State of the Merchant Report

I’m thrilled to announce the first annual State of the Merchant report!

I surveyed hundreds of store owners to understand how business is going, measure the trends shaping our industry and get a sense of how satisfied, wealthy and Amazon-dependent we are.

Read on to discover what stores have the highest conversion rates, the average net worth of an eCommerce entrepreneur and a list of the software darlings we store owners can’t get enough of.

(If you want to skip all my commentary and just get to the full info-graphic ripe with stats you can click here.)

Who Are These Store Owners?

More than 300 store owners responded to the survey I sent out last fall.  The majority are male, live in the U.S. and generate a full-time income from their store.

They are what I like to call “independent merchants”: entrepreneurs with meaningful businesses in the high six- and seven-figures but who aren’t large enough to be classified as “big” by most hoity-toity pundits and TV analysts. In general, they’re exactly the type of people you’d find inside our Private Community. 

Here are a few more details about the group:

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Anatomy-of-a-store-owner

Who’s Growing?

Store owners in general are enjoying healthy, vibrant growth.  On average, the group saw year-over-year revenue growth of 25%.  Pretty impressive!

Given all the hoopla recently about “building a brand” and “the death of drop shipping,” I wanted to break down growth by business type to try to better understanding the underlying trends.

The data back up what I’d suspected.  Companies that sell their own products (labeled below as “Private Label” or “Manufacturing”) are growing about 50% faster than those that don’t.

If you’re in the health, automative or pet supply space, it has likely been a good year for you.  These are the three fastest-growing categories for merchants.

What stood out most to me was stores with flat or declining revenues.  If a business is exclusively selling other people’s products it’s twice as likely to be flatlined or shrinking.

eCommerce in the U.S. is still pulverizing B&M retail (RIP my local Kmart), but it isn’t growing nearly as fast as in other countries.  Merchants in Canada and Europe are growing 50% more quickly than those in the States.

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Revenue-Growth

SEO is Dead, Right?!?

People have been predicting the demise of SEO for years now.  I certainly think there are much more significant headwinds for SEO today than even two years ago.  But when you look at the data, SEO is still a major source of traffic for store owners.

No, scratch that.

It’s far and away the most dominant source of traffic.

Organic search was the top traffic source for nearly half of all merchants.  Paid traffic (which would have been my guess for the #1 spot) came in a distant second at 29.3%.

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Top-Traffic-Sources

Conversion Rates

I was especially interested to see data on conversion rates, as it’s something we merchants love to compare.

The overall average conversion rate for all merchants was 2.10%.  Rates ranged wildly from below 0.50% to north of 5% on the high side.

(If that’s you breaking the curve with your above 5% rate, please contact me so I can become your humble CRO apprentice.)

As before, I also wanted to break out conversion by business type and category.  And the same trends we saw in revenue growth hold true: it’s far, far easier to convert visitors if you own your product.

We also see that conversion rates in Australia and Europe are about 40% higher than in the U.S.  I’m speculating here, but I’d guess that’s probably due to less competition in those market versus the States.

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Conversion-Rates

Is Amazon Our Only Hope?!

Amazon has become the major story and driving force in eCommerce.  It’s an incredibly powerful platform and has undoubtedly been to credit for many successful businesses.

But my suspicion coming into this study was that we merchants weren’t quite as beholden to Amazon as popular opinion would lead you to believe.

I think, to some extent, that’s what the data show.

Seventy percent of respondents listed their storefront as their biggest sales channel, with Amazon making up only 6.2% of their overall revenue.

Let me repeat that.

More than two-thirds of store owners are generating only 6.2% of their sales from Amazon.  That’s shockingly low for the number of loudly proclaimed Amazon success stories we hear.

On the other side of the coin, 20% of owners reported that Amazon was their primary channel making up 76% of their revenue.  So it’s a fairly polarized set of results.

Perhaps Amazon-heavy merchants are driving all of the growth, while store owners who have yet to get aboard the Bezos rocketship are languishing in business purgatory?

Not quite.

Of stores growing 50%+ per year, only 27% have Amazon as their top channel.  And 43% of them don’t even sell on Amazon.

