A successful e-commerce store can turn a simple idea into a 7-figure success story almost overnight. But for every Cinderella story, there are thousands of businessmen looking for an honest life.
Online sales have turned almost every industry into a global market. Although the potential profit is greater than ever, the competition is fiercer than ever.
Although the top-line numbers look good, in the final analysis, the key is how much profit your store brings.
To help increase this bottom-line number, today we listed the ways in which store owners can reduce costs. Listed below are 7 feasible ways that online shop owners can reduce the cost of e-commerce stores and increase their bottom line.
Transaction fees
Transaction costs occur at any time when customers purchase from your store. When you receive payment for the order, you cannot take away 100% of the profit. When a customer places an order with a credit or debit card, you need to pay a portion to the credit card processor to make the transaction possible. Some of these processors can charge companies exorbitant fees to use their services, as well as hidden fees that the shopkeeper may not know.
Renegotiation of payment processing fees
Payment processing fees are the fees paid to the processor for all credit and debit transactions. Basically, for every order a customer places on your website, someone else will get a share of it. If your online store gets a lot of sales, then this small portion can really add up! To make matters worse, credit card processors have various fees, and you may be hit. The following are the most popular:
- Overpass: The issuing bank receives a certain percentage of remuneration from each sale.
- Fare increase fees: The fees charged by commercial banks will vary depending on the industry, sales, monthly processing volume, etc.
- Evaluation fee: Credit card companies (Visa, MasterCard, etc.) also charge fees.
- Transaction processing fee: Every time a new transaction is processed, the payment processing program (and possibly your commercial bank) will charge a fee.
Many e-commerce companies don’t even consider renegotiating their payment processing costs because they think it’s impossible. Most people think that payment costs are fixed, but in fact they are not. However, even if you just lower your fee ratio, you can save a lot of money within a year.
Renegotiation of payment fees is a way for merchants to reduce operating costs. If successful, this is a good way to save money. Changing suppliers will not bring any risks. Once you get the next order, the saving begins and is permanent.
If the rate cannot be renegotiated with the current processor, it may be time to consider a new processor. We have collected some other information for your reference.
Provide the best credit card processor for your e-commerce store
There are hundreds of credit card processors on the market. It is not easy to choose the best one for your career.
To make this decision easier to manage, Business News Daily chose the best six processors for six different categories. If you want to study their research in depth, you can read it here.
Suppose your e-commerce store sells one million a year. $100 per transaction. Suppose your store has a total of 10,000 transactions. If your company negotiates your price from 3.5% to 2.7%, this negotiation will save your company a lot of time by $8,000.
Product packaging
Packaging plays an important role in the enterprise. Some companies use it as a way to further customize the brand. This is a good marketing strategy, but it must be remembered that the size and weight of the packaging will increase quickly. There are several ways for companies to ship products correctly without breaking their budgets and reduce the cost of e-commerce stores.
Minimize product packaging
Some companies do not realize that the carrier not only charges for the weight of the package, but also charges for the weight of the size. The size weight is the length, width, and height relative to its weight. The company has several ways to minimize packaging to reduce size and weight:
- Use the smallest packaging possible. The carrier charges dimensional weight; this includes width, length, and height.
- Use lightweight materials for packaging to reduce additional packaging weight costs.
- Use different shapes to reduce the size and weight of the packaging.
- Remove excess material that fills the space in the packaging. Any excess material in the package will add weight.
Logistics label
For many e-shop owners, shipping labels are completely an afterthought. However, if you are shipping in large quantities, all these stickers can really add up! The most popular size label in the world is the 4×6 label.
In fact, we wrote a small article detailing how much the company can save by buying their labels from manufacturers like us
Buying labels from manufacturers is much cheaper than buying them at retail prices from intermediaries.
If you are currently using an inkjet printer to print labels, or worse, just stick a piece of paper to the box, we strongly recommend that you consider buying a thermal label printer.
Thermal printing is by far the most economical, fast and efficient way to print labels in batches.
Packaging materials
Whenever possible, e-commerce store owners should source their product packaging materials from low-cost suppliers. Buying from a middleman, such as Wulin, may be convenient, but it is not cost-effective. The best way to save money is to get a sufficient lead time directly from the manufacturer.
- Negotiate volume discounts with suppliers
- Prioritize packaging of the products you use most
- Reuse and recycle all materials as much as possible
- For products that do not need to be shipped in boxes, please use cheap packaging
- Find a box that can be resized in many ways
Today’s consumers are companies with strong environmental awareness. If you work hard to be environmentally friendly, customers will notice. This is not only a good way to help the environment, but also a great way to get new customers by advertising your environmentally friendly packaging. In fact, a survey conducted by the Recycled Cardboard Alliance found that 60% of customers are more likely to purchase products from companies that use recycled packaging.
