I came across an article on Forbes today titled The Inconvenient Truth About E-Commerce: It’s Largely Unprofitable . The writer, Steven Dennis, states that despite the massive shift from brick and mortar stores and the digital revolution, most ecommerce businesses remains unprofitable and most investors will not reap an adequate ROI.
This is due to high start up costs for new brands, difficulties in getting customers and high fulfillment costs.
This is an interesting article but ignores various factors and approaches;
- The digital market continues to grow. In the USA online sales in 2015 had a global volume of $335 billion. Despite the doom and gloom experts believe that digital purchases will exceed $530 billion in 2020. That is an annual growth rate greater than 10%. Sales are growing, not stagnating.
- Long Term: Ecommerce needs a long term strategy. Most entrepreneurs expect high returns within 6 months to a year. However most ecommerce companies need time to develop their brand and earn customer loyalty.
- As modern consumers move from desktops to mobile ecommerce trends have shifted. Growth in ecommerce markets, especially China, South Korea and India, is now driven by mobile. Emarketer states that Analysys International Enfodesk reported that nearly two-thirds of retail and consumer-to-consumer (C2C) ecommerce sales in China in Q4 2015 occurred via mobile. That was up from 55.5% the previous quarter—the first time mobile accounted for a majority of ecommerce sales in the country. As mobile grows, the upward trend in sales will continue across the world.
How Can You Make Your Ecommerce Business Profitable?
A recurring question from ecommerce companies is how to increase net profits, not just revenue in a highly competitive market, especially for new companies. There are two main strategies that have become popular in 2017:
- Pushing up gross margins
- Reducing costs
However these two strategies by themselves are not sufficient. Whether your business is pursuing an omnicahnnel strategy or pureplay, you need experts with years of experience to help you increase profit and scale the business.
Contact us now and we can help you grow AND make a profit.