E-commerce performance drags down overall profits! Retailers return to the offline battlefield

According to a survey of global retail leaders conducted by Ipsos for Publicis Sapient and Salesforce, pure online retailers are twice as likely as brick-and-mortar retailers to report being unprofitable (44% vs. 20%), but they are also nearly twice as likely to make the necessary investments to improve profitability (69% vs. 39%).

The study involved about 300 retailers in the United States, United Kingdom, Germany, Denmark, Norway, Sweden and Australia.

The practice of rushing to strengthen e-commerce business during the epidemic began to show its drawbacks in the post-epidemic period. After the epidemic bonus faded, e-commerce sales also slowed down. The vast majority (70%) of retailers surveyed said that their expansion of e-commerce business was carried out in a "less than ideal way".

With stores shuttered early in the pandemic and many people wary of in-store shopping even when they opened, retailers of all sizes pivoted quickly, sending e-commerce sales soaring. They have also begun to slow in recent months as consumers have returned to stores.

In addition, higher return levels are also a reason for the decline in e-commerce profits.

The report shows that nearly 40% of retailers surveyed agree that their e-commerce business is not meeting profit targets, 27% say their e-commerce business is hurting overall profit margins, and 25% say it is not profitable at all. Even the largest retailers (with revenues of more than $5 billion) say that e-commerce is less profitable than their physical store business, and scale does not seem to help.

That’s led many DTC businesses like Warby Parker, Casper and others to turn to physical stores, either operating them themselves or partnering with third-party retailers. Wholesale can be one of the most lucrative avenues to profitability, according to research from BMO Capital Markets last year.

Despite this, 85% of retail executives surveyed believe that the COVID-19 pandemic has forever changed the nature of the retail industry, and as many as 96% of retailers believe that online sales will continue to grow no matter what happens with the pandemic.

To improve profits, retailers’ investment priorities include digital customer experience and omnichannel commerce at the top; supply chain modernization and marketing technology/data monetization in the middle; and customer service, digital stores and strategy at the bottom.

Editor✎ Ashley/

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