Is Ecommerce Still Profitable in 2023? We’ve Checked the Facts
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These days, it seems everyone is in ecommerce. In 2021, retail ecommerce sales amounted to over 5 trillion US dollars. And, by 2026, that figure is expected to grow a whopping 56% – reaching over $8 trillion*.
That’s a lot of money. But that, of course, includes all the sales done by huge online retailers – the Amazons and Alibabas of the world – not just the smaller, “average joe” businesses.
Which begs the question: Is ecommerce still profitable for the ordinary online business?
We checked the facts to find out. Below, we’re exploring the ecommerce landscape: unpacking its challenges, trends, and most profitable product opportunities. We dive deep into what a good ecommerce profit margin is, and address that trillion-dollar question…
Is ecommerce profitable in 2023?
The Ecommerce Landscape
To say the ecommerce landscape has grown in recent years is, well… a wild understatement.
It skyrocketed. It’s ballooned. It’s blown up – in the best kind of way.
With advancements in technology and internet connectivity – not to mention the meteoric rise of mobile devices as a way of shopping online – ecommerce is becoming easier and more accessible than ever before. With AI’s impact on the sector only set to rise – and the shopping and customer service processes becoming more personalized and customizable – the game has changed. (And is still changing!)
Of course, it’s impossible to talk about ecommerce – and answer the question “is ecommerce still profitable?” – without mentioning COVID-19 in the same breath.
The pandemic had a huge impact on our lives, and ecommerce: with consumers, unable to turn out at the brick and mortar stores of their local high street, turning instead to shopping online.
An Adobe Analytics report showed that, during the 2020 holiday season, online sales increased by a staggering 32.2% compared to the previous year – reaching a total of $188.2 billion. But the pandemic didn’t just increase our appetite for online shopping – it diversified it.
The global COVID-19 outbreak accelerated the world’s adoption of new ecommerce technologies, including:
- Curbside pickup
- Contactless payments
- Virtual try-on tools
What that meant? That businesses with little previous interest in dipping their toe into the world of ecommerce no longer had a choice.
Ecommerce had arrived, and the stage was set for it to grow and thrive.
It hasn’t disappointed – but, even in 2023, the industry still faces challenges.
Ecommerce Challenges in 2023
If you’re asking “Is ecommerce still profitable” then you’re probably aware that running an ecommerce business isn’t all smooth sailing. What are some of ecommerce’s biggest hurdles in 2023? Let’s take a look:
- Rising costs: inflation, supply chain disruptions, and changes in government policies are all factors threatening to add to ecommerce’s burgeoning tab. With the costs of shipping, managing inventory, marketing, and website maintenance already putting pressure on profit margins, ecommerce isn’t getting any more affordable.
- More competition: ecommerce’s growth – and potential for profits – hasn’t gone unnoticed. That means more entrants into the market, more competition – and more impetus for even the most established, entrenched ecommerce businesses to innovate.
- Higher return rates: in ecommerce, return rates hover at around the 20 to 30% mark – about two to three times higher than with in-store purchases. With more shoppers shifting to ecommerce, this rate will only rise – placing a responsibility on businesses to find ways of managing returns efficiently and cost-effectively.
- Cybersecurity threats: ecommerce businesses rely, of course, on technology and online transactions – which involve sensitive customer cardholder data – to function. This makes them vulnerable to threats such as data breaches, hacks, and phishing attacks, meaning good ecommerce security is a necessity.
Ecommerce Trends in 2023
In 2023, ecommerce poses challenges – but it also presents opportunities.
To be able to capitalize on those opportunities, though, you’ll first need to get to grips with the trends and follow the latest ecommerce best practices. This year, four of the biggest trends are:
- AR (Augmented Reality) integration: this technology’s already being used by many online sellers (such as ASOS and L’Oreal) to allow shoppers to “try on” clothes and makeup virtually – without having to be in a physical brick and mortar store.
- Voice commerce: voice assistants (such as Amazon Alexa, Google Assistant, and Apple Siri) are continuing to grow in popularity. For sellers, that means you need to optimize your website experience to enable your customers to make hands-free purchases.
- Personalization: more than ever, online shoppers crave – nay, expect – a personalized shopping experience. Whether that’s tailored product recommendations, targeted deals and discounts, or a shopping experience customized to their needs, personalization is king – and your store needs to be equipped to provide it.
- Sustainability: the environment (and the ecommerce industry’s impact on it) is becoming more important to customers. So ensure you’re selling sustainable products, and working with eco-friendly suppliers. The more you can put eco-friendly processes in place, the more you’ll resonate with an increasingly value-oriented audience.
What’s a Good Ecommerce Profit Margin in 2023?
To this question, there’s no “one size fits all” answer. What a good ecommerce profit margin looks like for your business will depend on your industry, what you sell, who you sell it to, and your ecommerce business model.
In terms of specific percentages, the NYU Stern School of Business puts a good gross margin figure for online retail at around 45%. Other sources place this number between the wide range of 20% and 50%; for yet others, it’s between 50% and 70%.
Sounds daunting, we know! But realistically, even a profit margin of 10 to 20% is good. In our own guide, for example, we call a 10% profit margin “average” and a 20% margin “very good” – so it’s all subjective.
Plus, it’s best not to dwell too much on your margin alone, and think about the bigger picture – conduct an ecommerce valuation to know how much your business is worth overall. After all, you still have the profile of your website and brand to consider – they’re worth something, too!
Profitable Ecommerce Products
Every year, the most profitable ecommerce products to sell change. The best high margin products fluctuate with trends, with technology, and with the ebbs and flows of the public’s mood.
Of course, it’s important – whether you own an established ecommerce business already, or are thinking about setting one up – to know which products these are. With this knowledge, you can take advantage of what’s hot now – and set your online store up for success.
In 2023, the most profitable ecommerce products are:
- Sustainable and eco-friendly products: including home goods, beauty products, cleaning supplies, and clothing.
- Technology products: such as smart home devices, wearables, phones, and TVs.
- Personalized products: including skincare, clothing and accessories, and home decor.
- Pet products: food, toys, and grooming supplies for pets will continue to be popular – lots of people adopted pets to keep them company during the pandemic, after all!
- Health and wellness products: another COVID-19 inspired industry, health and wellness came to the fore when people weren’t able to leave their homes to work out. And we expect fitness equipment, supplements, and healthy food and drink options to remain highly sought-after going forward.
Summary: Is Ecommerce Profitable in 2023?
So – is ecommerce still profitable in 2023?
The answer is a resounding yes.
Even if you set the bar low (by many standards, a 5% profit margin is still a decent return!), ecommerce still offers the chance to make serious money. However, there are several things you can do to give yourself an even better chance of succeeding in ecommerce:
- Research the ecommerce landscape
- Understand ecommerce’s biggest challenges in 2023
- Get to grips with the latest ecommerce trends
- Explore which ecommerce products are most profitable right now – and going forward
Fortunately, we’ve recapped all these points for you in the article above! But, if you need even more free, friendly ecommerce advice, we’ve got you covered. Check out our guide to the best ecommerce website builders, and also read our article on what an Ecommerce website is.
To learn more about the burgeoning role of AI in ecommerce, explore our dedicated guide.
For more of the ecommerce statistics you need to know about in 2023, dive into our comprehensive roundup.
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