Please don’t misunderstand me.  I’m not trying to downplay the power or opportunity on Amazon.  I genuinely do think Amazon is (and will continue to be) the biggest platform in the world for eCommerce.  There’s a lot of opportunity to be had, and you discount it at your own peril.

But it’s important to emphasize that it’s not the only way to build a vibrant business in 2017.  Heck, the majority of store owners (51%) aren’t even currently selling on Amazon!  I think that number will definitely decrease over time, but it’s a telling stat for a group of 300+ merchants with average sales of $750K.

Bottom line?  Make sure you’re thinking about Amazon and seeing if it’s right for you as a merchant.  But it’s by no means the only way to build a successful business today despite its dominance.

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Amazon

Popular Software

I cheated a bit on this section.

Most of the data in this report comes from our survey, but the results below are from our Community’s Software Directory.  Our proprietary directory leverages BuiltWith’s API to compile a database of the software being used on the websites of our 1,000 members.

All of the rankings discussed below are based on adoption numbers.  The star rating shows how store owners inside our Community have rated each tool.

(Disclosure:  I’ve worked with and/or hosted events sponsored by the teams at Shopify, Klaviyo and Yotpo.)

Shopify was the undisputed leader in the shopping cart category and is used on more than a third of all members websites.  Even just two years ago, I think Shopify and Magento would have been neck-and-neck.  But the last few years have seen a flurry of people jump ship and migrate to Shopify.

They’ve done a really good job of offering a stable, robust platform and fostering a great ecosystem.  I think it’s pretty safe to say they’re the most popular choice in the cart space for SMBs under $10 million in sales.

For email platforms, MailChimp comes in at #1 with Klaviyo a close second.  Klaviyo was the first company to offer truly powerful email marketing features at a price point that made sense for independent merchants.  That’s how they were able to gain such impressive adoption over a giant like MailChimp.

Until recently, I’d say that MailChimp’s adoption was primarily a result of their size vs. their feature set, at least for store owners.  But in 2016 they upped their game and are offering a much more impressive suite of eCommerce tools.  Once viewed as a solution primarily for run-of-the-mill newsletters, MailChimp has enticed more established store owners to give it a more serious look.

Zendesk is the most widely used help desk, but I predict fewer merchants will be using it a year from now.  Zendesk is incredibly powerful, but speaking from experience, I can tell you that setting things up can quickly get complex.  More and more store owners are opting instead for the simplicity of Help Scout.

Yotpo is the most well-known and used review tool, and one of the most robust in terms of features.  But offerings from Stamped.io (stand-alone SaaS app) and Judge.me (Shopify app) have received a lot of interest this year due largely to their compelling price points.

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Popular-Software

Gruesome Animal Attacks

The following might be the most important takeaway from this entire report:

I asked all store owners:  “Would you rather be attacked by a bear or a swarm of bees?”  It seemed an appropriately ridiculous question to break up a serious 50-question survey.

It turns out that people who picked the bee attack make 50% more money, although I struggled mightily to find any meaningful application of this stat to the real world.

OK, now that I’ve gotten that out of my system, let’s move on to information that’s actually useful.

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Bees-Vs-Bears-Edit

Personal Finances

I’m a bit of a finance geek and thought it’d be fascinating to see how the financial choices and health of store owners stacked up against others.  Plus, how often do you get to pry and ask people how much they’re worth?

The average store owner’s net worth is $175K, which is approximately 5x higher than what you’d expect to see for an American between the ages of 35-44.   While not a perfect comparison, I think it’s a pretty good one given our “average” store owner in the survey is a 38-year-old American.

I also asked where store owners were investing.

If you look at the average American, they have approximately 30% of their financial assets in the stock market and 15% in cash.  Store owners on the other hand have almost exactly the opposite holdings:  they’ve invested 17% of their money in the stock market and have 27% in cash.

It could be because entrepreneurs want/need a bigger safety cushion.  Perhaps they’re reserving more funds for potential business investments and believe they can generate better returns there.  Or maybe they just think the stock market is a sham.

Whatever the reason, I found the difference in allocations interesting.

If you’ve ever sat down with your accountant and tried to come up with a “reasonable salary according to IRS guidelines,” you’ll thank me for this next question.  I’m not qualified to give tax advice, but the data that follow are as good a benchmark as any I’ve seen for justifying the salary you pay yourself.

