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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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