Ecommerce profitability measurement falling short in most firms

Ecommerce profitability measurement falling short in most firms

The failure of many online retailers to measure any online profitability indicators consistently means that they are unable to harness useful information or allocate budgets effectively in order to get the best return on investment.

According to a survey undertaken among 101 UK ecommerce directors by ecommerce trading software provider eCommera, only 18% measured the overall profitability of their web site by looking at account margins and the costs and revenues generated by marketing and actual delivery either on a daily weekly basis. While 42% evaluated such metrics monthly, 22% did so only quarterly and 12% annually, some 6% never bothered at all.

Michael Ross, eCommera’s director, said: "Underlying a profitable business is the need for rigorous measurement of profitability – understanding what happens to your business when you pull different levers and understanding customer, marketing and product profitability in order to allocate spent to maximise returns."

The problem was that too many online retailers simply considered their e-tail site to be simply another store, which meant that they failed to harness the mass of ecommerce data available to them or understand the need for a different profit model, he added.

For example, only 37% measured the profitability of individual customers, while a mere 32% explored profit by recency-frequency-monetary segments. Some 15% measured nothing at all.

Moreover, only 4% of respondents looked at fully allocated spend when measuring marketing channel profitability, while 16% said that they never measured customer satisfaction. Nonetheless, 20% requested feedback after every interaction, 16% ran regular post-purchase surveys to measure customer experiences and 48% undertook regular onsite surveys to evaluate onsite visitor experiences.

A further 46% worked out gross margin return on inventory, 30% gross margin achieved and 16% fully allocated profit per product.

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