As we move through the 2020s, there is plenty of uncertainty in the world of commerce. A global pandemic, massive supply chain disruptions, and the emergence of cryptocurrencies and NFTs leave many people wondering what the future holds. One thing is certain: ecommerce is here to stay and will continue to grow.
In 2020, ecommerce sales in the United States accounted for $4.28 trillion US dollars. By 2022, statisticians estimate that ecommerce revenue will reach $5.4 trillion. Even though consumers flock to online marketplaces more often, brands and merchants often struggle to scale their business profitability. In an October 2020 survey, 23% of ecommerce leaders said that increasing profit was most important for company growth.
It is no surprise that ecommerce brand owners want to focus on profitability. However, the ecommerce landscape constantly evolves, and brands can become overwhelmed with the exorbitant costs of just trying to keep up. Whether they are replatforming their core commerce infrastructure, investing more in marketing, or adding third-party technologies, many online brands struggle to increase profitability and keep their business afloat.
Let’s discuss nine reasons why your ecommerce profit margins are suffering and how our ecommerce technology platform solves them.
1. Big Retail
Big retail is a massive problem for independent online brands. Amazon and its third-party merchants encompassed 43.5% of digital spending in the United States in 2021, and it looks like that percentage will only grow. Since Apple, Walmart, and Amazon set the bar high, brands must deliver a similar online shopping experience to entice customers to shop in their storefronts.
Big retailers like these constantly invest in research and development to improve their shopping experience, and most brands don’t have the resources to compete. Whether it’s lower ecommerce fulfillment costs or better product page optimization, Amazon has set the standard, and brands trying to match their resources cannot do it profitably, if at all. Brands not only overspend on marketing, but the misuse of discounts, promotions, and free shipping can often destroy their profit margins. But that’s what brands often figure they need to do to keep up.
Nogin offers brands the power of big retail to fight big retail.
For brand leaders needing to deliver superior growth with predictable costs and an exceptional online experience, Nogin created the world’s leading Commerce-as-a-Service (CaaS) technology platform and managed services. Designed to optimize the entire ecommerce operation, Nogin frees you to focus on your brand while running as much or as little of the infrastructure as you choose.
Plug into our Intelligent Commerce technology and access the tools you’ll need to finally compete. You’ll lower virtually every cost of running your ecommerce business while our smart tech automatically optimizes your storefront for profitability. Our extensive integrations and continuous investment in technological innovation allow our brands to elevate all aspects of their online business without the expensive price tag.
[Read more on How to Compete With Amazon.]
2. Inflation, Economic Uncertainty, and Recessions
Whether it’s at the gas pump or the grocery store, everyone is feeling the effects of inflation. Consumers have to tighten up their belts and prepare for a likely recession. The problem is compounded when businesses have to start trimming operating costs along with less spending power due to inflation.
Brands will have to cut marketing budgets and work with what they have. Most independent brands won’t have the budget to invest in the innovative tech and resources they’ll need to compete with big retailers.
Clients operating on a CaaS business model are less concerned about a recession than a typical retail brand. Our ecommerce platform, along with our unique model for delivering a full stack of capabilities, is virtually recession-proof. The most advanced enterprise-level technology is automatically deployed for our clients, and there is no upfront investment or ongoing development costs.
Since we operate on a value-based pricing model, our clients access a full-stack ecommerce technology package that continuously learns and optimizes. We deliver this by leveraging modern data capabilities and combining them with algorithms and constant testing for the best results. So, our customers experience the benefits of enterprise commerce capability with no upfront investment and shared risk pricing.
Recession-proof your business and plug into Intelligent Commerce.
3. Marketing Agencies
When you migrate to Intelligent Commerce, you’ll gain not only a comprehensive technology and services package to accelerate your brand’s growth but also the powerful performance marketing capabilities of Hawke Media to improve customer acquisition and retention. Hawke Media is a full-service digital agency providing performance marketing, creative production, custom web development, media planning and buying, and brand strategy consultation to leading brands across multiple industries, including RedBull and Crocs.
Our new partnership allows us to deliver the best marketing solution for growing ecommerce brands. You’ll gain our innovative technology that includes AI-powered customer segmentation, algorithmic merchandising, and smart promotion optimization capabilities to deliver personalized shopping experiences to your audience coupled with Hawke Media’s cutting-edge performance marketing services. It’s an affordable and comprehensive marketing solution that will help you convert more shoppers at significantly lower costs.
4. No Artificial Intelligence or Machine Learning
The most competitive ecommerce businesses rely on the latest technological advances, which many brands struggle to afford. AI and machine learning are pillars of Nogin’s Intelligent Commerce platform. It guides our marketing efforts and helps take the complexity out of many aspects of your ecommerce initiatives.
Our pre-integrated, full-commerce solution stack is optimized to elevate your online storefront. Our software synchronizes and improves your ecommerce efforts, including order management, customer data management, customer service, content management, and more. As soon as you migrate to our intelligent platform, our tech will start working 24/7 to improve profitability and lower operating costs to help you exceed all the most important ecommerce KPI goals you want to achieve.
5. Lack of Omnichannel Infrastructure
If you want to increase your profit margins and recession-proof your business, unifying your entire ecommerce infrastructure on an omnichannel platform is essential. Most brands waste considerable time, resources, and money trying to oversee all the various online channels they must manage. Fragmented channels leak money through the cracks, and you’ll have to rely on several teams, agencies, or SaaS to operate your business.
