E-commerce Profitability: Challenges and Solutions for Retailers

As e-commerce cements its role as a primary channel for retail, the promise of digital growth is often tempered by a persistent challenge: profitability. While online sales continue to rise and consumer expectations for seamless digital experiences grow, many retailers find that their e-commerce operations lag behind brick-and-mortar in terms of margin and overall financial performance. Understanding the root causes of these challenges—and the most effective solutions—is essential for retail leaders seeking to optimize their digital investments and secure sustainable growth.

The Profitability Challenge in E-commerce

Despite the surge in online shopping, a significant proportion of retailers report that their e-commerce businesses are less profitable than their physical stores. Nearly half of decision-makers with both e-commerce and brick-and-mortar operations acknowledge that their digital channels underperform in terms of profit. For some, e-commerce is not just less profitable—it actively drags down overall margins. This is especially pronounced among the largest retailers, where scale does not always translate to digital efficiency.

Several factors contribute to this profitability gap:

Knowing What to Do—But Struggling to Deliver

Most retail leaders are acutely aware of what’s needed to improve e-commerce profitability. However, identifying the right investments and executing them effectively are two different challenges. While nine in ten decision-makers claim to know the necessary steps, nearly half struggle to secure the resources or organizational alignment to deliver on these priorities. The pressure to rapidly scale digital capabilities during the pandemic often led to suboptimal implementations, leaving many retailers with fragmented systems and processes that now require refinement.

Critical Investment Areas for E-commerce Profitability

Publicis Sapient’s research highlights three investment areas as most critical for improving e-commerce profitability:

1. Digital Customer Experience

A seamless, holistic digital experience is the top priority for retailers aiming to boost profitability. This includes:

2. Omnichannel Commerce

Retailers recognize that the future is not online or offline, but both. Key focus areas include:

3. Supply Chain Modernization

Profitability hinges on the ability to fulfill orders quickly and cost-effectively. Leading retailers are:

Practical Recommendations for Retailers

To close the profitability gap in e-commerce, retailers should consider the following actions:

The Path Forward

E-commerce profitability is not an unattainable goal—it is a matter of strategic focus and disciplined execution. By investing in digital customer experience, omnichannel commerce, and supply chain modernization, retailers can unlock new efficiencies, delight customers, and drive sustainable growth. The most successful organizations will be those that bridge the gap between knowing what needs to be done and having the resolve and agility to make it happen.

At Publicis Sapient, we partner with retailers to navigate these complexities, harness emerging technologies, and deliver people-first commerce that drives results. The future of retail is digital, omnichannel, and profitable—for those who are ready to lead the way.