E-commerce direct marketers who use multi-channel integrated marketing dramatically increase their chances of generating profits and surviving the growing dotcom shakeout, according to a study by McKinsey & Co and Salomon Smith Barney.
The study found that the race to gain market share led many marketers to lose sight of the bottom line, thus losing money on each sale. First-quarter sales were below the cost of acquiring and distributing goods, the study claimed, citing loses ranging from $2 to $12 per order.
“The notion of a `pure play’ is turning out to be the wrong play,” said Joanna Barsh a direct at McKinsey & Co in a statement.
However, online retailers can still show a profit on each sales if the increase the average order size, keep discounting to a minimum, and sell higher-margin products.
The McKinsey/Salomon Smith Barney E-tail Economic Study focused on specific sectors within five industries: groceries, online retail, prescription drugs, specialty apparel, department store apparel, direct mail apparel, pure-play books, off-price apparel, pure-play toys, and pure-play apparel.