Ecommerce P&L with example

How to manage an ecommerce P&L and make it profitable

When you manage and ecommerce website or you own a business that sells online you need to have very clear how the P&L of Ecommerce is structured. Controlling every single line of the ecommerce p&L is essential to ensure the profitability of the ecommerce channel.

In this short lesson we describe the essential cost centers that need to be accounted for and that determine the profitability of your digital ecommerce. You also find an example of ecommerce p&l the illustrates all the profit and cost items.

Ecommerce Revenue streams or “channels”

Direct to Consumer (DTC) E-commmerce

DTC ecommerce is your brand website, usually it’s a brand.com website or localised e.g. brand.co.uk. This is your main domain on which is installed an ecommerce platform

Digital Wholesale Ecommerce

The relationship with e-tailers such as Net-A-Porter or Yoox. When you sell at wholsale price and in bulk to retailers or etailers that resell your products

Marketplaces

Are multibrand websites where you show your products and you benefit from the traffic present on the marketplaces to increase the visibility and reach new customers. Examples are Farfetch, Zalando, Miinto, but also many retailers and etailers have implemented the marketplace model on their website. This means that some websites are both etailers and marketplaces e.g. Breuninger, Galeries Lafayette, Yoox.

Digital in store

With the integration of online and offline channels, also called omnichannel, you can sell digitally from you phisycal store. You can use story telling apps on mobile phones, in this case there is an interaction with the sales personnel of the store, or you can install kiosks in store where the customers can order digitally from the store.

Flash Sales

Flash sales are events online with a duration of a few days when the customers can buy with a high discount. These websites are for example Veepee or Privalia or Best Secrets. It’s a good solution for brands who need to sell out remaining stock from the past season that is still in good conditions to be sold but it’s not suitable for the official stores.

Cost centers

Digital Supply Chain

The digital supply chain is the activitiy that consist in the creation of the photos, videos, descriptions, translations of the products.

Logisitics

The logistics is typically the wharehouse where you stock your merchandise, it can be directly operated by the brand or a service that you rent, in this case is a Third Party Logistics 3PL. In the logistics cost we also include the transportation inbound and outbound.

Technology

Ecommerce needs serval technological applications that need to be integrated to manage all the data flows: products, stock, prices, orders, customer data.

Cost of Goods

Costo of Goods Sold is the first “cost item” that you find in the ecommerce P&L, the Net Revenues – the costo of goods sold determines the Gross Margin which is an essential KPI for the profitability of fashion brands.

Legal and Administration

The costs that are not specifically generated by ecommerce such as the cost of top management, finance and administration and HR are spread over the profit centers in a proportional manner. For example the cost of Administration is divided by Retail, Wholesale and Ecommerce department proportionally to the revenue generated by each sales channel

Cost of Personnel

Ecommerce teams are made of few or hundreds of headcounts depending on the size of the business. Typically you have an Ecommerce Manager or Director and you have a Store Manager, a Buyer, a Visual Merchandiser, a Graphic Designer, an Operations Manager to oversee Logistics, Customer Service and Operation, you may have an IT person within your ecommerce team and one or more Customer Service operators.

Digital Marketing

Digital Marketing is one of the essential investments that need to be made to sell online, the investment in Digital Marketing is essential to generate traffic. While in bricks and mortar stores the traffic is generated by the location, online you need to invest in digital marketing to create traffic. You can invest in paid traffic for example advertising or you can create content the organically attracts visitors, this is also called content marketing.

Ecommerce P&L Example