Sales are increasing, but online retailers need to get better

The Irish e-commerce market has seen around eight years of growth in two years during the pandemic. Many Irish retailers took up the challenge and created world-class online operations that had a transformative impact on their entire business.

Funding made available through the government’s Covid-19 Online Retail Scheme to boost retailers’ e-commerce capabilities was a much-needed boost.

When laid out well, it has enhanced the ecommerce capabilities of many businesses. Yet despite this stellar growth in online sales during the pandemic, many retailers are still struggling to sell profitably online and achieve that bottom-line sales growth.

There are a number of common causes and solutions to this problem:

Sales hunt at any price

Amazon scaled its business for nine years before turning a profit. Irish retailers don’t have that luxury. Building scale is important, and in the early stages of building an ecommerce business, the cost of acquiring new customers is often unprofitable, but it can’t be a long-term strategy. A bad digital marketer will never want to talk about your product margins, and as a result, many companies get caught paying unprofitable customer acquisition costs as their revenue grows.

Operating with high customer acquisition costs can be very expensive to scale online and can lead to severe cash burn. The resulting scenario – the more you sell, the more you lose – is unsustainable.

It is therefore crucial that the company determines what its profitable customer acquisition costs are, it is monitored as a KPI and incorporated into every digital marketing conversation in the company.

cost behavior

There are eCommerce providers that work on the percentage of revenue model generated.

This may be appropriate for the company in the early days when the revenues generated may be modest. However, these fees grow with the site’s revenue and can quickly become a major drain on your online profitability. Always do the math before entering into these agreements and research your alternatives. If necessary, agree on a flat fee.

Failing to replicate what makes you a great online retailer

Successful Irish retailers have long mastered the art of converting visitors to their stores into lifelong customers. This is achieved by serving their customers well and building relationships.

But many Irish online retailers are focused on attracting new customers rather than building relationships with their existing customer base. Success in ecommerce lies in replicating the great in-store experience online and bringing your existing customers back over and over again, rather than buying new customers at ever-increasing costs. If you can get a new customer to buy from your website again, you’ve cut their acquisition costs in half.

The most successful online retailers achieve this through a relentless focus on the user experience from a customer’s first visit to the website to the delivery of their order and subsequent customer service. Something as simple as conducting a competitor analysis is extremely useful in determining where the “pain points” lie for your customers when doing business with you.

See the forest for the trees

It’s easy to become a busy fool in e-commerce, busy growing the business and making sure the orders come in.

There are a variety of analytics packages that will tell you in real time and in detail how much traffic your website is getting, its sources, sales revenue, conversion rates and so on.

Feedback on the site’s financial performance is typically less immediate or readily available. With so many hidden costs that can easily be overlooked, it can be very difficult to accurately assess how ecommerce operations are performing financially on a daily basis.

Robust monthly management accounts are essential to have a clear picture of the company’s performance and anticipate problems that arise later rather than when a crisis hits.

Operational Inefficiency

Anyone who has shopped online from Irish retailers over the past few years knows that orders often take too long to arrive. So far, Irish customers have generally tolerated longer delivery times than their UK or US counterparts. This will change as Amazon opens more fulfillment centers in Ireland, making millions of products available for next-day and ultimately same-day delivery.

Even more worrying is the persistently high rate of orders not being fulfilled due to website errors, inventory errors, picking errors, etc. These can prove incredibly costly to a business in terms of refunds, wasted customer acquisition costs, customer service time, and most worryingly, negative customer experiences.

To counteract this, the processes involved in picking, packing and shipping orders must be improved. Top Irish online retailers like have reduced the time from clicking ‘buy now’ to dispatch to around 30 minutes. This is what good customer service looks like on the Internet and must become the standard.

These are all important issues, but they can be overcome. I am confident that Ireland will continue to produce online retail champions who can challenge the international big hitters at home and beyond.

The Irish love to shop online and given the opportunity I think they prefer to support Irish businesses. It’s up to Irish retailers themselves to give them a compelling reason to do so.

l Martin McElhinney built Irish retailer McElhinney’s e-commerce business and now advises online retail companies. He works with David Fitzsimons, former CEO of Retail Excellence. Sales are increasing, but online retailers need to get better

Fry Electronics Team

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