How much should I spend on my ecommerce site?
Stuart Gardner / July 23, 2015
Two questions we get asked over and over, are “How much will my ecommerce site cost to develop?” and “How much should I spend on my ecommerce site once it is live?”
In truth, both of these are a little bit “how long is a piece of string”, but we’ll do our best to give you some actual advice and a practical guide to budgeting for your ecommerce site.
So, first up - “I want an online shop. How much will it cost to build an ecommerce store?”
The main reason this is a tricky question, is that there are numerous ecommerce platforms, each suitable in their own way for a different size of business, and each has their own price tag. To use a slightly long-winded transport analogy, if you needed to buy a vehicle to get across London, you could do this using a bicycle, motorbike, hatchback, 4x4, van, lorry, or sportscar.
All of these have the capacity to get you across London, but each has a vastly different price tag, and depending on your circumstance, not all will be suitable. Factors such as the number of passengers you’re travelling with; whether you need to transport any large items; if you’re after an eco-friendly transport method; whether it’s rush hour; do you want to avoid the congestion charging zone, etc, will all determine which mode of transport is best suited to you.
But How Much Should I Be Spending?
Let's take a look...
Similarly with ecommerce, at the lower end of the market, there are plug-and-play platforms such as Shopify and SquareSpace which set you back a few dollars per day. Squarely dominating the middle ground sits the world’s most widely used ecommerce platform, Magento. And all the way at the top end of the spectrum, you have platforms such as Oracle ATG, where setup costs alone will run into the £multi-millions. The most suitable ecommerce platform for your business will depend on your requirements, and this will in turn determine the upfront cost of your online store.
At GPMD, we focus purely on Magento ecommerce sites. Magento caters excellently for those looking to turnover six figure sums through to tens of millions. And within this focus, the investment you need to make to launch your ecommerce site varies considerably. As a ballpark figure, our projects tend to fall within the £50-£250k range. Other Magento agencies focus on the £10-30k range, whilst larger agencies focus on £250k+ projects.
Now I know what you’re thinking - I’ve been client side, and it is frustrating when an agency gives you a ballpark figure. Likewise, now that I’m agency side, it’s frustrating when a prospective client gives you a brief which either completely lacks any detail, and says “I want an online store”, or even worse, when they want a store that has absolutely EVERYTHING, even when they only need 30% of what they have asked for.
For us to be able to give you a more accurate estimate, we do need to scope out exactly what functionality you need from your Magento store, and this does require a fair amount of work. One fact that we are proud of at GPMD, is that once we have scoped a project to give you an estimate, we are always on budget - just a little something to note if you’re in the market for a new Magento agency :)
So to round off the first question, the answer is unfortunately a vague one. But hopefully it gives you a bit of insight into why this question is a tricky one to answer. If you’d like more information, do get in touch and we’ll be happy to answer any questions you may have.
Onto the second question - “Now I have an ecommerce store, how much should I be spending each month on my online store?” Or for an agency, the more dreaded “What do you mean I have to spend more money? I’ve paid to have my online shop built, why do I have to spend anything else?!”
There are a few components that play into this. The first thing to be aware of is that there will always be ongoing costs to running your ecommerce store. Yes, it’s a website, and yes fundamentally it is “just 1s and 0s”, but there is still a need to maintain your site. Back to the transport analogy, let’s say you plump for a nice Audi RS7 (a Magento equivalent of the car world).
First up, to keep your car running you have to buy fuel (in tech world, this is your hosting cost). Then you need to have insurance and AA Breakdown Cover (in tech world, this is your support cost). To make sure your car runs well, you need to take your car in for regular checkups, MOTs, and to replace your tires when they wear out (in tech world, this is ongoing maintenance). These are all of your ‘housekeeping’ costs, to ensure your site stays up and runs well.
What if I just want some improvements?
The more interesting part, is when we talk about improving your site (or pimpin’ your ride). Now what does this actually mean?
Let’s start with the end goal - the aim of an ecommerce store, is to generate revenue from online sales. So any improvements to your site should have the aim of increasing revenue from your online store. We do this for our clients by focusing on increasing the conversion rate of their online store, and by increasing the basket value of their orders.
Some of the ways we do this, include:
- Improving the site performance and page load time
- The faster your site loads, the higher your conversion rate will be
- A/B testing
- Testing aspects of your site, to see whether version A or version B converts best, and adopting the best converting version
- Analytics audit
- Identify where there are opportunities to increase conversion rate
- Checkout optimisation
- Removing friction in the checkout process
- Mobile optimisation
- Making sure the site is as easy to use on a mobile as it is on a desktop
- Site redesign
- Overhaul of your site to keep up with best practice design
- UX improvements
- Making the user experience frictionless and intuitive
Each of these is a detailed topic in itself, so I won’t go into these in depth in this post. However, it’s important that clients understand that very few of these improvements are quick fixes. To be effective, they require thorough planning, execution, measurement, and analysis. With the right approach, process and measurement, you will see revenue gains that far outweigh our fees for undertaking the work.
Keeping Ahead of the Game
Make sure your website doesn't hold you back...
It’s a dog-eat-dog world out there, and you’re competing in a global marketplace. If you want to stay on top of your ecommerce game, and to not be left in the dirt, you must invest continually in your ecommerce store. Our most successful clients are those who understand this, and they see a strong return on their continued investment, and double digit revenue growth year-on-year.
So that’s the backdrop. Now on to the actual question, “How much do I need to spend once my online store is live?” Aside from hosting and support costs, the answer is…
Nothing. Nada. Zero dineros. You don’t need to spend anything extra. But, you absolutely should be investing continuously into your site.
Many companies choose to do the former, and once their site is up, they choose not to invest further. In effect, they leave it to stagnate. They see their ecommerce store as a one-off project. It’s like buying that Audi R7 and then leaving it parked in your garage - what’s the point? Don’t get me wrong, we’re a small business ourselves, and we do understand that finding budget for additional work can be a challenge. However, at GPMD, all of the ongoing work we do for our clients has the objective of generating a positive return on their additional investment into their site. In effect, the more money you put into your site, the more money your online store will generate for you. It sounds cliché, but it’s a win-win - you make more money through your site, you re-invest and your site makes even more money, you re-invest, and so on and so forth. A truly virtuous circle.
For those clients who ‘get it’, and wish to keep investing, our rule-of-thumb guidance, is for them to spend between 2-10% of their annual online revenue on improvements to their online store. For smaller stores, or newer stores, we would expect this figure to be at the 10% mark for the first few years, and as the store grows, to fall gradually towards the 2% figure. E.g. if you’re a small store, turning over £250k per year, we’d encourage you to invest 10% (£25k) into improving your site. If you’re a larger store, say you turnover £5M online, we’d suggest you invest 2% (£100k) into improving your site.
So there you have it. GPMD’s ‘how long is a piece of string’ guide to investing in ecommerce. If you would like to find out more, please get in touch at firstname.lastname@example.org, or if you have any comments or challenges, just pop them below.