[{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.the-future-of-commerce.com\/2022\/08\/22\/report-debunks-roas-obsession-in-e-commerce\/#BlogPosting","mainEntityOfPage":"https:\/\/www.the-future-of-commerce.com\/2022\/08\/22\/report-debunks-roas-obsession-in-e-commerce\/","headline":"Report debunks ROAS obsession in e-commerce","name":"Report debunks ROAS obsession in e-commerce","description":"If you're obsessing about return on ad spend in your e-commerce business, you're doing it wrong, according to a new report.","datePublished":"2022-08-22","dateModified":"2022-08-31","author":{"@type":"Person","@id":"https:\/\/www.the-future-of-commerce.com\/contributor\/tracey-wallace\/#Person","name":"Tracey Wallace","url":"https:\/\/www.the-future-of-commerce.com\/contributor\/tracey-wallace\/","identifier":367,"image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/21377d3250d3cee37a219265f855ca86717424033839661349c4b6845d2250cc?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/21377d3250d3cee37a219265f855ca86717424033839661349c4b6845d2250cc?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"The Future of Commerce","logo":{"@type":"ImageObject","@id":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2023\/01\/logo-foc-schema-app-1.png","url":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2023\/01\/logo-foc-schema-app-1.png","width":172,"height":60}},"image":{"@type":"ImageObject","@id":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2022\/08\/2022-ROAS_FTR.jpg","url":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2022\/08\/2022-ROAS_FTR.jpg","height":375,"width":1200},"url":"https:\/\/www.the-future-of-commerce.com\/2022\/08\/22\/report-debunks-roas-obsession-in-e-commerce\/","about":[{"@type":"Thing","@id":"https:\/\/www.the-future-of-commerce.com\/commerce\/e-commerce\/","name":"E-Commerce","sameAs":["https:\/\/en.wikipedia.org\/wiki\/E-commerce","http:\/\/www.wikidata.org\/entity\/Q484847"]},{"@type":"Thing","@id":"https:\/\/www.the-future-of-commerce.com\/marketing\/","name":"Marketing","sameAs":["https:\/\/en.wikipedia.org\/wiki\/Marketing","http:\/\/www.wikidata.org\/entity\/Q39809"]},{"@type":"Thing","@id":"https:\/\/www.the-future-of-commerce.com\/marketing\/marketing-general\/","name":"Marketing","sameAs":["https:\/\/en.wikipedia.org\/wiki\/Marketing","http:\/\/www.wikidata.org\/entity\/Q39809"]},"Retail Trends, Data, News"],"wordCount":782,"keywords":["Advertising","Commerce","E-commerce Trends","Marketing"],"articleBody":"A new survey from the popular forum eCommerceFuel shatters one of the biggest misconceptions about the e-commerce industry: that success hinges on high ROAS.Browse social media, expert advice, or follow the money from venture capitalists and you\u2019d think that success comes to e-commerce founders who are under 30 and heavily invested in performance marketing, and the return on advertising spend (ROAS) it generates.Yet eCommerceFuel\u2019s eCommerce Trends Report bucks all of that. It found that the average e-commerce business owner is 41 years old. Their brands pulls in about $7.1 million annually, buoyed by a proprietary product, deep industry knowledge and incredible customer service \u2013\u2013retail pillars that haven’t changed much in hundreds of years.It makes sense, then, that more than 40% of these brands manufacture their own product, and another 20% have hybrid model in which they manufacture several of their own products and then private label, dropship, or resell other SKUs.However, the most shocking finding of this report — one that had Twitter abuzz — was about performance marketing and ROAS. Here’s how Andrew Youderian, founder of eCommerceFuel, phrased it:This content is hosted by a third party ( twitter.com ).To view the content, either update your cookie preferences or view it in a new browser window.Cookie PreferencesNew Window      The future of advertising: Tried & tested rules for effective campaigns                The future of advertising isn\u2019t that there will be no advertising, as others have suggested. Instead, it's that good and effective advertising will remain the same.      