(For those not familiar with this issue, many company owners struggle with where to set their salaries.  The lower you set it, the more tax savings you often receive.  But if you set it too low, you face potential penalties from the IRS.  So coming up with a reasonable salary that can be backed up when challenged by the IRS can be difficult.)  

Average salaries for store owners range from $25K on the low side to $136K for those with 8-figure stores. The full spectrum is below:

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Personal-Finances

Fulfillment and Struggles

Store owners may be richer than the general public, but are they happy?

It turns out, generally speaking, yes.

While I don’t have any control group for comparison, store owners rated themselves pretty high up on the scale (8’s out of 10) in terms of happiness with their lives and businesses.

Two things really stood out.  First, there was almost no correlation between the number of hours an owner worked and the size of their business.  This was a huge encouragement and reaffirmed that throwing more hours of work at a problem/business isn’t usually the best solution.

Second, we always hear that money can’t buy you happiness, and that old adage seemed to be supported by the data.  There was very little correlation between someone’s happiness and their net worth.

Finally, store owners listed as their biggest struggles: time, growth, traffic, cash, sales and inventory.

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Fulfillment-and-struggles-edit

Full Data Set and Thanks

I’m making the raw data set from this survey available under an attribution, non-commercial license.  As long as you reference and/or link back to eCommerceFuel, please feel free to use this data for blog posts, reports, etc.

You can download the complete data set here.

An enormous thank you to everyone who participated in the survey and those who helped spread the word.  Special thanks to David Rekuc and the team at Ripen eCommerce for helping share the survey through their list and their newsletter which I highly recommend.

Also, congratulations to Kyle Gougen for winning the round-trip international plane ticket we gave away as a prize.  Hope you have an epic trip, Kyle!

Here’s to a wildly successful 2017 for your store! Make sure to check back next year for the 2018 State of the Merchant.

Full Infographic

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Post tagged in: Case Studies, News, Popular

57 Comments

  1. Wow, excellent info-graphics and statistics regarding the various aspects of e-commerce. You said this info was submitted by 300 different store owners from a survey you sent out? Thanks for this — I’m sure that took a good amount of work to make all these. It’s great to see the majority of people are using Shopify now. It’s a powerful platform.

    1. Thanks Curtis! Yep, a good amount of work: dozens of hours and $2K+ in investment/prize money. 🙂 Appreciate you reading it. 🙂

      1. Anytime Andrew!
        This is an incredible post — I can recognize the amount of hard work put into it. I’m sure those Infographics will do wonders on Pinterest. I’ll pin some to my boards now.

  2. Great work Andrew — it’s not often you get to evaluate yourself against an on point peer group. Write up was concise, targeted, and very easy to read & understand. Big upvote from me on continuing to collect this data and generate the report on an annual basis.

    1. Thanks Ted! 🙂 Yeah, being able to benchmark yourself against others was one of the big reasons I wanted to compile it as sometimes it’s so hard to know how you’re doing relative to the market. Glad you enjoyed it!

  3. Great post! As “Curtis B” pointed out, a lot of work went into this and it shows! I agree with “Ted” that you should generate this report annually if you can. And if you allow, I might want to post this on our own blog.

    1. Thanks Morgan, definitely planning on doing in annually. Also, absolutely allow for use / re-posting on your own blog with attribution. There’s actually some embed code for the info-graphic above to make it as easy as possible. 🙂

  4. Hey Andrew! Great stuff. I was browsing through the data and I don’t see the e-commerce platform. Would be curious to dig a bit deeper into platform specific trends.

    Do you have a dataset with the e-commerce platform?

    1. Hey Patrick! So like I mentioned in the article, the platform data comes from our software directory inside of the eCommerceFuel Community. It’s a custom-built tool we created that utilizes Builtwith’s API to get real-time stats on our member’s collective software usage. So unfortunately that data isn’t available as part of the survey set.

      Hope this helps!

  5. Thank you so much for the great content! I just recently started going full time in my eCommerse business, and valuable information and statistics like this are just what I need. I believe that if I want to be successful, I need to learn from those who have done it and are successful. Thank you!

