Retail surgery: Which area of online retail achieves the most growth?

“The economics of online retail are entirely different to physical retail,” says eCommera director Michael Ross, “so you are absolutely correct to try to identify the areas to focus on in order to achieve maximum growth.”

As ecommerce gathers pace, many retailers have assumed that they can apply the same principles that herald from offline retail and use them to make the same high profits online. “This is not the case,” warns Ross. “Data is critical to profits. If you learn how to work the data you will be positioned to achieve significant growth.”

He believes there are three core economic fundamentals that retailers should focus on. The first is economics. “The profitable order is king,” he says. “Economics in the online world are driven by profit per order and volume of orders.” The second is growth. The best ways to do that are by building and nurturing your customer base and closely measuring marketing effectiveness. In trading, understand what data you have, what levers you can pull and how that affects profitability.

Ross concludes: “The first phase of ecommerce was about getting online. Now that most are, retailers are moving into the second phase - focusing on being profitable.

It’s now that they are starting to realise that traditional retailing economics do not work online - retailers need to rethink their approach and model or risk systemic underperformance.”