Understanding true profitability in ecommerce and the role customer experience plays

Profitability in ecommerce is more complex than ever, and it’s no longer just about the margin between the cost of goods sold and the sale price. You now have to understand the complete picture, taking customer acquisition costs, operational overheads, returns, discounts, and the long-term value of customer relationships into account. Without this all-encompassing view, businesses risk making decisions based on incomplete data and jeopardising sustainable growth.

This was the topic up for discussion at a recent UPPER CLASH roundtable event, where retail leaders came together to discuss this challenge, focusing on how to measure true profitability in a way that reflects real drivers of growth and accounts for the full spectrum of business costs.

The ROI Tightrope: Balancing spend with long-term value

One of the key themes that emerged from the discussion was the difficulty of balancing short-term ROI with long-term profitability. Many attendees found it difficult to justify long-term investments (that had the potential to increase long-term profitability) with the need to show returns quickly in environments where performance is judged within a tight financial period.

This tension is then compounded by the complexity of measuring profitability itself. Should it be measured at the product, purchase or customer level? Each offers a different perspective, but none are complete without factoring in the total cost of customer acquisition, which goes well beyond ad spend to include everything from agency fees, discounts, returns, packaging and more.

Profitability starts with Customer Lifetime Value

To better understand profitability, many agreed that businesses should shift their focus to the customer level and develop a clear, data-driven view of customer lifetime value.

While CLV will look different for every organisation based on what products they sell, knowing the longer-term value associated with a customer – be that over 6, 12 or even 36 months – can support more sustainable business decisions and provide a framework for tracking profitability over the longer term.

Having this long-term view then enables businesses to justify longer-term investments in customer experience, retention strategies, and technology that may not pay off immediately but are essential for future growth.

Customer experience as a profit lever

Another key theme was that customer experience is a key lever for profitability. Seamless, thoughtful experiences reduce returns, increase repeat purchases, and improve customer lifetime value – all of which have a positive impact on long-term profitability.

Investment in customer experience, therefore, needs to be strategic, and technology should be chosen its ability to align with business goals and existing capabilities rather than novelty.

This is where Inviqa’s expertise in experience design and software engineering plays a critical role. By grounding UX design decisions in evidence-based research and aligning technology decisions with real business needs and capabilities, Inviqa helps organisations create digital experiences that are intuitive and align with customer needs and behaviours. 

This approach also helps avoid common pitfalls like the one shared by an attendee who invested in a sophisticated search tool that ultimately failed – not because the tool itself was bad, but because the team lacked the resources and expertise to configure it properly. 

This experience also highlights the importance of getting the basics right, like a well-functioning website and a solid data strategy, before layering on more advanced or experimental features.

Simplify complexity with the right tools

Ultimately, organisations need to invest in tools, processes and experiences that simplify complexity, not add to it. Martech and analytics platforms should help teams connect the dots between acquisition cost, customer intent, and lifetime value to support gaining a clearer, more actionable picture on profitability, while the overall customer experience needs to be designed around making the journey to purchase intuitive and friction-free.

How Inviqa can help

At Inviqa, we help ecommerce businesses simplify the complexity of profitability by delivering solutions that enhance customer experience and integrate data across digital channels.

Our engineers and technology experts can help you identify which technology platforms will actually support business growth, while our experience design team uses research-led methods to ensure every digital touchpoint is aligned with customer expectations, helping reduce friction, increase loyalty, and drive sustainable growth.

From seamless website journeys to unified data systems, we support businesses in making smarter, more profitable decisions. Explore our work with brands like N Brown, Talkmobile and Arsenal to see how we’ve helped them improve cross-channel experiences and deliver business growth.