Reynaldo C. Lugtu, Jr. l December 29, 2022 l Manila Bulletin
With the continued Russia-Ukraine conflict, disruptions in supply chains, and spiralling inflation, 2023 promises to be tougher for most businesses, investors, and consumers globally. But opportunities abound in market volatility, technological shifts, and cross-border ecommerce growth.
We have culled eight trends for business to watch heading into 2023.
Trend 1: When it comes to the Russia-Ukraine war, the most discussed scenario involves Russia deciding to use a tactical nuclear weapon on the battlefield launched against Ukraine (or even a NATO country) cannot be ruled out, according to Kroll Institute. In addition, cyberattacks against Ukraine or its backers also remain a possibility. While these forms of escalation remain unlikely, both would engender enormous precariousness as regards the range of possible responses from the West. This will in turn generate uncertainties in the markets and economies.
Trend 2: Trade growth to slow sharply in 2023 as the global economy faces strong headwinds, according to the World Trade Organization (WTO). Due to the multiple shocks that weighed on the global economy, global merchandise trade volumes will grow by 3.5% in 2022—slightly better than the 3.0% forecast in April. For 2023, the WTO foresees a 1.0% increase—down sharply from the previous estimate of 3.4%. This compels global traders to tighten their belts and focus on growth markets.
Trend 3: The value of Asia Pacific (APAC) exports and imports is expected to grow slightly below this year’s performance at 7.5% and 5.0%, respectively, according to the report of United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). This is due to the sustained by the easing of restrictions on international travelling and by a slight pick-up in global merchandise trade. But what remains as the major downside risks to commercial services trade are the uncertainties surrounding the short-term performance of global merchandise trade and potential COVID-19 escalations. Traders in APAC, therefore, should aim to gain efficiencies in operations and focus on growth markets.
Trend 4: There will be volatile financial markets and market dislocations, according to Kroll Institute. In 2022, many companies have seen their market value collapse by half or more due to the markedly changed economic and geopolitical conditions. “Earnings pressure will likely persist into much of 2023, particularly for companies more vulnerable to rate rises (real estate and REITs) or recession (consumer durables)”, according to Kroll. Companies and investors in these sectors will remain cautious.
Trend 5: There will be a growth in environmental, social and governance (ESG) regulation, transparency, and scrutiny. “Environmental factors, particularly climate, sustainability-related and increasingly biodiversity impact, will remain top of mind; investors are demanding greater transparency and consistency when reporting ESG factors and are increasingly scrutinizing the integrity of underlying data,” according to Kroll. Exporters need to ramp up their ESD-related initiatives that provide transparency to how products are manufactured.
Trend 6: Related to the growing ESG concerns, consumers want to buy from green retailers and have items shipped by green providers. A 2022 Deloitte study revealed that following the pandemic, 52% of customers began to value sustainability. Consumers are now willing to spend more to purchase sustainable products, even in times of financial uncertainty. Exporters and sellers need to create sustainable practices by either giving customers a green shipping option at check-out, using paper or recycled packing, choosing suitable packing according to the size of their order, or offering products from recycled materials. Information technology systems should be in place that can detect multiple orders and consolidate orders into one package.
Trend 7: The eCommerce boom will continue to boom due to a growing number of online marketplaces, buying opportunities, and cross-border eCommerce purchases. According to Statista, retail eCommerce market global sales will reach 6.5 trillion dollars in 2023, a staggering increase of +85% compared to 2019 when sales reached 3.5 trillion dollars. In addition, online global sales are forecasted to reach 22% of all retail sales in 2023, compared to just 14% in 2019. On the other hand, the global B2B eCommerce market size is forecasted to reach almost twenty-six trillion dollars, expanding at a compound annual growth rate of 19% from 2021 to 2028, according to Grand View Research. Traders should therefore look at cross-border eCommerce to quell the impact of traditional commerce slowdown.
Trend 8: There is continued supply chain vulnerability. In 2022, there was a big global turbulence that made it difficult for traders worldwide. Cross-border ecommerce retailers and exporters must be adaptable and agile in the years to come, and should utilize technology, be innovative, and keep up with these trends to find solutions to these demands.
*** The author is the Founder and CEO of Hungry Workhorse, a digital and culture transformation consulting firm. He is the Chairman of the Information and Communications Technology Committee of the Financial Executives Institute of the Philippines (FINEX). He is a Fellow at the US-based Institute for Digital Transformation. He teaches strategic management in the MBA Program of De La Salle University. The author may be emailed at rey.lugtu@hungryworkhorse.com