How Much Is Too Much to Spend on E-Commerce?
We’re well into the e-com boom and it seems like e-commerce has turned into the gift that keeps on giving — or has it? To be sure, e-commerce has become a non-negotiable part of running a successful brand. Amazon is the first place many customers will look to find out more about your product, and holding strong in the competition without selling on multiple channels? Forget about it. One way or another, the ROI on moving to e-commerce is almost always net-positive.
All things in moderation, though. While it’s important — and even necessary — to spend on e-commerce, there’s always such a thing as too much. How much e-commerce spending is too much?
As you might expect, there isn’t an easy or singular answer. Every brand has its own unique budgeting needs. That being said, there are certainly ways to get an idea of how much to spend, and signs that show you might be spending too much. Let’s take a look.
How much to spend
As it tends to go with e-commerce, it’s the same old story in a new book. How would you decide how much to spend in any business model? By drawing up a budget, of course. We won’t get too far into the details here, but how is budgeting for e-commerce costs any different than the budgeting we’re already used to?
In short, it’s about recognizing the new characters in this new book. You’ve had to manage product information before, but not across this many channels. You’ve had to sell the customer on the product before, but “seeing is believing” is a whole different game from behind a screen. Many, if not all, of the elements of a well-constructed e-commerce spending budget will look familiar, but they’ll be just different enough to warrant new approaches, new tools, and different budget allocations. Same story, new book.
Fortunately, modern problems require modern solutions, and modern solutions are met with modern tech. While the game has changed just enough to warrant new strategies, brands aren’t left to take shots in the dark — at least not anymore. New and powerful tools show up on the scene every day, providing much-needed guidance and support in this constantly developing market.
Signs of overspending
While there’s no hard number for “how much is too much,” there are signs that you might be overspending — or at least, spending too much in the wrong places. The main theme will be that the numbers don’t match up. Maybe you have great engagement on Twitter and Instagram, but you have way too much inventory left over at the end of the day.
Social media marketing has become an incredibly important aspect of a successful modern brand, but if engagement isn’t translating to sales, something is getting lost along the way. You might be spending too much money on social when something else needs your attention — what’s the good of a great social media presence if it doesn’t pay off?
Another thing to consider is that, by the nature of e-commerce, there’s going to be a lot of noise to deal with. A lot of data from enriched product listings for sure, but also a lot of work having to do with how and where things went wrong when they did. You’re going to have to spend more on digital marketing (targeted ads, social media campaigns, etc.), but if this doesn’t translate to sales, how can you know what the problem is? At a certain point, diminishing returns has got to be the answer, but even before that point, you could still run into problems.
An incredibly important thing to analyze, especially for e-com brands that can’t seem to turn their marketing campaigns into sales, is the buyer journey. Maybe your marketing campaigns are actually working really well, but potential buyers get lost on the way to the checkout button. Seeing where traffic is heavy and where it’s light on your site can be incredibly important insights into where the problem is and, significantly, where you might be spending too much money (and where that money might be put to better use).
As much as it’d be nice to have a concrete number or a simple formula to decide whether or not your e-commerce spending is “too much,” things just aren’t that simple. What is simple, though, is that numbers don’t lie. If you run the numbers and something looks funny, it’s probably because something is funny. With proper analysis and the right tools, if you follow the numbers, you’ll likely find your problem.