  6. Man, this is such a good article with tons of interesting data points. As a store owner, these are some of the most frequently pondered questions I ask myself. It’s nice to see them all laid out on one big infographic. Thanks!

  7. This is awesome, thanks for putting this together! It’s heartening to see that others are having similar worries as me, but also that many are overcoming and growing in a range of different markets.

  8. Thanks for the survey and the great infographic. I have been on the sidelines for a long time, not knowing the real status of online selling. Unusual for the internet of today, this is extremely useful!

  9. Hey Andrew- Have followed your stuff for a while, but this is the first time I’ve found cause to comment. We launched our site http://www.elitesrsfitness.com in April, and we’ve a conversion rate of 5.5% (6.8% organic / 4.76% paid / 4.42% direct / 6.8% referral / .43% email / 1.9% social). Our traffic isn’t outstanding yet — we’re between 150 to 250 visitors a day — but it’s obvious to me that we have a great conversion rate. I’ve launched a couple stores now, and this is by far the most initially successful, especially in the conversion rate department. I don’t profess to be a conversion rate expert, so I’m curious as to what’s going on. I have some ideas, but would love your feedback.
    Cheers!

    1. Hey Jordan! Thanks for commenting and congrats on a successful store and conversion rate, they’d definitely far above average. Awesome! Without knowing the market and doing a deep dive on your site it’s hard to say what’s driving that (could be few # competitors, poor other products, amazing site design, lots of referrals coming from trusted positive reviews, combination, etc) but sounds super promising for the future of your business. 🙂

      Congrats and keep up the awesome work!

  10. Tremendous information, Andrew, thank you. Can’t wait to review with my partner!

    What did you use to generate the infographics?

  11. Your posts always add value! Thank you for sharing this data. The fact that 51% of store owners are not selling on Amazon is very encouraging to hear – atleast I know that I am not alone 🙂

  12. Andrew, you’re over-delivering again. This is information I’ve often wondered about and you just painted a picture that affirms AND challenges me. Thank you for this amazing compilation of insights. I’ve shared it with others who also found it helpful.

    1. Thanks Raphael, and really appreciate you sharing it around. Great seeing you in Savannah and hope all is well!

  13. Thank you. This post is full of amazing information and was incredibly helpful to help orient myself on where we are strong/weak within the larger marketplace. The infographics really help to illustrate things. I will be referring to this many times in the coming months.

  14. Much appreciated Andrew! Much of this type of information isn’t generally shared, accessible or openly discussed.

    I wholeheartdely agree with how important ‘owning your own product’ is. The drop shipping space continues to get saturated due to low barriers to entry. In the early 2000’s when I was running my store, it was the custom made/exclusive products that really drove the 80% of revenue, whereas the drop shipped items filled in the rest.

    The same point applies to the Amazon sales percentage you shared. Another testament to owning your space, and ensuring your store even has a REASON to exist!

    Just goes to show, being another ‘me too’ isn’t working like it once did. Creating something worthwhile wins in the long run.

    1. Agreed, 2017 onward is all about building a strong brand IMHO. That’s why I got out of the drop shipping game as I think it’s getting harder and harder.

      Appreciate you reading!

  15. So interesting that only a relative fraction of revenue is coming from the Amazon sales channel. Found this article after reading the transcript of “Dangers of Amazon and FBA”.

    Would you say this research qualifies a concept from “Dangers of” that marketers are wary of Amazon hijacking their niche?

    My team creates software that automates replenishment (future orders) for CPG marketers and have observed marketers that are wise to growing the omni channel but very cautious about exposing their best/repeat customers to the Amazon marketplace.

  16. thanks a lot Andrew, this is a very valuable article and data.. quick question: why is the subset of population you studied so small? (only 312 merchants responded)… this is an incredibly small data pool to draw conclusions from; perhaps we can broaden our reach to an even bigger audience going forward and tie it to incentives? I am an entreprenuer in Canada in the QSR industries with multiple restaurants and I value studies like the above a lot! Hence, if there is anything I can do to help, I would!

  17. Wow, this study is awesome, the amount of work you guys put into this is mind-blowing. Thank you for sharing it with the world, there is a lot to learn from it.

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