Industries
Ecommerce choices with a record, not a post-holiday story
An online store makes its consequential decisions about where to sell, what to stock and who ships it. Each one carries inventory that cannot easily be returned and fees that only show themselves once the volume arrives.
Margin lives after the sale
Revenue is the least informative number in ecommerce. What matters is contribution per order after product cost, payment fees, marketplace commissions, fulfillment, returns and the advertising it took to win the sale. Two channels with the same revenue can differ by ten points of margin once those are counted.
Returns deserve particular care. In categories such as apparel and footwear a large share of orders comes back, and each return carries shipping both ways, handling and often a markdown. A channel that looks profitable before returns can lose money after them, and the difference rarely appears in the first month.
The questions behind a new channel
Adding a large marketplace looks like extra demand. Some of it is, and some is your existing customers moving to a place where you pay a commission on every order. The evidence that settles it is a limited test with a comparison period: list a narrow range, watch direct sales over the same weeks, and measure how much moved rather than arrived.
Private label and fulfillment choices have their own traps. A private label line improves margin on paper while adding minimum order quantities and the risk of unsold stock. Handing fulfillment to a single partner simplifies operations and concentrates them, and one bad peak week at one warehouse can cost a season of goodwill.
A channel decision, argued
The Decision names the options plainly: add the marketplace, stay direct, or test one category for ninety days. Each has its own Champion. The Challenger presses on cannibalization and on the commission that compounds with every repeat order.
Inspector keeps last season's results in their place, as evidence about last season and not a forecast of the next. Red Teamer runs the peak week when the fulfillment partner misses its cut-off. The Judge weighs stock you cannot send back as seriously as margin, and the Verdict states the test result that would change its mind.
Who decides, and when to skip the room
Small choices, such as a discount code or a new product photograph, are better run as quick experiments. Bring to a Decision Room the choices that lock in stock, contracts or a fee structure for a year or more. The Verdict is analysis, and the Human Decision belongs to the owner or the team who will live with the inventory.
Listing on a marketplace
A brand selling direct at an average order of $80 earns about $22 of contribution per order. On a marketplace with a 15 percent commission and a $6 fulfillment fee, the same order earns about $10 before any advertising on the platform. The marketplace is forecast to bring 1,200 orders a month. If a third of those come from customers who would have bought direct anyway, the brand gains 800 new orders at $10 and gives up $12 on each of 400 moved orders, a net gain of about $3,200 a month. The engine finds the turning point: once moved orders pass about 45 percent, the channel loses money. The Verdict favors a ninety day test on two categories and names that share as the figure to watch.
Questions
- How do we tell new demand from moved demand?
- Run a limited test against a comparison period. Watch direct orders, repeat purchase rates and searches for your brand name during the test, because movement shows up there before it shows up in total revenue.
- Should returns be a separate criterion?
- For categories with heavy returns, yes. Give returns a weight of their own so a channel with a high return rate cannot hide behind its gross sales.
- Can the room forecast our holiday sales?
- The room can work through the figures you provide and label a forecast as a forecast. Last year's peak is evidence about last year, and the record keeps that distinction visible.
Further reading
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