Profitability of online shops - what influences it?

E-commerce is a rapidly growing economic sector worldwide. According to statistics, in 2021, the global e-commerce market was worth around $4.5 trillion, and forecasts suggest that this value will continue to grow in the years to come. The profitability of online shops can be affected by several factors. Let's take a look at some of them:

1. Product range availability: One of the key factors influencing the profitability of an e-shop is the wide selection of products. Customers appreciate being able to find everything they need in one place. E-shops should therefore ensure that their assortment is diverse and that their offer is regularly updated to meet customer expectations.
2. Quality customer service: Excellent customer service builds loyalty and encourages customers to buy again. Therefore, online shops should provide easy access to product information, fast and friendly service, and flexible return and complaint policies. Good customer relations contribute to increasing loyalty and gaining positive recommendations, which directly impacts profitability.
3. Transaction security: Security is a vital issue for customers shopping online. Online shops should provide secure payment methods, use data encryption protocols and protect the privacy of their customers. A lack of trust in the shop can affect conversions and ultimate profitability.
4. Website optimisation: Website loading speed and responsiveness are paramount to users. Studies show that longer loading times lead to more abandoned shopping carts. Therefore, online shops should technically optimise their pages to ensure users' smooth and convenient experiences.
5. Marketing strategy: an effective marketing strategy is key to attracting customers to your online shop. You should invest in online advertising, build a social media presence, email campaigns and use remarketing strategy. Monitoring performance and analyzing data to adapt the process to customer preferences and behaviour is also essential.
6. Logistics and delivery: Fast and reliable delivery is one of the most critical factors for customer satisfaction. Online shops should handle efficient logistics, including effective warehouse management, skilful packaging of goods, and cooperation with reliable courier companies. Free delivery or low shipping costs can also attract customers and increase profitability.

The growth of the e-commerce market can be observed worldwide in both developed and developing countries. The COVID-19 pandemic has further accelerated this trend, increasing the number of people using online shopping. The global e-commerce market is now estimated to be worth more than $5 trillion, and forecasts suggest further growth in the coming years.

The future of e-commerce seems promising, especially with the development of technologies such as artificial intelligence, augmented reality, and the Internet of Things. Online shops will look to personalize their offerings further, improve the shopping experience, and use analytics data to target customers effectively.

What areas of e-commerce are supported by data analytics and Power BI?

Anyone running an online shop knows that analysing site traffic or user behaviour data is essential for growth. Based on the data collected, we can:

· Identify sources of traffic to the online shop,

· Know the demographics of customers - age, gender, location, hours of activity,

· Select the most effective communication and promotion channels,

· Identify the products that generate the most profit for our e-business,

· Find the cause of basket abandonment.

To analyse the data correctly, it is crucial to aggregate and segment them appropriately. This is where Power BI comes in, which allows you to gather all the data about your online shop in one place and analyse and visualise it appropriately in the form of clear and interactive reports. Moreover, using Power BI, the aggregated data is available to everyone in the company, regardless of location and time.

Microsoft Power BI is a business intelligence tool that will take data analytics in your online shop to a new level.

Thanks to the Power BI service, they are available in one place regardless of location and time, and by using Power BI Mobile also from mobile devices.

Power BI lets you combine information from multiple sources - databases, files, folders, Azure, or web services. Report creation is fast and intuitive, and reports can be freely modified and shared with other users.

What data in your online shop will Power BI help you analyse?

1.      Sales and margins - analysis of price levels and sales of goods (also per SKU), market share, and competitive analysis. Power BI provides real-time insight into sales data for individual categories or brands.

2.    Inventory - Power BI helps analyse inventory and performance indicators, including those relating to deliveries, which allow inventory management optimisation.

3.    Marketing - website traffic, sources of hits, activity on social channels, the effectiveness of promotional campaigns - the Power BI system analyses all this data and, thanks to its ability to visualise the impact of marketing activities on the e-shop, help make business decisions.

4.    Finance - the analysis of cash flow, receivables, and payables gives managers a constant overview of the company's financial situation and enhances their ability to respond to crises.

Why is data analysis in e-commerce so important?

Data analysis in e-commerce is fundamental for several reasons:

1. Understanding customer preferences and behaviour: Data analysis in Power BI allows online shops to gain an in-depth understanding of their customer's preferences and behaviours. This enables you to tailor your offerings to your audience's expectations and personalise the shopping experience. The data can also identify trends, popular products, and preferred communication channels, helping to make effective business decisions.
2. Optimisation of marketing activities: Data analysis allows online shops to optimise their marketing activities effectively. Based on the data, the effectiveness of advertising campaigns can be monitored, the most effective channels and messages can be identified, and promotional strategies can be adapted to customer preferences. Data analysis also enables segmenting customers and creating more targeted and personalised marketing campaigns.
3. Improving the sales and customer service process: Data analysis in Microsoft Power Bi also allows you to identify sales and customer service weaknesses. Conversions, average order value, delivery time, and other metrics can be analysed from the data to optimise business processes. Online shops can also analyse customer service data, such as response times and customer satisfaction, which helps to improve service quality.
4. Forecasting and strategic planning: Data analysis allows for forecasting and strategic planning. Based on the data, market trends can be predicted, seasonal changes in demand can be identified, past sales performance can be analysed, and based on this, decisions can be made regarding orders, product mix, marketing, and other business areas. Data analysis allows you to make more rational and fact-based business decisions.

The insights derived from Power BI data analysis in e-commerce are precious for online shops, as they allow them to understand their customers better, adapt their offerings to their preferences, optimise their marketing activities, improve sales and customer service processes, and plan strategically. With data analytics, online shops can operate more efficiently and compete effectively in the e-commerce market.

Correct data analysis in Microsoft Power BI gives you a global view of your online shop's health and helps you make sound business decisions. If you want to implement a Power BI system in your e-shop, please do not hesitate to contact us. We will be happy to prepare a dedicated solution for your company.