Ecommerce traders are failing to analyse their online profitability properly, according to new research. As a result, suggests the report, they miss out on learning what works in their internet retailing business.
eCommera’s Trading Intelligence Quarterly found that online retailers were “very inconsistent” when it came to measuring success in sales – and didn’t understand “what good looks like” in a yet-to-mature industry.
The research found that almost half of the 101 UK ecommerce directors who took part in the research reported growth of less than 20%. Only 18% measured website profitability daily or once a week, Some 42% evaluated it each month, 22% quarterly and 12% once a year. Six per cent never measure it at all.
When it comes to measuring profitability against specific KPIs there was still less consistency between respondents.
Only 37% of respondents measure the profitability by individual customer, and only 32% look at profit by recency-frequency-monetary segments. And in measuring the profitability of marketing channels, 25% analyse the return on their advertising spend, 40% review the cost of per customer acquisition, and 19% measure the cost per order. But 8% never analyse return on marketing investment at all.
Customer satisfaction is another area with room for improvement 16% don’t grade it at all. However, 20% ask for feedback after every interaction and 16% run regular aftersales surveys and 48% run regular online surveys to measure visitor experiences.
Michael Ross, director, eCommera, said: “The purpose of this research was to understand how retailers are measuring their profitability online. What we’ve discovered is that the online retail industry is still too immature to know what good looks like. However, it is clear that higher performing online retailers are more sophisticated and focused in their measurement of profitability.”
He said that profitability needed to be measured rigorously in order to understand what happens to a business when different levers are pulled, and how to allocate spending on areas such as marketing, customer acquisition and products. “It is clear from our research,” added Ross, “that many organisations are thinking of online as just another store. They must harness the mass of ecommerce data available to them and understand the need for a different profit model online.”
Peter Fitzgerald, industry director at Google UK, said: “It is clear from the findings that the retailers who measure and value profitability measurement are doing well. The key is to focus efforts on the metrics that really matter. However, across the board there appears to be a blurring of indicators about what exactly should be measured and what the best indicators of online profitability actually are.”