Nogin’s intelligent platform utilizes an omnichannel infrastructure. It connects all your channels, and brand leaders can oversee their entire ecommerce operation. Best of all, our Intelligent Commerce technology platform delivers optimization across Nogin’s entire customer base with data insights that deliver the best tactics across our client network. Once you migrate to our platform, our tech finds and fixes the inefficiencies in your ecommerce channels to increase profitability.
6. Segmented Managed Services
Many brands must deploy and juggle many SaaS or agency solutions to operate their storefront. It is not only a costly investment, but you’ll need your own internal or external team members to manage the SaaS or marketing efforts.
Our pre-integrated commerce platform is built to scale without upfront or ongoing investments. Our tech provides a single solution for your business rather than switching, installing, and managing a host of plug-ins or apps.
If you do need additional support, we offer world-class, à la carte managed services, including:
- Website development and continual R&D
- Merchandising
- Content management
- Digital marketing services
- Order management
- Customer data management
- Traffic
- 3PL Fulfillment
- Payment
- Customer service
- Reverse logistics
By offloading the mechanics and constant complexity of ecommerce, you’re free to focus on what differentiates you.
7. DIY and Sourcing Top Talent
Many brands think that the Do-It-Yourself approach will save them money. It may work for many new ecommerce businesses, but once brands reach around the $1 million annual revenue mark, it’s simply no longer a scalable option. Brands will have to invest in better, enterprise-level tech that is expensive and requires manual oversight.
They’ll have to recruit top talent to oversee and operate their business. Great ecommerce specialists are in high demand, so brands are often hung out to dry if their specialists leave for better and more lucrative opportunities. Needless to say, a lot of upfront, expensive, and time-consuming investments increase operating costs while decreasing profitability.
Our Intelligent Platform requires no upfront investment, and our tech eliminates the need for a lot of the conventional oversight required to operate an ecommerce business successfully. Elevate your site to a world-class standard, avoid the headaches, and become successful on day one.
8. Replatforming and Backend Management
The ecommerce world is constantly evolving, and as brands grow, they will have to eventually replatform their storefront. It is essential to help scale an ecommerce business as it grows and will help improve the customer experience, security, and speed of a website. Upgrading your platform will offer new features and management tools to improve your online experience and cut costs.
Unfortunately, the replatforming process is typically expensive, slow, and problematic. The migration process can put an existing store’s operations on hold, and brands will have to retrain their team to operate on the new platform. Data migration can be painful, and you’ll likely lose features and integrations from your old platform.
Nogin’s intelligent platform delivers all the pros without the cons. There are no upfront costs, and brands go live in 60-75 days compared to the industry’s 1-2 year average. In fact, Nogin clients NEVER have to replatform again! Our headless ecommerce platform also offers more flexibility, scalability, and agility to your storefront than other enterprise platforms. Take the nightmare out of replatforming and managing your backend on your own and plug into Intelligent Commerce.
9. No Research and Development
Amazon is at the top of the ecommerce industry because they constantly invest in research and development to improve its platform and resources. Their team analyzes data across Amazon’s infrastructure and refines their approach for maximum profitability and sophistication. Most brands only have their own customer data to examine, and the insights are often insufficient to drive improvements to elevate their business.
All our clients gain the benefits of our enterprise R&D solution, which includes Nogin’s ability to constantly A/B test new strategies across our entire client base. As our team of site optimizers tests, analyzes, and deploys strategies, our clients benefit from the insights gained from each storefront on our Intelligent Commerce platform. In fact, clients who migrated to our enterprise platform achieved an average growth of more than 40% in annual gross merchandise value (GMV) in their first year!
Nogin’s technology will improve your P&L by leveraging sophisticated algorithms and machine learning to push benefits back to our customers’ businesses at scale, capturing far more nuanced information than a single brand can collect.
Plug Into Intelligent Commerce and Take the Headache Out of Running an Ecommerce Business
If you want to recession-proof your business and instantly become more profitable, it starts with a smarter approach. Learn more about the research and data behind a CaaS business model and download the Coresight Research Reports below, or contact us today:
- Part One: Evolving State of Ecommerce
- Part Two: Solving Profitability Issues in Ecommerce
- Part Three: Optimizing Ecommerce Infrastructure
E-commerce Profit Margins FAQs
What are good eCommerce profit margins?
Good ecommerce profit margins typically range between 20-30%. However, this can vary depending on the industry, product type, and business model.
What is a good ROI for eCommerce?
A good ROI for ecommerce is generally around 25-50%. This means that for every dollar invested, the business earns back $1.25 to $1.50.
How much does the average ecommerce business owner make?
The average ecommerce business owner can make anywhere from $30,000 to over $100,000 annually, depending on the business size, industry, and profitability.
How long does it take for an eCommerce business to be profitable?
It typically takes 6 months to 2 years for an ecommerce business to become profitable. This timeline varies based on the business model, market conditions, and initial investment.
Which type of e-commerce is most profitable?
B2B ecommerce is often the most profitable due to larger order values and recurring purchases. Niche markets and high-demand consumer products can also be very profitable.
What is a typical ecommerce profit margin?
A typical ecommerce profit margin is around 20-30%. This margin depends on factors such as product type, pricing strategy, and operational efficiency.
