Clarity and alignment is critical. Logical teams align to a common and agreed set of Trading Principles to maximise SALES GROWTH at the AGREED TARGET CPA%
IRP provide core TRADING NUMBERS and exact maths behind the Daily Trading Profits into the hands of all key stakeholders every day.
Merchants Owners and Ecommerce Managers receive a daily ‘IRP Trading Profits’ email showing the previous day's eCommerce Web Sales Total, associated Traffic Spend and Service Marketplace Performance and eGross Profits.
Correct Ecommerce Accounting
The Trading Profit email follows the standard model of accounting for ecommerce. Ecommerce profits are achieved by maintaining product margin, controlling Traffic Spend and managing overheads.
The equations show the maths linking traffic and net profit:
- Traffic x Conversion Rate x Average Order Value = eCommerce Sales
- eCommerce Sales - Cost of Goods = Gross Profit
- Gross Profit - Traffic Spend = eCommerce Gross Profit
- eCommerce Gross Profit - Overheads = NET PROFIT
Understand Calculating Net Profit
Previous Day’s Web Sales
Trading Profits shows the three sales inputs - Traffic, Conversion and AOV - that mathematically make the previous day’s sales number - and also includes the traffic costs impacting eGross Profit.
Product Margin and Gross Profit
Product Margin% and Gross Profit gives the merchant an understanding of sales minus Costs of Goods Sold.
eCommerce eGross Profit
eGross Profit is the fundamental IRP construct and key ecommerce metric - it indicates true performance by revealing profit after the variable cost of the Traffic Spend.
Traffic Spend is the total cost paid to Google, Facebook, Bing, Affiliates, Email and all paid traffic sources. This Traffic Spend in ecommerce is measured as the percentage cost of sale - the CPA%.
*Trading Profits calculates the daily Traffic Costs based on the previous month’s CPA% data and uses this value in the eGross Profit and eGross Profit Margin calculations.
Important - Trading Profits Totals Include VAT
All Sales, costs and profit numbers in Trading Profits include VAT. At this early stage in the sales process we do not exclude VAT as this would falsely reduce Net Profit and we do not know the VAT payable at this point from within the business.
The reason for this is that you cannot know the ex VAT position of the company in real time.
Service Marketplace Performance
‘Trading Profits’ shows traffic costs and Service Provider performance for the previous month. Merchants have direct access to the IRP Service Marketplace to trade services.
Merchants can see at a glance the month’s channel costs, sales and CPA%. Variable Traffic Spend substantially dictates overall merchant profitability and merchants should ensure that CPA% is closely managed and as close to the Agreed Target CPA as possible.
First Party Data
The IRP platform is unique in tracking sales and attributing costs resulting in ‘tight control’ of ecommerce businesses. IRP continues to leverage first-party data in ‘Trading Profits’ for merchant benefit.
CONCLUSION
All sales numbers and profit numbers include VAT. Alignment of interests and fixation on these accepted key numbers is critical for accountability. The numbers are all mathematically constructed and are completely objective.
IRP is the world's most powerful ecommerce plaform - no other system provides this cirtical data in realtime.
