% year over year. Some online retailers even went fully digital, adding cryptocurrency payments to their ecommerce sites. On the flip side, retailers like Lowe’s piloted a way to prevent in-store theft that lead to sales of stolen products on secondary marketplaces. Other retailers added automation to their fraud-detection processes.

Below, we recap some of Digital Commerce 360’s best coverage about online payments — and the fraud attempts accompanying them — in 2023. These stories highlight meaningful payments and fraud trends from last year, showing how online retailers are staying focused on their bottom lines.

What did online retailers do in 2023 to make payments easier for consumers?

Online price matching: pros and cons

Guaranteeing to match the online prices of competitors makes sense in categories like consumer electronics, where it’s easy for shoppers to compare prices on branded products. But one expert says price-matching is less important today now that many big brands limit online discounting. 

Price cuts coming for accepting online debit?

The Federal Reserve is proposing to reduce its price cap for transactions from big debit card issuers by more than 25%. What are the specifics, and what does it all mean for card-accepting merchants? 

Etsy Payments expands to seven more countries

The technology helps both sellers and buyers make relevant options available across the global marketplace, an executive said. 

PayPal usage among Top 1000 retailers up 7.3%

Online payment system PayPal Holdings Inc. is accepted at 82.8% of the online retailers ranked in Digital Commerce 360’s Top 1000. 

Demand for buy now, pay later (BNPL) increases

Apple launches long-awaited Apple Pay Later

Apple throws its hat into the buy-now-pay-later ring with the official launch of its own BNPL service: Apple Pay Later. 

Apple Pay Later threatens other BNPL services, experts say

Industry experts weigh in on how Apple’s buy-now-pay-later service, Apple Pay Later, is an opportunity for retailers to grow their market share. But it is important to be transparent with consumers. 

BNPL is a low-risk option for attracting new customers 

Executives at Overstock and Forever 21 say buy now, pay later lets consumers without access to traditional credit buy their products. But an increase in BNPL payments could lead to a debt problem, experts say.    

Some customers distraught after duplicate charges from BNPL service Affirm

Some buy-now-pay-later Affirm users were incorrectly charged multiple times for their loan payments Jan. 13.

Affirm cuts 19% of workforce, reports losses for fiscal Q2 2023

Buy-now-pay-later vendor Affirm Holdings Inc. cut 19% of its workforce. The BNPL provider reported a loss of $322.5 million in its fiscal Q2 2023.  

Overstock CEO says customers are using BNPL for purchases as low as $10

Younger customers without established credit history are the most likely to use the service, CEO Jonathan Johnson said. 

Ikea adds BNPL late in the game — why?

Ikea added buy now, pay later for orders ranging from $40-$500. Why now and why the $500 limit? The retailer weighs in. 

Consumers embrace buy now, pay later during Cyber 5

Buy-now-pay-later spending reached record levels during Cyber 5, putting November on track to be the biggest month yet. 

Online retailers implement cryptocurrency payment options

Is offering cryptocurrency at checkout worth the reward for retailers?

Cryptocurrency payments are still a nascent payment form for online retailers. And rightly so, as the digital currency is notoriously volatile — the value can change dramatically in any single day. Two top online retailers that accept cryptocurrency payments have outsourced the headache of complying with ever-changing regulations and money-laundering worries to appeal to consumers with cryptocurrency to spend.  

Shop.com: ‘Low cost’ of outsourcing cryptocurrency processing is worth avoiding possible legal missteps

Shop.com says the 1% transaction fee to outsource cryptocurrency processing at checkout is worth it. Offering cryptocurrency gives customers more options to pay, while BitPay ensures the retailer is in line with rules and regulations. 

Watch reseller offers cryptocurrency at checkout to entice international shoppers

A portion of luxury watch reseller WatchBox’s international customers prefer to pay using cryptocurrency instead of wire transfer. While it is a small percentage of the retailer’s total $500 million in online sales, it is an important option, the retailer says.

With payments come fraud attempts. How did online retailers address fraud in 2023?