Green packaging refers to the use of materials or manufacturing methods that have less impact on energy consumption and the environment. You can reduce the amount of packaging used, the amount of hazardous materials used, the cost of packaging, and you can increase the use of reusable materials.
Paper and cardboard are easy to recycle, biodegradable, and very common. Cornstarch packaging has little impact on the environment and is very suitable for anything with limited use. Bubble paper is another cheap and environmentally friendly option.
Shipping fee
Shipping can sometimes facilitate or disrupt a transaction. Customers not only want their orders to be shipped quickly, but they may also delay delivery due to high shipping costs. As a company, you want to find a balance between meeting customer needs without losing money for a long time.
Free shipping
Customers like free shipping; thanks to Amazon. When online shoppers see high shipping costs, it often turns guaranteed sales into an abandoned basket.
A survey conducted by AlixPartners shows that 36% of people postpone their purchases because of delivery costs. This is the second most important reason why online shoppers choose not to check out. The first reason is that they need to see or try on the product before buying.
Unfortunately, the answer is not just to provide free shipping on every order.
Transportation costs, especially “free shipping” reduces the company’s profit margins. E-commerce companies should not only provide free shipping services for every order, but should consider optimizing their delivery methods. Finding the right balance between maintaining profits and avoiding abandoned shopping carts is crucial.
If your company cannot provide free shipping, try to provide it for a specific product or at a specific time. Here are some options to explore:
- Domestic and International-Free shipping for domestic orders, shipping charges for international orders
- Threshold-Free shipping for orders over a certain price
- Items-Free shipping for the purchase of the minimum quantity of goods
- Seasonal-Free shipping on holidays such as Christmas or Black Friday
- Membership Program-Amazon uses loyalty program technology to provide free shipping service. Members can pay for Amazon Prime. In return, Amazon provides them with free shipping
When consumers shop online, free shipping is a huge deciding factor, so providing free shipping is more advantageous, even if you have to increase product prices to accommodate it.
Negotiate the price with your carrier
E-commerce companies should seek to negotiate with their operators, because even they don’t want to lose customers. As long as your reasons are convincing enough, most airlines are willing to negotiate.
Shopping at different prices will help ensure you get the best price. When you figure out who will give you the best price for the service you need, this is when you ask another operator if it can give you a better price.
Batch processing is a great way to make your shipping business more efficient. Companies should not print orders and labels individually, but should process all orders in batches to save money and time. This is also important if your company sends your package to the post office, UPS or FedEx. Many times a day instead of once a day is the real efficiency killer.
Many e-commerce operations use software, such as shipyards, which helps automate batch processing of orders.
Paid advertising
One way companies should consider is paid advertising. This is a way for the company to extend its reach to potential customers and potentially generate more revenue than before. Thanks to the ever-expanding market, there are too many tools and programs available to help decipher your advertising analysis, and where you should focus your spending in order to better serve your organization.
Use Google Analytics to determine which marketing channels generate revenue
A properly installed Google Analytics tracking script can provide e-commerce store owners with all the correct information to make intelligent and data-driven decisions. If your company is engaged in any paid advertising, such as Google ad words, email marketing or search engine optimization, then it is easy to determine the effectiveness of your advertising campaign.
Once you know which marketing channels are profitable and which are not profitable, it is easy to decide to eliminate bad marketing activities or make some drastic changes to improve performance.
One of the channels where we can significantly reduce bad spending is our Google ad word ads. We detail some of the strategies we use to do this below.
PPC-optimize Google advertising campaigns
Negative keywords Correct use of negative keywords is the easiest way to reduce bad spending in your advertising budget. This is especially true if your organization is taking advantage of any broadly matched keyword targeting activities. For a detailed analysis of negative keywords, please check the Hero Guide PPC.
- E-commerce companies should make better use of negative keyword match types
- Use bid modifier for device type and days of the week or hours of the day
- Focus on advertising budgets for high-performance campaigns and ad groups
- Bid Modifier-Another way to reduce advertising expenditure is to know how to use the Bid Modifier correctly. Bid modifiers give advertisers (you) the ability to reduce (or increase) how much you are willing to spend based on specific criteria. These criteria can include hours of the day, days of the week, location, and device type.
For example, if your company sells business-to-business, you probably don’t want to spend so much money on a particular keyword on Saturday night, just as you want to pay for the same keyword on Tuesday afternoon. When you want to pass a specific bidding condition, you can specify a specific bid percentage.
Returning or exchanging goods
Unfortunately, returns are inevitable. If not handled properly, it can be a real profit killer for a company. A lot of money can be lost between the time the customer service agent spends processing returns and refunds. Although having a reasonable return policy is what most shoppers expect, there are many ways for shopkeepers to reduce the money lost or wasted when customers return items.
