Why and how to calculate your return on investment (ROI) in e-commerce?

by Elliot Infelta on Jun 17, 2021
Whatever sector of activity your company is located in, you are best placed to know that it is important to measure the profitability of a project or an action. Indeed, this partly allows you to become aware of the profits and losses that could result from an investment in the realization of a completely new project. Thus, with full knowledge of the facts, you could gauge the relevance of injecting money or not into a new advertising campaign, marketing or website creation for example.

You are not yet convinced about this performance indicator? Rest assured, we will explain why you have every interest in using this tool for your e-commerce activities or b2b site creation.

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What is ROI in b2b e-commerce?

By definition, the return on investment ( Return On Investment for our Anglophiles) is a financial indicator expressed as a percentage which allows you to measure your potential gains or losses when investing.

In short, this ratio will allow you to know whether your investments have been successful or not, in the short or medium term.

Very useful in the context of meetings with your investors or associates, thanks to the ROI, each of the stakeholders will be able to gauge in an instant whether they have any interest in financing a project or not, taking into account the risk they may incur.

Indeed, it is more than important to know the risks involved in setting up a new website before investing your time and money in it. The use of ROI is therefore an essential tool to guide your choices in the creation of your b2b e-commerce site.

What are the advantages and disadvantages of ROI in b2b?

You are right to ask yourself the question, if you are thinking of implementing return on investment in your e-commerce activity for example, here is what you gain:

  • time saving : no longer waste your time trying to make forecasts on your potential financial gains, the ROI is the essential tool which will reliably measure whether or not you should invest in this or that project.
  • a tool coveted by investors : you may prepare a concrete speech to attract new investment, the data is very significant. So, amaze them with your promising ratios and bring new contracts to you.
  • identify your weaknesses : analyze using ROI the failing elements that jeopardize your profits and rather promote your financial losses. Subsequently, you will be able to adjust and improve your strategies and thus optimize your returns on investments.

Although the implementation of ROI in your activities turns out to be a qualitative indicator, this indicator has certain limits that are important to know.

Indeed, even if the main goal of this tool is to promote your company's projects, some of your benefits (" non-financial ": actions not aimed at profit in the short/medium term such as a marketing project in order to 'increase the number of visitors to your b2b site) will not be counted in the formula and could reduce the reliability of this tool. In short, ROI only takes into account economic and management data.

In addition, keep in mind that some of your projects may be successful after a certain incubation period, as the tool very often takes into account short or medium-term investments, it is possible not to be able to assess the relevance of a long-term project. In other words, there is no point in getting discouraged if your RIO ratio in e-commerce is low because this may not reflect as well the profitability that you could earn.

How to calculate return on investment in b2b e-commerce?

If you want to calculate your ROI yourself, here is the formula to use:

ROI = (Gains from investment - investment) / investment x 100

If you obtain a positive result, this means that your project brings you profit and is therefore beneficial for your business. On the contrary, if you obtain a negative result, this sometimes means that you are in a situation of financial loss on the b2b e-commerce site creation project.

Of course, it may be that your ROI is "neutral" in which case you do not gain, but do not lose any gains in your investments. So see this as an opportunity to reverse the balance and move to the “profit” side.

Methods to boost your ROI in b2b

As explained previously, ROI is a very useful performance tool for assessing your potential risks during your investments. However, if you want to optimize the latter we advise you to keep a report of your investments through a dashboard for example where you could follow your ROI and KPIs.

Let's take a concrete example, you are a company that wishes to acquire a new b-to-b e-commerce site to increase your visibility on the internet and increase your customer base. You will therefore start by investing in hiring new specialist employees in the creation of the b2b site, communication, advertising, SEO, etc...

Or, you outsource this service to a web agency specializing in this subject, whatever the method chosen, you should before injecting financial capital evaluate the potential risks or gains that you could gain.

This is why you will be able to set up a dashboard which will allow you to measure and compare your chosen indicators (Cost of creating the e-commerce site, communication budget, etc.)

In a second part, the KPIs (Key Indicator Performance in English) will come into play because they will allow you to monitor the progress of the returns of your previously chosen indicators. Indeed, like the retention or conversion rate when launching a campaign aimed at increasing your number of customers.

E-commerce ROI simulators for your activities

If you are convinced by the use of ROI in your activities but want to save time without going through calculations, we offer you some tools that you could use easily.

Calcuworld allows you to quickly calculate your return on investment (ROI) thanks to its powerful calculator, all you need to do is enter the data that you will be asked for. Following this, the program will be able to instantly calculate your result.

Huggii has also developed a simpler tool allowing you to quickly calculate your return on investment in e-commerce. Thus, you are assured of knowing your profitability threshold for your B2B/B2C project.

Thanks to this simulator , you will be able to know in real time your potential annual gains, taking into account your future growth in turnover, your margins and the time you will save (in hours).