Is it Time to Start Running from E-Commerce Revenue Sharing?

Time to Run from E-Commerce Revenue Sharing
Revenue sharing is coming, revenue sharing is coming, do you have a plan?

Seems there’s a growing trend for both e-commerce platforms and even Third Party Logistics (3PL) fulfillment companies to base their pricing on sharing in their customer’s revenue.

For those in early stages of e-commerce growth it may sound like a good idea to try and keep the initial start up costs down, but as with many key business decisions taking the longer view may be more prudent.

For companies like Demandware (now a Salesforce company) revenue sharing has been part of their pricing model for some time now. The question to be posed to those companies using these platforms, is how often do you conduct a feasibility review of your all in costs for licensing, support and revenue sharing versus other alternatives?

Given how rapidly e-commerce volumes are growing, and continue to grow, this should at a minimum become an annual review exercise to ensure that your e-commerce platform provider is not taking an unreasonable slice of your e-commerce revenues.

Perhaps of even more concern is the fact that the practice of e-commerce revenue sharing as a business model for e-commerce platforms seems to be growing.

Last year, the very popular Magento 1.0 e-commerce platform announced the new Magento 2.0 platform and it looks like within 3 years the old platform will no longer be supported.

Normally, this wouldn’t be an issue at all, however in this case the new Magento 2.0 e-commerce platform pricing is based on e-commerce revenue sharing and it seems almost daily I’m speaking with users of this platform who don’t even realize this change is coming.

There are a number of great alternatives where you can effectively avoid revenue sharing and at the same time migrate to easier to manage SaaS models where you’re paying for your actual IT usage, not some arbitrary share of YOUR company’s own e-commerce revenue.

So take proactive action now to avoid getting locked into revenue sharing (or develop an escape strategy if you already are) start today to begin active review and analysis of potential alternatives, feel free to reach out and discuss which common sense options might make the most sense for your business.

Jeff Ashcroft

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