Many estimates suggest that worldwide e-commerce sales are expected to double within 5 years. This hints that for today’s traditional retailers, this massive rise is of great concern. There are even those cases in which the quickest-growing digital channel is not very profitable. This happens because features such as long-tail product assortment and same-day delivery reduce slim profit margins.
Still, it is safe to state that opportunities exist. When there is a shift from one digital channel to another, this goes on to question all the things that retailers usually believe in regarding market share, customer loyalty, and growth forecasts. As more and more customers go on to reassess their purchasing options, it gives retailers a chance to earn the trust of new customers. Many of these retailers then start to take an interest in the four pillars of E-commerce profitability.
Interesting Point Associated with Pillars of E-commerce Profitability
Traditional retailers should seriously consider how they can better optimize e-commerce by effectively lining up technology, people, and operations throughout the value chain. This will then make them unlock fresh efficiencies and create value for the business and customer. Retailers should also look into ways to maintain profitability in E-commerce. To do this, it is imperative that retail and other organizations go on to assess every single business function, figure out cost savings areas, and decide the manners to enhance customer experience. Organizations should also investigate custom ecommerce web design services.
In light of the assessment made above, let’s take a deep look at today’s established four pillars of e-commerce profitability. This will allow you to better come to terms with the fact that any retailer can go on to optimize its efforts, which will ultimately result in the creation of fresh and sustainable revenue streams. This will be done in tandem with the optimization of the present processes for efficiency and cost savings.
First Pillar: Customer Retention and Acquisition
It is a fact that product pricing could differ from one channel to another. But it is also a fact that the same goes for marketing. The overall cost that is related to attracting customers into stores compared to mobile sites is differently marketed.
Here, it is also important to understand that data can help us figure out many answers. Let’s say that with the assistance of data, we were able to figure out what sorts of offers are better responded to by the customers. This translates to the fact that it will give us a very amazing opportunity for optimization, as some of the costliest advertising options may not be the most beneficial. For instance, there could be some retailers that would be able to emphasize the most effective times and days. This will let retailers save on marketing expenses while generating brand engagement. On top of this – take note of these two points that can assist you to maintain profitability in E-commerce:
- Personalization steers the existing customer loyalty factors
- Proprietary data monetization can offset some digitization costs
Second Pillar: Product Promotion, Pricing, and Selection
A big positive associated with today’s E-commerce marketplaces is that they have a great degree of flexibility to present a huge range of goods with minimal warehouse costs and inventory. Partnerships with many brands or retailers permit expanded product selection to a greater consumer network alongside the making of proxy revenue streams, like digital advertising. This is exactly why retailers should consider marketplaces as a thing to enhance their product offerings. This will then allow the retailers to become a place where shoppers can find all the things they require. Retailers should also try to look into custom ecommerce web design services:
The following are some of the key points that retailers must take note of all the while emphasizing product promotion, pricing, and selection:
- A review of today’s e-commerce models and cost-to-serve analytics
- The dynamic pricing concepts
On a side note, many retailers that are just starting to establish themselves in the digital space should carefully consider how their competitors are doing the functions of product promotion and pricing. This may allow any retailer to have a better and more thorough understanding of the competition that is ahead.
Third Pillar: The Optimization of Supply Chain
A cost-effective and efficient fulfilment process is the foundation of a retail entity. Additionally, since shopping is making its way into digital channels, a great number of retailers see a rise in their fulfilment costs.
Today, free and quick shipping is a big driver of sales, regardless of the fact that it may consume a significant portion of profits. Many estimates suggest that delivery lead times and shipping costs are critical differentiators for today’s purchasers. Here, around three-quarters of consumers expect their shipping to be free. On top of this, if there are unexpected shipping costs, this can cause customers to leave their cart and go with better offers. If retailers want to accelerate supply chain optimization then they need to focus on the following points:
- Create a digital copy of real-world applications
- Optimize inventory costs
- Improve fulfilment for cost-effective service
- Improve the returns process with the aid of digital interventions
Many e-commerce gurus believe that if you are able to fully optimize your business supply chain, it will make you steer ahead of your competition. This is a debatable point. Nevertheless, the point highlights the overall importance of the optimization factor.
Fourth Pillar: Big Data and I.T. Modernization
This is truly a unique pillar among other pillars of E-commerce profitability. There is a close relationship between technology and e-commerce profitability. This is because both product catalogue and supply chain depend on technology to note down opportunities, thereby leading towards solution activation. A very clear example of technology’s power is seen in data analysis, machine learning (ML) and artificial intelligence (AI). When there is high-quality data, it will allow retailers to find trends that can assist in foreseeing buying patterns, set promotions and prices, and optimize inventory levels, which can maximize revenue. The stated technologies can make use of a huge amount of data resources such as social media activity, behavioral data, and past transactions to make models and algorithms.
These models and algorithms will allow an organization to have better business awareness as well as a more complete customer profile. Furthermore, AI can also be utilized to power solutions, such as customized product recommendations and chatbots. This will then aid retailers in their attempts to raise their profit margins in a growing digital space.
The following are some related points to the fourth pillar, which today’s retailers and other organizations should take note of:
- Performing data transformation in the cloud
- The modernization of the overall organization
Here, the modernization of any retail business can become a very time-consuming and costly activity. This is why retailers must do a proper cost analysis of the overall modernization activity.
Concluding Remarks
This post has discussed in detail the Pillars of E-commerce Profitability. There is no denying the fact that a great number of retailers from all across the world are enjoying e-commerce profitability. But it is also true that few of them are going for a holistic approach when it comes to the maintenance of sustainable growth and retention. The following are a few points for today’s retailers who are on the path to optimizing and refining their entire e-commerce strategy:
Customer Retention and Acquisition
- Identify the cost of attaining and even retaining a new online customer
- Identify some of the most effective manners of reaching new customers and reclaiming old customers
- Making a customer experience that discourages inefficient and expensive consumer habits
- How to monetize consumer data so that it offsets technology investment costs
Product Promotions, Pricing, and Selection
- Identifying the lowest and highest profit items present in the digital catalog
- The refining of the digital pricing strategy so that it takes note of higher operating costs
- Identifying ways to allow dynamic pricing to account for demand-related lapses or surges
Supply Chain Optimization
- The adjusting of the existing shipping options in order to maximize profit margins, all the while not affecting customer experience
- The evolution of the returns process to decrease losses and shorten the timeline
- Figuring out how to utilize both data and advanced technologies to improve forecasting, inform inventories, and predict demand.
Big Data and I.T. Modernization
- The ways in which an organization can leverage the available third-party data and vast proprietary stores.
- The ways to introduce RPA and robotics in an organization
- Grasping a better knowledge of the point at which the organization will earn a return on the I.T. investments
