Is my E Commerce Business Doing Well?

10th August 2014

Setting benchmarks to assess the performance of your online business.

One of the questions many of our partners ask us is – what is the criteria for success?

When we first talk to prospective partners we always tell them that our benchmark for a successful online business is to create at least £24000 as month in online turnover within 2 years of the business starting. This is growth roughly on the level of around £1000 extra a month. We explain this growth is hard fought, does not come easily but is possible so long as both partners work hard to achieve the sales. They can’t do it without our help and expertise in content creation and internet marketing; we can’t do it without their expertise in finding and buying the right products to suit their brand.

We think this is a good benchmark for an online business selling around 1000 products across multiple channels and with some international sales. But what are the main criteria upon which to judge success apart from sales? Here are three areas to consider:

Margin: A lot of businesses make good online turnover but very poor profits. If your business thrives on only making a small amount of money per sale because your product range is sold by 98 other stores then it’s not a good business. Some people argue the importance of loss leaders in a building customer base – but in our experience for lesser known brands there is very little customer loyalty so there is little to be gained in trying to sell something for nothing. Good online businesses maintain margins and fight for customers in other ways.

Growth: Generally online sales should stay the same or go up so long as product exposure is maintained. It is a rare online business start up that sees turnover decline once it has been established. There are risks of course – such as competitor activity, supplier problems and even Amazon/Ebay issues but even these can’t halt a decent business with a decent product range. On the whole your sales turnover should be solid and going up.

Feedback: The customer service levels required by Ebay, Amazon and by the various review sites are very high so it is important to maintain these demonstrate a long history of effective delivery, value for money and customer service. Any business failing to meet these standards online (and to a large extent they are the only standards customers rely upon) will not work. Amazon in particular will cut businesses off for failing to meet very exacting standards and Ebay similarly will try to exclude businesses forever if they fail to service their customers effectively.

Product Strength: The key to a really successful business is product conversion rate. We see many businesses working with poor product ranges investing in new websites and promotion campaigns that are completely flawed – they are paying for visitors to see products they don’t want to buy. So another key to “success” is having faith in your product and seeing good conversion rates for those products whenever new customers see them.