Lowe’s pilots new way to prevent theft at stores, sales of stolen goods on secondary marketplaces

Lowes’ Project Unlock uses point-of-sale activation and a transparent record solution as a technology-forward and low-cost way to prevent theft at physical stores. But it puts the onus on purchasers to verify if they are purchasing a stolen item in the secondary market.

Sportitude cuts fraud costs by 55%

After switching its fraud prevention technology, footwear merchant Sportitude says fewer transactions are flagged as potentially fraudulent, requiring manual review to approve. But its fraud rate has stayed the same while its costs have decreased. 

Will AI power all of fraud management?

Fraud prevention technology powered by artificial intelligence can improve the fraud-fighting operations for many merchants. Still, most online retailers employ manual review teams to further review transactions the software flags as risky. But some merchants hoping to increase efficiency are looking to eliminate manual review altogether and have AI make all the fraud decisions. 

6 quick tips to manage ecommerce fraud

Ecommerce fraud analysts share tips online retailers can implement to help verify legitimate transactions and block fraudulent ones. 

NRF retracts statement on financial impact of organized retail crime

The NRF removed a statement attributing nearly half of shrink to organized retail crime from a report released in April.

Rainbow Apparel says the biggest challenge in ecommerce fraud is allowing legitimate orders through

Rainbow uses Signifyd’s anti-fraud software and AI to detect and flag potential fraud and allow other orders through. 

How one furniture retailer combats fraud during online checkout

The outdoor furniture merchant Polywood automated its fraud-detection processes at checkout, resulting in higher conversion rates. 

How is Amazon handling fraud?

Amazon is cracking down on counterfeiters, and a legal expert says consumers should be ‘cautiously optimistic’

Ecommerce lawyer Robert Freund says Amazon’s efforts are promising, but it’s nearly impossible to eliminate counterfeits completely. 

Amazon accuses former employees of conspiring with fraud ring

Amazon says seven employees committed fraud by processing illegitimate returns, costing the retailer $500,000. 

How did fraud affect online sales during the 2023 holiday season?

Higher web sales and lower fraud brighten retailers’ holiday

While online sales increased over the Thanksgiving weekend, fraud attempts were down 20% compared to the same period in 2022, says Signifyd, a provider of fraud prevention services. That’s because there has not been a repeat of a massive fraud attack on U.S. online retailers during the 2022 holiday season, Signifyd says. 

Fraud decreases during Cyber 5, ClearSale data shows

At the same time, ClearSale found that from Black Friday to Cyber Monday, order volume decreased 41% year over year. Order amount decreased, too, down 27% year over year. 

VF Corp. discloses cyberattack on first day of new SEC rule

Although consumers can purchase available merchandise, VF Corp. is experiencing operational disruptions as a result of the cyberattack. 

How Everlane fights ecommerce fraud during the holiday season

Online retailers must adjust their ecommerce fraud defenses to take into account that consumers buy more and more frequently during the holiday season, says TJ Stein of apparel brand Everlane. He says clear communication throughout the purchase process can minimize customer disputes that stem from confusion or the shopper not being able to get questions answered. 

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Apoorv Chaudhri, director of computer vision and machine learning at Amazon Fashion, detailed the AI use cases for apparel in a blog post. The examples shared highlight not just how Amazon is using AI to make recommendations, but which data points it is using to inform the results.

Amazon is No. 1 in the 2023 Digital Commerce 360 Top 1000, a ranking of North America’s leading retailers by online sales. It also ranks No. 3 among marketplaces by gross merchandise value.

Amazon’s AI fit recommendation

Amazon uses AI and machine learning models to recommend which size of a clothing item is most likely to fit a consumer. The recommendation is based on other data consumers have shared in the past.

The ecommerce retailer’s algorithm groups together consumers who purchase similar sizes of clothing and demonstrate similar preferences for how they want their clothes to fit. Apparel items with similar fits — for example, oversized or slim fits — are also grouped together. The algorithm accounts for a particular item’s details, size chart, customer reviews return rate and data about consumers who purchased the item. 

