I RECENTLY delivered a talk on “Making Your E-Commerce Business Profitable.” While I expected questions about Shopee, Lazada, TikTok Shop, Facebook, GrabFood, and foodpanda, I did not expect the number of entrepreneurs who approached me afterward.
Some shared that despite selling through multiple online channels, they were struggling to generate enough sales. Others had the opposite problem: they were generating sales but not earning enough profit. Several expressed concern over increasing platform costs. Some estimated that after commissions, advertising, affiliate incentives, vouchers, shipping support, and other selling expenses, the total cost of selling online could approach a quarter of the selling price, depending on the product category and marketing strategy.
The question many asked was straightforward: “Should I simply leave the platform and sell through Facebook or my own website instead?”
It is a reasonable question. But after reflecting on those conversations, I believe the more important question is whether we truly understand the economics of digital commerce.
There is no free market access
One of the biggest misconceptions among entrepreneurs is believing that profitability depends on choosing the “cheapest” sales channel. In reality, every business pays for market access.
Traditional retailers may require listing fees, promotional support, rebates, display allowances, product sampling, and other trade investments. Convenience stores have their own commercial arrangements. Food delivery platforms and e-commerce marketplaces charge commissions and promotional participation. Businesses selling through their own websites avoid marketplace commissions but invest in website development, payment gateways, search engine optimization, digital advertising, content creation, customer support, and logistics.
Even businesses relying primarily on Facebook, Instagram, or TikTok quickly discover that organic reach alone is rarely enough. Many eventually invest in paid advertising, influencers, content production, or community management to consistently attract customers.
The costs differ, but the principle remains the same: every business pays to acquire customers.
The question is not whether one channel is free. The question is whether the value created exceeds the total cost of acquiring that customer.
Revenue isn’t same as profit
During the seminar, I asked participants how many knew their monthly sales. Almost every hand went up. I then asked how many knew their customer acquisition cost, customer lifetime value, repeat purchase rate, and net profit margin. Only a few hands remained raised.
That simple exercise revealed an important lesson. Many entrepreneurs carefully monitor revenue but pay far less attention to profitability.
A seller proudly announcing P1 million in monthly sales may still struggle financially if advertising expenses, vouchers, shipping subsidies, affiliate commissions, product returns, and customer acquisition costs consume most of the margin.
One of my favorite reminders is this: “Revenue is vanity. Profit is sanity. Cash flow is reality.”
A business can generate impressive sales and still experience financial stress if cash is tied up in inventory, delayed settlements, or aggressive promotional spending.
Understanding true cost of customer acquisition
The digital economy has changed how businesses acquire customers. In the early years of e-commerce, marketplaces invested heavily in free shipping, vouchers, and seller incentives to accelerate growth.
As digital platforms mature, many are seeking to build more sustainable business models by adjusting their revenue structures. For sellers, this reinforces the importance of understanding how changes in commercial terms affect profitability and adapting accordingly.
Recognizing these business realities, however, does not diminish the importance of fair commercial practices. Sellers deserve transparency in fees and commercial terms, reasonable notice before significant policy changes, and clear communication that allows them to plan and adjust their businesses. Likewise, businesses benefit from predictable commercial relationships built on trust and mutual understanding.
Understanding business economics and advocating for fair commercial practices go hand in hand. Entrepreneurs should also recognize that customer acquisition has always carried a cost.
If that cost is not paid through marketplace commissions, it is often paid through Facebook Ads, Google Ads, influencers, search engine optimization, or other marketing investments.
The cost has not disappeared. It has simply changed form.
The risk of relying on single channel
Many online businesses generate most of their revenue from a single marketplace or social media platform. While this may accelerate growth, it also increases exposure to changes in platform policies, algorithms, advertising costs, or commercial terms.
This is why diversification should not be viewed merely as a growth strategy. It is also a risk management strategy.
Successful businesses increasingly combine multiple channels — marketplaces, social media, their own websites, traditional retail, distributors, and business-to-business sales — to reduce dependence on any single source of revenue.
Diversification provides flexibility when market conditions change.
Measuring what truly matters
One of the most valuable habits entrepreneurs can develop is regularly monitoring the indicators that drive profitability.
Revenue remains important, but it should be considered alongside net profit margin, customer acquisition cost, customer lifetime value, repeat purchase rate, inventory turnover, cash flow, and dependence on individual sales channels.
These numbers often reveal far more about the health of a business than revenue alone.
For many MSMEs, every peso matters. A business may survive declining margins for a period, but persistent cash flow problems or an inability to retain customers can eventually force even promising enterprises to exit the market.
At the same time, improving financial discipline should not prevent discussions about market transparency. Better business management and better market governance reinforce one another. Entrepreneurs thrive when they understand their own numbers, and markets function better when commercial relationships are transparent, predictable, and mutually beneficial.
Building resilience in changing marketplace
Digital commerce will continue to evolve. Platform fees, advertising costs, customer expectations, artificial intelligence, and technology will continue to reshape how businesses compete.
Entrepreneurs cannot control all of these developments. What they can control is how well they understand their own businesses.
Perhaps the question we should stop asking is: “Which platform charges the lowest fees?”
Instead, we should ask: “Which combination of sales channels allows my business to acquire customers efficiently, retain them over the long term, manage risk, and generate sustainable profits?”
The future of digital commerce will depend on two complementary foundations.
Entrepreneurs must strengthen their understanding of profitability, cash flow, customer acquisition, and customer retention. At the same time, digital marketplaces, retailers, and other sales channels should continue striving for transparent, predictable, and mutually beneficial commercial relationships.
Sustainable digital commerce depends not only on innovation and technology but also on trust, sound business decisions, resilient business models, and fair value creation across the entire ecosystem.
