eCommerce Revenue Loss: Examining Common Causes

eCommerce is growing remarkably and estimates project that by 2040 it will drive 95 percent of international purchases. Intense competition best describes the current landscape as merchants across industries try to grab their market share.

Much information and advice exist for merchants on growing sales and revenue to enhance eCommerce profits. However, there’s little focus on what eats into eCommerce bottom lines and derails their growth goals.

This article explores the common causes of eCommerce revenue loss and suggests actionable ways to prevent it.

Here are some common causes of revenue loss in eCommerce

1. Suboptimal shopping experience

An unsatisfactory shopping experience at a brick-and-mortar store compels customers to not spend or return for shopping. So does an unintuitive online shopping experience.

As a practice, most eCommerce merchants spend significantly on grabbing customer eyeballs through various marketing and promotional efforts. However, they often need help to convert their prospects. Estimates suggest that the global eCommerce conversion rate stands at about 2.17 percent.

It’s noticed that if the user journey is unintuitive or complicated, online shoppers don't receive it well. Friction during navigation, insufficient information, or a lengthy checkout process makes users lose interest. Slow site speed also upsets customers and a loading time increase on mobile devices from 1 to 3 seconds increases the webpage bounce rate by 32 percent.

How to prevent it?

Pay strong attention to your eCommerce store's UI-UX and make the shopping experience as seamless as possible. When building your online store, invest the required attention to the backend and ensure quick site speed by minimizing code and using proper content delivery modes.

Research suggests that apps have a 300 percent higher conversion rate when compared to mobile websites, making them a potential area to explore.

Moreover, with increased competition, personalization is an excellent way to stand out and increase conversions. As a merchant, you can learn more about your target customers through data analysis tools, user experience analytics platforms, customer data collection, and customer service feedback. This information can help you drive strategic Conversion Rate Optimization(CRO) efforts.

2. Post-shipment losses

When selling physical goods online or offline, there's always a risk of good damage, misplacement, or theft. Such risks increase in eCommerce post-shipment.

Improper packaging often damages goods and results in irreversible losses. It also increases the chances of theft during shipping. Moreover, delays in shipment without proper customer tracking often invite returns, refund requests, and chargebacks, causing monetary losses to merchants.

How to prevent it? 

Invest in proper packaging to minimize shipping-related losses. Some ways include using the correct box size and filling empty spaces to prevent damage and also keep shipment costs in check. Further, attach fragile labels wherever necessary to improve handling. Whatever your shipping policy, keep your customers updated on any changes to avoid misunderstandings and prevent avoidable payment disputes. Finally, in case of repeated shipping concerns, study your shipping data deeply to identify and address the root cause of the problem.

3. eCommerce fraud

eCommerce fraud comes in many forms and is among online merchants' prime causes of revenue loss.

Transaction fraud arises when fraudsters purchase online with stolen credit cards. When the actual cardholder notices a questionable transaction, they tend to file chargebacks that cost merchants in terms of lost revenue and chargeback fees.

Friendly fraud occurs when the original cardholder is the one making the purchase. They may accept the goods and request a chargeback due to memory loss, opportunistic behavior, or even malicious intent.

Then, there are also more sophisticated frauds. For example, triangulation fraud involves a legitimate buyer, seller, and a fake online store run by fraudsters with access to stolen card details.

Estimates suggest that eCommerce fraud numbers have skyrocketed by 70 percent during the pandemic, making it a significant concern for merchants. While stopping all eCommerce fraud is a utopian thought, managing it is necessary to reverse revenue loss.

How to prevent it?

Work with a dependable payment processor that automatically detects suspicious transactions as they occur. Fraud protection tools also help to identify fraud before it happens.

For disputed customer transactions, use robust chargeback mitigation solutions to reverse the possibility of lost revenue and chargeback fees. Using the right tools can protect you from risks and help you focus better on growing your business.

4. Mistakes in compliance

While eCommerce diminishes national and international borders for selling goods, it often raises compliance concerns. For example, the taxation rules often vary when selling across different states or countries. Thus, sales tax is a common issue facing eCommerce stores, and merchants are often penalized for compliance violations.

How to prevent it?

As an eCommerce merchant, make sure you're aware of the taxation laws where you're operating. Use specialized software to automate your tax calculations to simplify the task and ensure accuracy. Relying on a seller of record is also a good idea. They support their clients as financially liable entities.

5. Improper customer service

Suboptimal customer service annoys most customers - whether pre-purchase, during consideration or after-sales. Customers avoid purchasing from a seller due to poor customer experience. Moreover, annoyed customers also impact future conversions by creating negative word-of-mouth publicity. Research estimates that 62 percent of customers are quick to share their negative experiences with others.

How to prevent it?

Pay attention to providing excellent customer service. A report by Bain and Company outlines that improving customer service and experience can increase revenues between 4 to 8 percent.

Some ways to do that include providing clearly outlined customer support information and explicit cancellation and return options. You may use intelligent chatbots alongside email and call-based support to answer customer queries promptly. Moreover, now is the age of personalization. Delight customers with custom experiences to gain an extra edge, as 67 percent of customers are happy to pay more for a better experience.

Identify and address revenue loopholes

Sustainable eCommerce growth is a combination of enhancing revenue directly while also blocking the bottom line leakages. Preventing eCommerce revenue loss requires pausing and analyzing the key cost centers and revenue loss contributors. Then, with that knowledge, you need to take action to reverse those trends.

It always helps to use specialized services to manage risks and reduce the possibilities of losses. After all, time is a scarce resource, and you should focus on your core strengths to grow instead of working on damage control.

Justt offers a comprehensive success-based solution that simplifies preventing and fighting chargebacks. We achieve this by utilizing a combination of artificial intelligence and industry expertise. Contact us to learn more about streamlining your operations and reclaiming revenue losses or read more on our blog.