Amazon uses that information to make an intelligent recommendation on size. That’s based on what consumers who typically buy the same size have bought and kept. The algorithm also adapts to changing sizes, Amazon says. For example, it will recommend a larger children’s size than the one purchased in previous months.

The fit recommendation tool analyzes millions of data points each day to generate billions of size recommendations per month, according to Amazon. And that leads to better conversion results. Customers — the company claims — are more likely to purchase, and less likely to return a clothing item when a size is recommended to them. 

Other size tools using AI

Amazon’s sizing recommendations also use customer reviews, Chaudhri says. AI creates a review highlight that’s specific to each customer based on common themes across reviews. It pulls in information from customers who purchased the recommended size for that consumer and highlights what they had to say about the fit. Then, it recommends sizing up or down, based on the review consensus. That takes into account aspects of a garment like size accuracy, stretch and fit on specific areas of the body.

In addition, Amazon is rolling out a tool to standardize size charts using AI. Chaudhri says large language models (LLMs) create more accurate and consistent size charts. They do so by compiling sizing data from multiple sources and removing duplicate information to make it easier to read. The LLM can also correct missing or incorrect information. Amazon is experimenting with different formats, like showing just the recommended size information instead of the whole table. That makes the most relevant information easier to find, Chaudhri says.

Amazon sellers can benefit from the AI tools

Amazon is offering some of the benefits from the data it gathers with these AI fitting tools to third-party sellers. The Fit Insights tool aggregates customer feedback on apparel features like fit, style and fabric. It scans returns data, customer reviews, and any errors in size charts. Retailers on Amazon have access to this information. They can use it to better communicate size and fit information with potential customers, or even to adjust product designs in the future, with a goal of reducing returns.

AI sizing tools give retailers a way to use their troves of data

Amazon is not the only major technology and ecommerce company to consider ways AI could improve the apparel purchase process and possibly lead to fewer returns. Google released a tool in 2023 to let consumers virtually try on clothing using AI models.

At the time of Google’s announcement, Robert Brown, managing director and client executive at digital strategy consulting company BDO, said the use case of generative AI gave retailers the “holy grail” in terms of customer data. The ability to use AI to gather data on how consumers purchase based on size and preferences and make recommendations allows retailers to tailor experiences on a one-to-one basis, he said. AI generates “massive” amounts of data about consumer preferences and needs that retailers can turn into future conversions, he said. Amazon is directly using its customer data to sell more apparel items to consumers, with a lower chance of them making a return.

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These are the most important trends of the 2023 holiday season, according to Digital Commerce 360’s coverage.

1. Consumers spent despite inflation worries

Analysts spent much of 2023 warning about an economic slowdown. Consumers, meanwhile, were burdened with shrinking savings, resumed student loan payments, and inflation. Retailers shared similar concerns in quarterly earnings calls.

“The sharp deceleration in retail growth is due to stubborn inflation in many sectors, spiking interest rates, a year-over-year decline in COVID-era federal stimulus, and the ongoing rotation of consumer spending from goods to services,” president at retail research firm Consumer Growth Partners Craig Johnson said in a holiday forecast.

Despite these concerns, consumers spent anyway. According to Adobe Analytics, U.S. online holiday spending reached $221.8 billion. That’s in line with Adobe’s projection of $221.8 billion. Online holiday spending in the U.S. grew 4.9% over Adobe’s recorded $211.7 billion in 2022, setting a new ecommerce record. Growth was higher than the 3.5% year-over-year growth Adobe reported in 2022. Adobe classified November and December as the holiday season.

Fraud prevention vendor Signifyd says U.S. holiday sales increased 7% in 2023 over 2022. Signifyd classifies Oct. 1 through Dec. 31 as the holiday season. The security company previously predicted that sales would grow 5%.

Some consumers might have even spent money they didn’t have. Buy now, pay later services like Klarna, Affirm and Afterpay were used to finance more holiday spending than ever this year. That contributed $16.6 billion in online spending, an increase of 14% and $2.1 billion over the same period in 2022. U.S. consumers used BNPL for $9.2 billion in online purchases in November, up 17.5% year over year. Cyber Monday was the biggest BNPL day in history, accounting for $940 million in sales, up 42.5%.

