In retail, a customer walks in through a door, whereas online, a customer visits a website. Online is completely different from retail in terms of cost.
While it's free for customers to walk into your door, online retailers must effectively pay for traffic and foot traffic to their websites. They use less familiar traffic-driving services like Google PPC (pay per click), Facebook, TikTok, and more. This fluctuating cost of traffic makes things worse for online merchants.
Of course, companies like Amazon understand everything from a net profit perspective, but small businesses fail to establish a strong profit-based framework for accounting, to their own detriment.
Like everything else in 2024, the answer is data. E-commerce requires a fundamental set of data standards across all areas, especially accounting and attribution. Data standards have never been applied to the e-commerce industry, and this is a deeper problem than it may appear on the surface.
Without common metrics and benchmarks, there's no easy way to compare and know what's good and what's bad. Most industries set standards early on, but no universal standards have emerged for e-commerce, perhaps because it's only about selling goods.
IRP is looking to fill the gap with first-party data for its merchants, publishing e-commerce market data monthly on growth, traffic spend, channel performance, conversion rates, agency performance and more.
We have taken this a step further and collated and published in a usable format the Northern Ireland Ecommerce Benchmarks for 2023. The goal is to provide KPIs for ecommerce merchants in Northern Ireland.
The data collected showed that on average IRP merchants in Northern Ireland grew 11.29% year-on-year with 60% of sales going to the UK. Exports accounted for 40% of sales, with Ireland being the number one export destination and the US second.
Merchants recorded sales to over 100 countries with e-commerce products shipped direct from Northern Ireland. The average order value was £106.39. Website session conversion rates ranged from 0.65% to 5.46%, with the average conversion rate in Northern Ireland being 1.78%.
Traffic spend is a major driver of a merchant's net profit margin. Google PPC alone accounts for 51% of merchant sales based on last-click attribution. Google PPC remains by far the most important traffic channel. Email is the second largest traffic channel, with 9% of sales coming from email. Interestingly, Facebook doesn't feature as prominently in ecommerce, coming in sixth with just 1.36% of sales based on last-click attribution.
Revenue per visitor was £1.46, and mobile continues to grow, accounting for 62% of sales. Devices vary greatly by market, but there is no doubt that mobile is top of mind in most markets, particularly in fast moving consumer goods (FMCG).
Perhaps the most interesting and most important is cost. IRP records show that Northern Ireland merchants pay £7.78 in traffic costs for every £100 of sales. That's an average CPA (cost of goods sold) of 7.78%. After deducting all overhead costs, returns and all other operating costs, merchants reported that they were targeting a net profit margin of 8% for a successful year of online trading.
These KPI findings primarily cover individual merchant level data to provide benchmarking, with brief reference to macro-economic level data. Our data also shows that 90% of Northern Ireland merchants' sales are shipped outside of Northern Ireland.
Are there greater economic opportunities in e-commerce for Northern Ireland, with a GVA of over £6 billion? Perhaps only if e-commerce is recognised as an export and regional trade.
KPIs and benchmarks are helpful, but IRP believes that like AI, data in e-commerce is still in its infancy. In the next 2-3 years, we expect e-commerce to become an industry built on data standards and where success is measured in profits. This has been needed for a long time.
Daniel Loughlin is the founder of e-commerce platform provider IRP Commerce.
