[INFOGRAPHIC] Is Your e-Commerce Store Leaking Money?

Ray Hartjen
Ray Hartjen
Director, Marketing

In today’s omnichannel retail environment, online stores help drive top line growth, but more often than not fail to deliver bottom line profits. Where is your online channel losing out on opportunity, and what can you do about it?

Today’s multichannel shopping journeys require retailing brands to present and execute upon a seamless cross-channel strategy. Each channel has its own inherent strengths and, of course, its own unique limitations. But, in this hyper-competitive retail environment, it’s crucial for retailers to capture every opportunity that is presented.

Physical stores allow for differentiated experiences, enhanced shopper service, and ability to “touch and feel” and try on, and immediate fulfillment, and as such, affords perhaps the highest profit margins for retailers.

Digital channels allow for a wealth of brand extensions, discovery, increased awareness and education, convenience and so much more. However, due to the lack of differentiation, intense price competition and large shipping expenses, most online stores – Amazon included – struggle to return operating profits.

Consider this quote from Nordstrom (NYSE: JWN) CFO & EVP Michael G. Koppel, as reported in Retail Information Systems:

“This business model has a high variable cost structure driven by fulfillment and marketing costs in addition to ongoing technology investments. With our increased investments to gain market share along with the changing business model, expenses in recent years have grown faster than sales.”

It’s not just Nordstrom, either. Check out what Michael Kors (NYSE: KORS) CEO John Idol said in February of this year, as reported in Business Insider:

“Unfortunately today, e-commerce generates a lower operating profit for us than four-wall brick-and-mortar. We think over time that will reverse itself, but, as you know, when the consumer requires free delivery, free return, wonderful packaging, plus there’s a new trend that people are buying multiple sizes of things to try them out at home and then return them, that all is a negative headwind for us.”

The infographic below, created and published by Red Stag Fulfillment, identifies the most common areas where online stores loss our on opportunity and provides tips on how to create more value – for your shoppers and for your retailing business!

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