2. The holiday season extended

Holiday shopping started earlier this year. Amazon’s Big Deal Days sale in October kicked the buying season off in earnest. Walmart held a competing Holiday Kickoff Sale at the same time, explicitly marketing the October event as part of the holiday season.

Other retailers felt the pressure to start marketing holiday promotions earlier, too. True Religion launched its holiday campaign in October, earlier than in previous years. The retailer studied consumer behavior and Google search trends, alongside information from consumer research firms like McKinsey and Deloitte.

Meble Furniture made a similar calculation, president Raf Michalowski said. The marketing firm that works with Meble advised the retailer to start the sale earlier.  

“Consumers only have so much money to spend, so you want to get in front of them or they spend it somewhere else,” he told Digital Commerce 360.

Sales and holiday-themed marketing events, such as Big Deal Days, pushed consumers to start shopping earlier in the season, says Kasi Socha, analyst at retail data research company Gartner. Consumers are trending toward shopping for holidays all year long, she says, and Gartner predicts 30% of consumers will shop for winter holiday gifts year-round by 2026.

A November poll from Digital Commerce 360 and Bizrate Insights bears that out. Nearly one-quarter (23.9%) of the 844 consumers surveyed said they started shopping for holiday gifts before September this year. Another 11.1% started in September, and 13.4% started in October. Just 21.9% of consumers waited until the Cyber 5 period or later to start holiday shopping.

3. Online shopping kept growing

2023 proved consumers aren’t willing to give up the convenience of online shopping, even if they feel safe going to stores. The U.S. Census Bureau, as well as the National Retail Federation (NRF) and CNBC’s Retail Monitor, reported that November online holiday spending outpaced in-store sales growth.

Online sales recorded the largest growth of any category measured by Retail Monitor, growing 26.27% year over year. Core retail sales, meanwhile, grew 4.7%. Retail Monitor’s data comes from credit and debit card purchases from consumer data vendor Affinity Solutions. 

The U.S. Census Bureau also reported online sales growth outpacing total retail in November. Nonstore sales, which encompass online sales, grew 10.6% over 2022. That’s significantly higher than total retail sales, which grew 4.1% over the same period. 

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That meant being creative with where merchants shipped orders from, and where consumers could pick up their online orders. And even when everything goes right, consumers are still bound to return some of their orders — especially after the holidays. In fact, shipping carrier Pitney Bowes plans to add almost 1,000 drop-off locations through a partnership with PackageHub as the current holiday returns season peaks.

Below, we recap some of Digital Commerce 360’s most insightful coverage about fulfillment and delivery in online retail from the past year. These stories highlight meaningful fulfillment trends among online retailers in 2023. Most notably, they include in-store and curbside pickup, retailers shipping from stores, outsourcing fulfillment to other companies, and the impact returns have on all these processes.

What we learned about fulfillment and delivery methods in 2023

How merchants cut shipping costs

In an era where online shoppers expect free shipping, retailers need to find more profitable shipping approaches, such as by changing packaging, negotiating with shipping carriers, changing shipping schedules or outsourcing fulfillment to a 3PL.  

Home Depot customers opt for ship to home — if the wait isn’t too long

Home Depot invests in its supply chain to cut costs and speed up delivery. As a result, more customers are opting to ship their orders to their homes. 

Keeping customers updated during the shipping process can make or break the experience 

Retailers say more communication is always better around fulfillment as consumers increasingly expect accurate, regularly updated information on their online orders.  

Pickup takes different forms, yet isn’t worth it for some retailers

Committing to curbside pickup — or breaking up with it

Retailers scrambled to launch curbside pickup during the pandemic. But now that many consumers resumed in-store shopping, retailers must determine if offering curbside is still worth it. 

Will alternate package pickup points take off?

Some retailers allow online shoppers to ship products to locations other than their stores or shoppers’ homes. The alternate fulfillment option can reduce package theft and offer convenience, but leaves the customer experience at pickup outside of the merchant’s control.

