Many companies, whether small, medium, or large, venture into e-commerce with the expectation of making significant profits quickly and with minimal effort. In some cases, they experience initial success: they start selling, their revenues grow year after year, and they even manage to generate profits.
The real challenges arise when companies attempt to scale their digital business. Moving from an initial revenue of 1–3 million euros to 5, 10 million, or more requires specific skills, tools, and strategies that cannot be improvised.
At this stage, many companies seek the help of an e-commerce advisor to take the next step. This has also been my experience working with brands such as Twinset, Woolrich, and 7 For All Mankind. In each of these cases, e-commerce growth eventually slowed down: revenue stopped increasing while costs continued to rise, affecting the profitability of the online channel.
This is a common scenario because companies invest in technology, expand their online product assortment, and hire staff to enhance customer service. However, these investments must be accompanied by proportional sales growth to maintain profitability.
Why do sales stop growing?
The primary reason often lies in digital marketing activities. The initial success of fashion brands in e-commerce is typically driven by existing brand awareness, which brings in a sufficient volume of qualified traffic to generate a solid number of sales.
For example, when a brand launches its e-commerce, it typically runs branded keyword campaigns on Google, purchasing search terms that combine the brand’s name with generic keywords. This strategy works until there are no more branded keywords to buy, at which point e-commerce growth stalls.
To continue growing, brands must either wait for organic brand awareness to increase or implement new strategies to generate traffic and sales.
How to improve e-commerce performance
The first step in overcoming stagnation is to analyze weak points and take action to improve performance. Optimizing the entire e-commerce value chain, from product assortment and stock availability to customer experience and user interface, is essential. Key areas to focus on include:
Product & Sales
- Assortment & Stock
- Visual Merchandising
- Photography
- Product Information
Commercial Strategies
- Promotions & Sales Events
- Loyalty Programs
- CRM & Newsletters
- Personalization & Rewards
Logistics & Customer Service
- Shipping & Returns
- Service Levels
- Localization & Payment Methods
User Experience & Technology
- Site Speed & Mobile Optimization
- Apps & Digital Enhancements
In-house vs. outsourced activities: making the right decision
Deciding which activities to manage internally and which to outsource is one of the most critical choices in an e-commerce project. While outsourcing might seem like the easiest solution, it can significantly impact profitability. In some cases, excessive outsourcing can even render the e-commerce channel unprofitable.
When a company entrusts e-commerce management to an external provider, the provider typically takes a percentage of net revenue. While this incentivizes them to increase sales, it does not necessarily align with the merchant’s goal of maximizing profitability.
Finding the right balance between in-house and outsourced activities
Some activities are almost always outsourced due to the economies of scale required to make them efficient. For example:
- Shipping: Most e-commerce businesses rely on carriers like UPS or DHL, as only giants like Amazon manage logistics internally.
- Payment Services: Companies typically use third-party providers like PayPal or Stripe for payment processing.
- E-commerce Platforms: Businesses usually purchase or lease solutions from providers like Shopify or Salesforce.
However, the decision to keep or outsource certain functions becomes more complex for activities such as:
- Product photography and descriptions
- Online store management (e.g., promotions, content updates, performance monitoring)
- Customer service (especially for global operations requiring multilingual support)
Outsourcing these functions can provide access to specialized expertise but may also delay the development of internal capabilities. Moreover, excessive reliance on third-party providers can generate high costs that reduce profitability.
As companies grow, they may find themselves needing to build an internal digital team to manage and coordinate external suppliers. This can lead to duplicate costs, as companies end up hiring staff to oversee outsourced activities.
The most efficient organizational approach
From my 15+ years of experience in the industry, I have found that the most efficient approach is to keep strategic and core activities in-house while outsourcing functions that require specialized technical skills or market-specific knowledge.
For example, running a 24/7 global customer service operation requires linguistic and cultural expertise, along with the flexibility to handle seasonal demand fluctuations. Maintaining this function in-house is often inefficient. In such cases, outsourcing provides the necessary flexibility without compromising profitability.
Conclusion
Finding the right balance between in-house and outsourced activities is essential for achieving both flexibility and profitability in e-commerce. Companies must carefully assess their core competencies and determine where external expertise can add value without eroding margins. By making informed decisions, businesses can build a scalable and profitable e-commerce operation in the long term.
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