E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
When executives at 278 companies including manufacturers and distributors were surveyed about their online sales and financial performance, those that conducted sales online through their own and other companies’ e-commerce sites reported profit margins four percentage points higher—17.7% versus 13.3%—compared with companies not selling online.
It pays to sell online, accounting and business advisory firm Grant Thornton says in a recent study of 278 companies comprised of manufacturers, wholesalers/distributors and retailers.
When Grant Thornton surveyed the companies last August and September, it found that the 39% not yet selling online had an average profit rate before interest and taxes, or PBIT, of 13.3%.
Profits were higher among the 61% of companies that were selling online, and PBIT’s were highest among those that sell through more than one online channel. Companies that sell through their own e-commerce site or through an online shopping portal, such as eBay.com or Amazon.com, had an average PBIT of 14.9%. But the average PBIT for those that sold through both their own site and a third-party site shot up to 17.7%.
Grant Thornton didn’t provide profit figures by types of business, but it notes that 61% of respondents said they were manufacturers, 24% retailers and 23% wholesalers/distributors. In some cases, companies fell into two or more categories.
The survey also found, however, that selling across multiple e-commerce sites can create confusion among customers, resulting in lower rates of customer retention. 50% of companies selling through their own e-commerce sites and online marketplaces sites said multichannel conflict was either a “moderate” or “major” issue.
Those conflicts appear to impact customer loyalty. Customer retention rates average 79% for companies that cited no multichannel conflicts. But among those who said multichannel conflict was a moderate issue, the average customer retention rate fell to 60%; among those who said it was a major issue, average retention dropped to 47%.
To avoid channel conflict, Grant
Thornton advises companies to offer products exclusive to each selling channel; to sell some brands only through wholesale channels and others through retail, and be clear with trading partners about plans and reasons for selling strategies in each channel.
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