Office Depot delivers on 20-minute BOPIS promise

The office supply chain can have an order ready for pickup 20 minutes after shoppers order it online 98.9% of the time. 

Walgreens commits to pickup and delivery customers: ‘they spend more money with us’

Lindsay Mikos, senior director, retail omnichannel at Walgreens, told Digital Commerce 360 more than half its digital orders are same-day pickups. The retail chain’s omnichannel services were critical during COVID-19, but now, Walgreens customers continue to want the convenience of shopping online and either picking up in-store or having orders delivered to their homes. 

Tractor Supply 2022 conversion for BOPIS and curbside is 60% higher than home delivery

In 2022, Tractor Supply Co.’s conversion for buy online, pickup in-store and curbside orders was 60% greater than home delivery. 

Some retailers save on costs by shipping from store

Why some retailers use — and avoid over-using — stores as fulfillment locations

Today’s shopper is a hybrid in-store and online shopper. Retailers face logistical and fulfillment challenges to ensure inventory is there. Three retailers strategize how to divide orders between warehouses and stores to efficiently meet shopper demand. 

Apparel retailer Vince ‘pulls the lever’ on and off to use stores to fulfill orders

Apparel brand Vince LLC invested in software to navigate buy online, pick up in-store services, resulting in a 7% increase in BOPIS sales. 

Destination XL Group uses stores to help promote its website

Big and tall men’s apparel retailer DXL increased online sales 9.9% in fiscal 2022, which ended Jan. 28, compared with 2021. By cutting back on the brands it carries and selling private-label merchandise on marketplaces like Amazon.com, the retailer plans to continue to expand its ecommerce presence. 

Aviator Nation automates returns, uses stores to fulfill online orders

The California 1970s-inspired leisure wear brand Aviator Nation decreased its refund rate 11% by automating returns. The retailer also fulfills online orders through its 17 store locations. 

Outsourcing fulfillment can make it faster and cheaper

What is 4PL, and does your ecommerce business need one?

Family farm Palouse Brand cut fulfillment costs by 20% by working with Ware2Go, a fourth-party logistics UPS company, to streamline shipping. 

As orders mount, online men’s skincare brand outsources fulfillment, sells on Amazon

As demand grows, online retailer Black Wolf Skincare opts to outsource its fulfillment services and expand its reach by selling on Amazon. 

PacSun pilots RFID to improve inventory accuracy, reduce split shipments

With products tagged with RFID, PacSun store employees can quickly count inventory several times a week, a large increase from a few times a year. 

Retailers expect returns after holidays, but how do they handle them?

Online returns outpace in-store in 2023, NRF report finds

Online sales have an even higher rate of returns than in-store sales in 2023, according to a report from the NRF and Appriss Retail. And about 13.7% of returns (of online and offline orders) were fraudulent.

Retailers are in for a ‘tsunami’ of holiday returns this year: Salesforce

Holiday returns typically spike following Cyber 5, and then again right after Christmas, says David Sobie, CEO of Happy Returns.

How returns can be a retail ‘superpower’

A returns management CEO explains the valuable data behind returns. 

Retailers revisit return policies ahead of the holiday season

Retailers give shoppers an average of 30 days to return their products, and a large majority of retailers plan to make their return policies stricter in 2023, according to Salesforce data. 

Loop processes 60,000 returns a day during 2022 holiday season

The return-management software company said Dec. 27 was its busiest day, with 68,000 returns processed that day. 

Amazon will charge for some UPS returns, warn customers about frequently returned items

Some customers will have to pay a $1 fee to return orders at a UPS store if they have other options closer to home. 

Holiday returns decline as retailers raise fees

Return fees are more common, but extended returns windows are, too. 

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The technology plays a role in how consumers decide what to purchase, and in how retailers facilitate those purchases. In addition, sellers use it to improve customer service and fulfillment efficiency. And the impact is already significant. Salesforce says that AI influenced 17% of all online orders made in November and December. It also says AI accounted for $194 billion in sales over the holiday season.

Salesforce arrived at that figure based on analysis of shopping data from 1.5 billion shoppers, says Rob Garf, vice president and general manager of retail. 

