Daniel Loughlin: KPIs and benchmarks help, but e-commerce data is still in its infancy

In retail, a customer opens a door and enters a store, whereas on the Internet, they land on a website. It is on the cost side that the Internet is completely different from retail.

It’s free for a customer to walk through the door, but online retailers actually have to pay for traffic or the number of visitors to their website. They use services to drive traffic, such as Google PPC (pay per click), Facebook, and TikTok, which are often unknown. It’s this variable cost of traffic that can cause serious problems for online retailers.

Sure, companies like Amazon approach everything in terms of pure profit, but SMEs have failed to develop a solid profit-based accounting framework, which works against them.

Like everything else in 2024, the answer is data. E-commerce needs a set of basic data standards across the board, but especially in accounting and attribution. Data standards have never been applied to e-commerce, and this is a bigger problem than it first appears.

Without common measurement standards and benchmarks, there is no easy way to compare and understand what is good or bad. Most industries established standards early on, but perhaps because e-commerce is all about selling goods, no universal standards have emerged.

For our own merchants, IRP works to fill the gaps with our data. We publish e-commerce market data monthly on growth, traffic spend, channel performance, conversion rates, agency efficiency, and more.

Taking this a step further, we have compiled and published the Northern Ireland E-commerce Benchmarks for 2023 in a consumable format to help deliver KPIs for e-commerce retailers in Northern Ireland.

From this data collection we found that the average IRP seller in Northern Ireland had a year-on-year increase of 11.29%, with 60% of sales being to the UK. Exports accounted for 40% of sales, with Ireland being the number one destination and the US the number two.

Merchants reported sales to over 100 countries, with e-commerce goods shipped directly from Northern Ireland. The average order value was £106.39. Website session conversion rates ranged from 0.65% to 5.46%, with an average conversion rate in Northern Ireland of 1.78%.

Traffic spend largely dictated a retailer’s net profit margin. Google PPC alone accounted for 51% of retailer sales based on last-click attribution. Google PPC remained by far the most important traffic channel. Email was the second-largest traffic channel, with 9% of sales coming from email. Interestingly, Facebook didn’t rank high for e-commerce, coming in sixth on a last-click attribution basis, with just 1.36% of sales.

Revenue per visitor was £1.46 – and mobile continued to grow, accounting for 62% of sales. Devices continued to vary significantly across markets, but most markets are now clearly mobile-first, especially fast-moving consumer goods (FMCG).

Perhaps the most interesting and important of all was the cost. The IRP noted that merchants in Northern Ireland paid £7.78 in traffic costs for every £100 of sales. That’s an average of 7.78% CPA (cost of revenue). After all overheads, refunds and all other operating costs, merchants reported that they were targeting an 8% net profit margin for a successful year of online trading.

These KPI findings mainly include data at the individual retailer level to provide benchmarks. They also briefly refer to data at a macroeconomic level. Our data also showed that 90% of sales by retailers in Northern Ireland were shipped outside Northern Ireland.

With a GVA of over £6 billion, does Northern Ireland have a greater economic opportunity in e-commerce? Perhaps, but only if e-commerce is recognised as an export and regional trade.

While KPIs and benchmarks help, IRP believes that, like AI, data is in its infancy in e-commerce. We predict that in the next two to three years, e-commerce will become an industry built on data standards, and success will be measured in profit. This is long overdue.

Daniel Loughlin is the founder of IRP Commerce, an e-commerce platform provider