What is ROI in E-commerce?

If you are planning to set up a virtual store and are researching on e-commerce, you may have heard a lot about this term “ROI” after all what is ROI, how is it measured and what does it serve in E-commerce?

ROI is an abbreviation of the English term “return on investment”. It is a rate that measures the return on an investment made for profit.

This term is used in the most diverse markets and means of business and investment, as well as in the capital market.

It serves to measure the percentage of return you had on the investment you made.

ROI in E-commerce

The ROI in e-commerce is used to measure the return on investment made in marketing to generate conversions.

See the example below how it can be calculated:

You’ve invested $ 1,000 in advertising to drive traffic to your site.

These  $ 1 thousand generated 10 thousand visits which, in turn, generated $ 5 thousand in sales in its virtual store.

So you invested R $ 1 thousand and had a return of $ 5 thousand , correct?

Your ROI is calculated as follows:

• First you need to define the campaign you want to measure, done that, calculate how much you invested in the campaign.
• Subtracting the value you had from your return for the amount you invested in the campaign:
• In the example: we invoiced 5,000 and invested 1,000, then 5,000 – 1,000 = 4,000
• then we divide the above result by the amount you invested: 4,000 / 1,000 = 4

We had a ROI 4, which means we have recovered 4 times the amount invested.

What is the Ideal ROI?

There is no way to answer this question in a generic way, since any business has its peculiarities, contribution margin and different profits.If your product has a low profit margin, you’ll need a high ROI like 10/15 to make a profit, on the other hand, if your margin is high, a ROI 5 might be great for your business.

What we can say with certainty is that the ROI of an effective marketing campaign, must always be above 1, if it is below 1, it means that you have not even recovered the investment you made, which means you investment.