AI product recommendations are getting more accurate

Predictive AI for product recommendations was by far the most common use case for the technology, Garf says. Retailers have been using AI to make product recommendations for years, he explains. As the technology matures, it makes better recommendations that consumers actually use.

“AI is really only as good as the data that it is fed, and from our point of view, that data lives predominantly in a retailer’s own four walls,” Garf says.

Retailers have access to data about their customers’ preferences, shopping history, brand allegiance, return history and more, he states, so it’s all about using that data most effectively.

“Our research shows on average, consumers experience nine different touch points in any given shopping journey,” he notes. “So what AI is doing is helping smooth out that shopping experience by helping both the customer directly and as it relates to their shopping experience and the frontline employee.”

AI frees up employee time

Retailers also began to dip their toes into generative AI for more creative tasks, Garf says. He points to Salesforce clients using generative AI to create subject lines for email marketing campaigns over the holidays. An employee still oversees and edits the text, but doesn’t have to do the initial drafting. 

Verlo Mattress took a similar approach in the months leading up to the holidays, says Ira Klusendorf, vice president of marketing at Verlo. The mattress retailer prioritizes responding to online reviews within 24 hours as a key part of its customer engagement strategy. However, that can be time-consuming.

“Creative writing takes time. So the AI helps you be creative and effective [in a shorter amount of time],” he says.

Verlo uses generative AI to create appropriate responses to reviews, which are about 98% accurate to the brand’s voice, he explains. “We played with the brand voice,” which the brand uses “across the board,” he says. Verlo is now experimenting with AI-generated social media posts that could further free up employee resources to focus on other tasks.

Retailers use AI to be more efficient behind the scenes

In some cases, consumers weren’t necessarily aware of the extent to which AI was involved in their holiday purchases. For example, many of the largest online retailers incorporated AI across their fulfillment and logistics networks.

“[AI] is meant to be something you don’t see or feel, but it’s as critical as oxygen,” says Scott Hamilton, vice president for last-mile delivery routing and planning technology at Amazon, in a press release. “When you don’t realize it’s there, that means it’s working perfectly.”

The online retail giant uses AI to forecast what products will be in demand and coordinate which items to stock in which warehouses. Then, AI-enabled robots sort and inspect millions of packages at these warehouses before they’re loaded into delivery vehicles. The robots are trained using generative AI, which creates simulations of scenarios they might encounter during busy shopping periods, according to Amazon. That same technology allows the robots to map out Amazon’s fulfillment centers and become more efficient at navigating them as time goes on.

Walmart uses AI similarly, senior vice president of end-to-end fulfillment Parvez Musani says in a blog post detailing the company’s AI holiday plans. Walmart trains its AI using historical shopping data, online searches and page views to forecast demand and stock products appropriately. 

“We also consider ‘future data’ such as macro-weather patterns, macroeconomic trends and local demographics to anticipate demand and potential fulfillment disruptions,” Musani writes. “With this combined data, our engines identify and correct discrepancies, inefficiencies, or inaccuracies in supply chain models.” 

The system works in reverse, too. Walmart’s AI technology is sophisticated enough to disregard anomalies, such as highly unusual storms, to prevent muddying the data. 

Amazon ranks No. 1 in  Top 1000. The Digital Commerce 360 database ranks North America’s leading online retailers by their web sales. Walmart ranks No. 2.

Consumers were open to AI this year

While retailers actively incorporated AI into more parts of the selling process, consumers also showed interest, proving themselves willing to engage with the new technology. They had high expectations, too. 76% of respondents to a Talk Survey poll in November said that they expected to make fewer returns of holiday purchases because AI would help guide their purchases.

88% of consumers said they would use AI in some way for holiday purchases in the survey. That included chatbots and personalized recommendations, which were the most common applications for AI, according to Salesforce.

Consumer experience with AI in the 2023 holiday season might have implications for future uses. 68% of online shoppers say they would lose trust in a brand if it gave them poor recommendations. 53% said the experience would stop them from shopping with the retailer again.

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