Last updated: How to up your e-commerce game for profitability in 2024

How to up your e-commerce game for profitability in 2024


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I’m guilty of “bracketing.” I bet you are too. I frequently go online and purchase the same item in multiple colors and sizes.

When buying shoes for a fickle four-year-old, there’s no other option. Physical stores just don’t carry enough inventory. Our search requires an online aisle of endless options.

So every four to six months, we embark on an online journey to discover that unicorn pair of shoes that’s both fantastically fashionable and comfortably cozy. One will inevitably be too tight, and another, the wrong shade of pink. Therefore, we order multiple sizes and colors, knowing that the mountain of castoffs can easily be returned, for free.

This type of behavior has become a nightmare for retailers and is one of many e-commerce phenomena that has led to an erosion of profitability.

A 2022 survey by Narvar found that 63% of shoppers bracket their online purchases, leading to higher shipping costs (both outbound and inbound), a drain on labor, and product shrinkage when the returned items are never are resold.

The old game: Capture market share at any cost

According to a McKinsey & Company report, “Getting to breakeven in e-commerce has proved elusive for most companies because of its tremendous complexity: retailers must connect the dots between growth and cost levers and align incentives across the organization.”

Looking back to the early days of e-commerce, today’s challenges should be no surprise – brands need to focus on what it really takes to improve e-commerce profits in 2023.

Brands initially rushed to gain their share of e-commerce commerce growth at any cost. Free shipping, low pricing, and easy returns became the norm.

During this time, e-commerce technology was primarily focused on growing top-line revenue through front-end enhancements such as flashier user interfaces and smoother checkout flows.

So, where do retailers go from here?

The new game: Sustainable & profitable e-commerce 

U.S. e-commerce sales now account for 15% of total retail sales, and companies can no longer afford to sacrifice margins associated with this increasingly important channel if they want to improve e-commerce profits.

In fact, a recent Oxford study revealed that 63% of retail executives believe that increasing margins and profitability is a top strategic priority for their digital commerce business.

Now, brands need a digital commerce platform that can help them deliver profitable revenue. However, it requires much more than just a great frontend shopping experience. When evaluating technology, brands must up level their expectations.

Generating revenue at any cost is no longer acceptable. Generating profitable revenue is key to success.

Text stating SAP is named a leader in the 2023 Gartner Magic Quadrant for Digital Commerce. You can click the image to access the report.

Re-imagining the shopping experience: How to improve e-commerce profits

Let’s imagine how this new approach could revolutionize my shoe shopping experience, boosting my loyalty and customer lifetime value to the brand, while increasing the profitability of each transaction.

  1. Personalize the experience with enterprise-wide data – Based on past transactions, you know that I am a parent of two young kids, regularly outfitting two pairs of fast-growing feet. Don’t make me search through your endless online aisle. Proactively come to me with informed options based on my past purchases and what’s currently in-stock or even better, available in store.
  2. Innovate beyond the UI to build new business models – Want to lock me in as a consistent customer with predictable revenue? You know I need a couple of pairs each month, so offer a subscription model to keep me from checking out the competition.
  3. Entice me to behave in a more sustainable and cost-efficient fashion – Whether picking up an order or making a return, give me a discount by doing so in store. Not only can this generate additional revenue, but it offers tremendous savings by avoiding shipping costs and gets acceptable merchandise back on the shelf faster.

Keep in mind that this digital commerce experience must be scalable. As my kids grow from toddlers to teens and beyond, it’s critical that the retailer facilitate this lifecycle – that’s how you improve e-commerce profits for the long-term.

A unified commerce platform that scales to include all of a company’s brands and geographies not only ensures that the entire organization benefits from complete data, but significantly lowers the total cost of ownership and complexity associated with multiple teams using disparate technologies.

Flexible. Agile. Future-proofed.
The power of hybrid, composable commerce is real.
Discover real-life examples of success HERE

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