The truth about ROAS, revealedReturn on ad spend is a common marketing metric that companies use to compare how much they’re spending on advertising versus how much revenue the ads bring in.Marketers use ROAS to:Gauge general effectiveness of their advertising campaignsIdentify the most effective advertising channelsGuide planning and budgetsSpot inefficienciesHowever, obsessing over ROAS is misguided, according to eCommerce Fuel, which showed no correlation between ROAS and growth or profitability.Instead, successful ecommerce founders were 600% more likely to cite branding & storytelling as their competitive advantage, and 77% more likely to make their own products.Source: eCommerceFuel      Experiential marketing: Resurrected and revamped for digital times                With masks coming off and live events returning, brands are returning to experiential marketing, but changing it up to suit a different world.      Zoning in on operational efficienciesThe study even found that brands growing in the top 20th percentile relied 25% less on paid traffic sources than those in the comparison group, and had 4% lower ROAS.They also had 50% smaller teams, were 24% less likely to run their own warehouse (likely relying on 3PLs instead), had 8% more visitors purchase (high conversion rates), and had 37% higher profit margins.\u201cThe strongest predictor of profitability was lean, efficient operations\u2013\u2013NOT advertising performance,\u201d Youderian wrote on Twitter.A high ROAS was no indicator of a successfully growing or profitable e-commerce business. But, that doesn\u2019t mean that the successful brands aren\u2019t advertising or focusing on improving their ROAS.The point here is that successful brands have instead first focused on operational efficiencies throughout the organization in order to achieve maximum margins, and create a sustainable business.      What is operations management? Definition, types, examples                Every business needs effective operations management to drive profitability, achieve long-term success, and win competitive advantage. Learn what operations managers do and how they impact CX.      Top e-commerce marketing channelsAll e-commerce businesses are 56% more reliant on paid traffic in 2022 than they were in 2019, though, and 36% less reliant on organic traffic in that same time period, the report showed.Facebook ROAS has decreased 30% for brands on average, too, likely due to Apple\u2019s privacy policy updates that caused widespread industry panic and recalibrating.All e-commerce brands, according to this study, need to diversify their marketing mix to keep costs low. Email marketing remains the No. 1 marketing channel, as it was in 2019, with Google Adwords now No. 2 in 2022, displacing 2019\u2019s second-place holder, Facebook Ads.Source: eCommerceFuelE-commerce leaders see TikTok, influencer marketing, SMS and YouTube as the marketing channels with the most future potential for 2023.      Click into the power of UGC marketing on TikTok                User-generated content can be gold for marketing. Find out how brands can leverage the hot social media platform to engage buyers.      A new mindsetAll in all, as the e-commerce industry corrects from its heights in 2020, and a recession looms, there’s a new mentality the industry is embracing, one said well by Aaron Orendorff of Common Thread Collective: \u201cLosing is normal. Surviving is winning. Growing is monumental.\u201dGood luck out there\u2013\u2013and remember, operational efficiency does more for your revenue than ROAS.  Flexible. Agile. Future-proofed.The power of hybrid, composable commerce is real.Discover real-life examples of success HERE.\u00a0"},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"2022","item":"https:\/\/www.the-future-of-commerce.com\/2022\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"08","item":"https:\/\/www.the-future-of-commerce.com\/2022\/\/08\/#breadcrumbitem"},{"@type":"ListItem","position":3,"name":"22","item":"https:\/\/www.the-future-of-commerce.com\/2022\/\/08\/\/22\/#breadcrumbitem"},{"@type":"ListItem","position":4,"name":"Report debunks ROAS obsession in e-commerce","item":"https:\/\/www.the-future-of-commerce.com\/2022\/08\/22\/report-debunks-roas-obsession-in-e-commerce\/#breadcrumbitem"}]}]