As e-commerce cements its role as a primary driver of retail growth, the challenge for retailers is no longer just about scaling digital sales—it’s about making those sales profitable and sustainable. While digital channels have unlocked new opportunities for customer engagement and revenue, many retailers are finding that e-commerce is less profitable than their traditional brick-and-mortar operations. To move beyond growth-at-all-costs, retail leaders must focus on optimizing margins, modernizing operations, and delivering seamless, customer-centric experiences across every channel.
Despite the surge in online shopping, profitability remains elusive for many retailers. Nearly half of decision-makers with both e-commerce and physical stores report that their digital business is less profitable than their in-store operations. A significant portion also say their e-commerce channels are below profit targets or even hurting overall profitability. This gap is especially pronounced among the largest retailers, who often face higher costs for fulfillment, returns, and last-mile delivery.
The reasons are clear: digital commerce introduces new complexities and cost structures. Shipping, returns, and customer acquisition costs can quickly erode margins. The rapid pivot to digital during the pandemic led many organizations to implement solutions quickly, sometimes at the expense of long-term efficiency and integration. While most retail leaders know what needs to be done to improve profitability, nearly half struggle to make the necessary investments or execute on their plans.
To achieve sustainable, profitable growth in a digital-first world, retailers must focus on several key investment areas:
A seamless, intuitive, and personalized digital experience is now a baseline expectation. Consumers are more likely to buy from brands that offer fast shipping, easy navigation, and product availability. Frustrations such as out-of-stock items, poor search functions, and complicated checkout processes are leading causes of cart abandonment. Investing in user-friendly websites and mobile apps, robust search and filtering, and clear product information can directly impact conversion rates and customer loyalty.
Personalization is also a powerful lever for profitability. More than a third of consumers want personalized offers and content, and AI-driven recommendations can increase average order value and repeat purchases. However, personalization must be balanced with transparency and data privacy, especially in regions with strict regulations.
Consumers expect to move fluidly between digital and physical channels. Features like buy-online-pickup-in-store (BOPIS), curbside pickup, and unified loyalty programs are now table stakes. Retailers that integrate inventory, fulfillment, and customer data across channels can offer more flexible, convenient experiences while optimizing costs. Real-time inventory visibility, digital wayfinding, and seamless returns processes are essential for reducing friction and building trust.
Replatforming to modern commerce solutions, expanding product selection through marketplaces, and leveraging dynamic pricing and promotions are also critical for scaling omnichannel profitability. Retailers should continuously evaluate and adapt their technology stack to support evolving customer journeys and operational needs.
Shipping and fulfillment are among the largest cost drivers in e-commerce. Optimizing delivery partners, offering multiple shipping options, and investing in micro-fulfillment centers can help reduce costs and improve speed. Automated fulfillment solutions and inventory visibility tools enable retailers to better match supply with demand, minimize stockouts, and reduce excess inventory.
Supply chain digitization also supports sustainability goals, which are increasingly important to consumers—especially in Europe. Transparent sourcing, carbon tracking, and circular economy initiatives can differentiate brands and build long-term loyalty.
Business intelligence, analytics, and data monetization are essential for understanding customer behavior, optimizing marketing spend, and driving profitable growth. Investing in customer data platforms (CDPs), advanced analytics, and retail media networks enables retailers to deliver targeted offers, measure performance, and unlock new revenue streams. Personalization, when done well, can increase conversion and retention, but must be executed with respect for privacy and consent.
Retailers seeking to improve e-commerce profitability should consider the following strategies:
E-commerce is no longer a side channel—it is central to retail’s future. But sustainable growth requires more than just digital sales; it demands a relentless focus on profitability, operational excellence, and customer-centric innovation. By investing in digital experience, omnichannel integration, supply chain modernization, and data-driven personalization, retailers can unlock new efficiencies, improve margins, and build lasting customer relationships.
Publicis Sapient partners with retailers to navigate these complexities, harness emerging trends, and deliver people-first commerce that drives both growth and profitability. The future belongs to those who can deliver seamless, connected, and profitable experiences—across every channel, for every customer.