Customers may return goods for various reasons. For example, if they have purchased some complex electronic products, they may have encountered some problems in the configuration. Another example is if a customer buys some clothes that do not fit well. Don’t lose all hope. There may be a good reason behind the return.
This is where good customer service training becomes so important. If your customer service representatives are well-educated and proficient in your product, then they are more likely to solve customer problems and maintain product sales.
Clear and transparent return policy
Return policies are very important for e-commerce companies because they must be strategic when trying to avoid lost profits. Your return policy should be reasonable and easy to read. According to the surveys comScore and UPS, 63% of American consumers will check the return policy before purchasing goods, and 48% of consumers will shop with retailers that provide convenient returns.
Return management involves multiple links such as customer service, supply chain management, and inventory. The company should ensure that all these operations are combined to provide a seamless return experience.
An e-commerce company should have an attractive return policy that allows customers toBenefit. The return policy should be clearly written and should be easy to find on your website.
Customers should be able to go to the return policy page from the homepage and product page. The return policy page should also include contact information for any customers who may have questions.
Closet: Wear the clothes they bought once, and then return them
“Try on” consumers: order clothes online, with the mentality of trying them at home, without the intention of keeping the clothes
/>People in the fitting room: Buy different sizes of clothes, try to see which size is best for you, and then return the other products you bought.
Good customer service
For help For these “repeat customers”, e-commerce companies should ensure that they have good customer service.
A bad review can affect hundreds of current and potential customers, so it’s important to always keep you at your best. However, errors do occur, and when they occur, you must deal with the problem quickly.
Providing 24/7 customer service via phone, email, and live chat is a great way to help reduce returns, because customers can choose to talk to someone who can help them solve their problems.
Customers have busy schedules and varying comfort levels, so maintaining your customer support options is essential. For example, for social customers who have time, calling is a good choice, but real-time chat may be more suitable for shy customers who are trying to solve problems quickly.
Provide convenience for customers through different channels. Contact information should be easy to find.
Try to set up a free Google Voice number. Google Voice will allow you to record voice mails for customers. When you are away, you can choose to use your personal phone to call customers back when you are free. Google Voice also allows you to block your number, so you can use your personal phone as a business phone.
Excellent customer service is a great way to build awareness and customers. Take Chick-fil-a as an example. Chick-fil-a surpasses other companies in customer service, and their employees are known for putting extra effort into meeting customer needs. As a result, they are known for their customer service, and many people return to their restaurants for this reason.
Inventory management
Inventory management can not only save companies money, but also save time. Properly organized and accounted products can minimize the error of ordering too much or too little inventory, and reduce lost or missing inventory, saving storage or warehouse space. Consider using an inventory system to help your business reduce unnecessary costs
Eliminating sluggish inventory is an easy way to quickly recover costs. This includes products that were not sold last year, which are becoming obsolete, obsolete and difficult to sell. It costs money to store inventory. Eliminating these products will reduce your storage costs.
For a company, an easy way to get rid of these products is to offer them at discounted prices. This discount rate should be motivated enough to clean up your inventory, consider discounts of 50% or more.
A good place to clean up this type of inventory is Amazon or eBay. If your product already has a market in one of these markets, and the current selling price is higher than the price you are willing to realize, you can quickly load your dead inventory.
If you are not a manufacturer, please ship directly
Direct shipping refers to a company that does not stock the products they sell. Instead, when they receive an order, they buy the goods from a third party (perhaps a manufacturer or wholesaler) and then ask them to blindly ship the goods to the customer. This method does not require storage and storage of any inventory at all.
Although direct shipping is an easy way to reduce costs, it will almost certainly reduce profit margins. After all, other people are doing all the hard work, storage, picking, packaging and shipping of sales. If this is a path you can consider, we suggest you consider all the pros and cons.
Focus on existing customers
Finding new customers is more costly than retaining existing customers. The company has a better return on investment. E-commerce companies will think that getting more customers is a logical thing, but in the end, it will make them pay more and reduce the company’s profits.
The probability of a new customer buying something from your website is 20%, while the probability of a current customer is 60%-70%.
Current customers tend to spend more money on their next purchase. The best way for an e-commerce company to increase profits is to show existing customers that their products are of high value.
This is back to maintaining excellent customer service. There is no faster way to lose customers than to provide poor customer service. Customers have several different options, so focus on convincing them why they should choose you.
A great way to retain customers is to provide them with a personalized experience. As the company grows, this may become more difficult, but it is still possible.
Record all customer notes and data. This way you can look back on your past experience, whether it’s good or bad, customers have been with you. Use these past experiences to improve the customer experience every time you talk to them.
