profit margins for ecommerce

Effective Ways to Increase Profit Margins for eCommerce Businesses

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Ecommerce is not only widespread and cost-effective but profit margins for eCommerce are relatively high. That is why more and more entrepreneurs are starting online-only companies that offer goods and services online. In this sense, it’s always possible to increase the already high-profit margins for eCommerce online businesses.

Profit margins as sales indicators

The higher the profit margin on a product, the more the seller makes. However, profit margins can be used to track sales as well. Namely, if the profit margins are too high, the sales will drop and if the profit margins are unfavourably (for the seller) low, sales will boom.

When examining sales figures and shifts in profit margins side by side, business owners are able to set the ideal price. This price should be low enough to attract customers while ensuring that profit margins are as high as possible.

The obvious thing to do

increase profit in eCommerce
Image by Steve Buissinne from Pixabay

In such a constellation, increasing the prices seems like the best and the most straightforward way to increase the profit margins for eCommerce.

However, as stated earlier, increasing the prices will drive away from some customers, lowering the sales figures in the long run.

Every increase in prices, therefore, should be accompanied by laborious research of the market with special attention to the actions of your competitors.

Check out what the competition is doing

Although running an eCommerce platform is cheaper than managing a brick-and-mortar store, the competition online is stiff. In fact, you cannot afford not to look at what your competitors are doing.

For products on discount at several web stores at the same time, you have to set a fixed profit margin, so you don’t lose part of the action.

Drop some items from the offer

The reason why shoppers like to buy stuff online is the sheer variety of items offered. During the coronavirus pandemic, buyers can even order a car online and have it delivered to their address! The more products you offer, the more shopping options customers will have.

However, after a while, the marketing department will identify products that don’t sell (or at all) and products with laughable profit margins that can’t go up.

You should look to drop these items from the store immediately, as you are losing money on them. If the demand suddenly increased for a scraped item, it shouldn’t be too hard to reintroduce it to the online store.

Logistics issues

eCommerce businesses
Image by Mediamodifier from Pixabay

The reason an online business is affordable to start and run is the fact you don’t need a physical location. Sure, there must exist a warehouse but you can always lease storage space, at least in the beginning. Apart from an online shopping platform, you will also need to ship the products to customers.

In this sense, contacting freight companies and enquiring about their respective fees is the best way to lower the cost of transport. If address the issue of logistics sloppily, the cost of shipping can really eat into your profit margins for eCommerce.

Never run out of the most popular products

Speaking of the warehouse, running out of storage space is out of the question. Just like there are items that don’t sell well, there are going to be items that will sell exceptionally well. Products that are high in demand should never disappear from warehouse shelves.

Namely, the items you sell the most don’t have to have an ultra-high profit margin to be profitable in the long run. What we mean by this is that these items provide your finances with a clean bill of health, allowing you to stay afloat during the more challenging times.

Constantly introduce new products

Do you know how there is always a craze when a new iPhone is launched? A new model doesn’t necessarily have to be better than its predecessor. A major part of its aura is simply the fact that it’s brand new. Customers find new products exciting, so you should introduce new wares from time to time. 

Manufacturers have the hard task of coming up with a novel design but for online entrepreneurs, it’s about finding the right supplier(s). Once you figure out which products are high in demand, you need a reliable supplier that will feed the constant drive for increased sales.

Build an army of loyal customers

Sometimes it is possible to sell a product at a sky-high profit margin but this will be a one-time sale. If you seek to increase the profits over a longer period, then you need loyal customers that will keep coming back, i.e. clicking back. 

The best way is to build trust through affordable pricing, fast delivery, the quality of products, and excellent overall customer experience. Just like you lease a warehouse, you can outsource customer service operators to keep the shoppers happy.

Superb client support can help your organization stick out. On the off chance that clients realize you will back up your items, your transportation, and the whole experience, they’re bound to become faithful clients, regardless of whether that implies they at times pay more than they’d pay with a contender. Set up a call place and email uphold with assumptions for what amount of time follow up should require, what the appropriate systems are, and afterwards screen what occurs. Examining crafted by the client support specialists is basic to keep up that great standing. 

Holding clients is another approach to expand productivity. It’s a lot less expensive to offer to existing clients than to get new clients. Promoting endeavours zeroed in on current clients are probably going to get higher buy rates than for possible clients, with less showcasing dollars behind them.

The potential of upselling

Upselling in a brick-and-mortar store was hard because the salespeople had limited options to offer to customers. However, there are countless alternatives to offer clients online. A small discount can draw them in to purchase a newer model of a smartphone, for instance, or add a glass protector to the deal. 

Running an online business is rewarding in the sense that there is more than one effective way to boost sales. From discount offers to lower shipping costs, there is always room to increase the profit margin without losing any loyal customers.  

About Post Author

Mike Parsons

Mike is an Australian business consulting specialist. He’s working with companies that outsource their IT maintenance. He often writes about technology, business and marketing and is a regular contributor on several sites.
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