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Calculating downtime costs

Published February 27, 2019

Almost every hosting company and eCommerce platform offers uptime guarantees, with most at around 99%. But even 1% of unexpected downtime can be costly.

With most platforms and hosting companies offering 99% uptime, many eCommerce companies feel that downtime is not a major issue. But is that true?

Even with minimal downtime, costs can add up very quickly for an eCommerce business. Some costs are easy to quantify, while others are much more difficult.

Direct Monetary Costs

There are numerous estimates and calculations online to determine the direct monetary costs associated with downtime. While every company will be affected by downtime, eCommerce companies are especially vulnerable because they rely on their website to bring in revenue.

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Estimates for direct downtime costs vary based on the type and size of a business. For large corporations, costs can be as high as $17,244 per minute, while costs for small companies range between $137 and $427 per minute.

Most companies average around 87 hours of downtime each year, which means businesses could lose between $715,140 and $90,013,680 during that time.

In other words, that 1% of downtime every year adds up fast.

Productivity Costs

Like all other costs, productivity costs will vary depending on the nature of a business and the type of downtime that it is experiencing. If your whole system is down, customers will probably be unable to place new orders and you may be unable to fulfill existing orders as well. You might even have other employees that need your system to run reports, manage inventory, or chat online, but they are unable to do so due to downtime.

Since employees will be affected differently, the general formula for calculating productivity costs is this:

Number of employees affected * Percent they are affected * Average hourly salary of employees * Hours of downtime = productivity costs

However, you will likely have to pay employees to deal with the problems caused by downtime too. Whether you have an IT department that handles problems like this or you manage these issues on your own, it still takes time away from other tasks.

Even a problem that is easily fixed could end up requiring a lot of employee hours to resolve if it directly affects your supply chain or your customers. This means you could end up paying far more in productivity costs than you realize.

Reputation Costs

Direct sales and productivity losses are not the only thing to consider when assessing the impact of downtime. Your company may incur further costs related to its reputation if customers are adversely affected by poor site performance.

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For instance, according to Kissmetrics:

  • Nearly 50% of consumers abandon a page that takes longer than 10 seconds to load.
  • There is a 7% reduction in conversions for every 1-second delay in page response.

Adding this up then, an eCommerce site making $100,000 per day could potentially lose $2.5 million in sales every year just because of a 1-second page delay. Of course, this number rises exponentially when services are not available at all for an extended period.

With website performance being so important to consumers, eCommerce companies need to be prepared to handle any downtime efficiently. If customers fail to come back because of website difficulties, your company could be missing out on a lot of future revenue.

Unknown Costs

Because downtime interrupts the flow of business, there are often consequences that you never anticipated. This can include fees for delays, inaccurate orders, time spent to repair consumer trust, and even repair costs if the cause of the downtime is a major problem. These costs could add up quickly.

Post Author: Jackie Long
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Blog Manager at NS8. With a varied background and over 5 years of content creation experience, Jackie works hard to provide a compelling range of informative articles.