8 ways to make your e-commerce business more profitable
It’s no secret that online retail is booming. A study by HKTDC Research quoting Euromonitor found that e-commerce in the ASEAN region is well poised to grow at an annualised rate of 22% and the sector can reach about US$150 billion in revenue by 2025.
But if you’re like most e-commerce business owners or decision-makers in the region, you’re probably not satisfied with your current profit margins. Making your e-commerce business more profitable can seem like a daunting task. But with the right tools and strategies in place, it is within reach. So how can you make your e-commerce business more profitable? Here are some ways to get you started.
1) Increase your average order value by offering add-ons and upsells
If you want to increase your e-commerce business’s profitability, one key area to focus on is your average order value. One key method to do this is by offering add-ons and upsells. By cross-selling related products, you can increase the value of each order and boost your bottom line.
For example, if you sell shoes online, you could offer a discount on socks when a customer adds them to their purchase. Or, if you sell electronics, you could offer a warranty or an extended service plan as an upsell. By offering these additional products and services, you can make your e-commerce business more profitable. By increasing your average order value, you can further improve your profitability and drive growth for your e-commerce business.
2) Track your results and make changes based on the data you collect
As the e-commerce business rapidly expands, it is more important than ever to track your results and make changes based on the data you collect. This will help you be more profitable and grow your business efficiently. By tracking your results, you can see what areas are working well and which need improvement. You can then change your business model or marketing strategy accordingly. You can use data to find new growth opportunities. For example, if you see that a certain product is selling well, you could consider stocking more of it or expanding into related products. Ultimately, tracking your results is essential for ensuring the profitability of your e-commerce business.
While tracking results and data is one of the most fundamental tenets of running an e-commerce business, too many e-commerce businesses focus on top-line revenue growth without adequately managing the profitability of their operations. As a result, they find themselves in a death spiral of declining margins and eroding profitability.
The first step to avoiding this fate is to track the right e-commerce metrics. By measuring the right e-commerce KPIs, you’ll gain actionable insights into what’s working well and where there’s room for improvement. This will allow you to make targeted changes that drive real results.
There are dozens of e-commerce metrics out there, but not all of them are equally important. To help you focus on the most essential KPIs, we’ve put together a list of the 8 most important e-commerce metrics for profitability. By tracking these metrics closely, you can ensure that your e-commerce business is on track for long-term success.
- Gross margin: This metric measures the percentage of revenue that remains after accounting for the cost of goods sold (COGS). It tells you how much profit you make on each sale after accounting for direct product costs.
- Order value: This metric tells you the average amount each customer spends when they place an order on your site. Increasing order value is key to growing revenue without sacrificing profitability.
- Conversion rate: This metric measures the percentage of visitors to your site who take action by making a purchase or completing some other desired goal (such as signing up for a newsletter).
- Customer lifetime value: This metric represents the total amount of revenue that a customer is expected to generate throughout their relationship with your business.
- Customer acquisition costs: This metric measures how much it costs you to acquire each new customer. It’s important to track this metric closely so that you can ensure that your acquisition costs are lower than your customers’ lifetime values.
- Churn rate: This metric measures the percentage of customers who cancel or fail to renew their subscription with your company over a given period.
- Employee satisfaction: This metric measures how happy and engaged your employees are with their work. Satisfied employees are key to maintaining high levels of productivity and quality control.
- Overall satisfaction: This metric measures how satisfied your customers are with their overall experience with your company. Satisfied customers are more likely to remain loyal and make repeat purchases in the future.
3) Optimize e-commerce operations with an integrated e-commerce management platform
An e-commerce management platform can help optimize e-commerce operations and make the business more profitable. With an integrated platform, businesses can manage all aspects of their e-commerce activities in one place. This can increase efficiency and help to ensure that growth is aligned with profitability.
In addition, an e-commerce management platform can provide valuable insights into customer behaviour and trends. By understanding what customers want and how they shop, businesses can make better decisions about product development, marketing, and sales. Ultimately, an e-commerce management platform can help e-commerce businesses to reach their full potential.
There are a number of different e-commerce management platforms available on the market. To select the right one for your business, it’s important to consider your specific needs and objectives. Additionally, it’s important to compare features and prices to find the platform that offers the best value.
For instance, Ordazzle is an integrated and extensible platform that helps e-commerce and omni-channel businesses achieve their true potential. It synchronises with a multitude of marketplaces, webstores, and logistics providers to help smartly manage any size of e-commerce business. Ordazzle helps manage new products and catalogues with flexible attributes, images, videos, inventory, and promotion & price updates. Handling many nodes across countries and allocating and routing orders to the right nodes Ordazzle ensures that the right products reach the right customers at the right time & cost.
4) Reduce shipping costs by using a fulfilment service
Running an e-commerce business can be a great way to tap into a growing market and make a profit. However, one of the key challenges of e-commerce is managing the costs of shipping and fulfilment. By using a fulfilment service, you can outsource your shipping and logistics operations to a third party to reduce your shipping costs and improve your profitability.
Fulfilment services provide several benefits, including access to discounted shipping rates, order tracking and management, and customer support. In addition, they can help to streamline the shipping process, making it more efficient and reducing the chance of errors.
By partnering with a fulfilment service, you can gain access to their extensive network of warehouses and distribution centres. This can help you expand your e-commerce business into new markets and reach more customers. As e-commerce continues to grow, fulfilment services will become increasingly important for businesses looking to remain profitable. By using a fulfilment service, businesses can save money on shipping and improve their bottom line.
5) Respond to customer inquiries promptly
In today’s e-commerce landscape, it is more important than ever to respond to customer inquiries in a timely manner. Not only is this good for customer relations, but it can also have a significant impact on your bottom line. Promptly responding to customer questions and concerns can help you resolve issues quickly and efficiently, preventing them from escalating into larger problems.
Responding on time shows customers you value their business and are invested in providing them with a positive experience. This can lead to repeat business and referrals, both of which are essential for e-commerce businesses to be profitable. In fact, studies have shown that e-commerce businesses that provide excellent customer service are more likely to experience growth and profitability. So if you’re looking to take your e-commerce business to the next level, make sure you’re responsive to your customers’ needs.
6) Price your products competitively without sacrificing quality
When it comes to e-commerce, pricing your products competitively is essential to driving traffic and growing your business. However, it’s also important to make sure that you don’t sacrifice quality in the process. Maintaining a balance between these two factors can be difficult, but it’s essential for ensuring profitability and long-term growth.
One way to strike this balance is to focus on offering unique or high-quality products that are still competitively priced. This can help you attract customers who are looking for a good deal, while also ensuring that your products stand out from the competition. In addition, it’s important to regularly review your prices and adjust them as necessary to ensure that they remain competitive. By taking these steps, you can ensure that your e-commerce business is both profitable and sustainable in the long run.
7) Optimize your website for search engine traffic
Organic search traffic can be a major source of revenue for e-commerce businesses. In fact, studies have shown that organic traffic accounts for an average of 40% of all e-commerce traffic. This means that if your website is not optimized for search engines, you could miss out on a significant amount of potential business.
Your website’s ranking in search results can be improved with a number of methods, such as ensuring your website’s performance and responsiveness across all screen sizes, optimising your website’s meta titles, tags and descriptors, creating relevant content, and building backlinks. By taking these steps, you can ensure that your e-commerce business is visible to potential customers and generates more traffic and sales.
8) Use paid advertising to reach more customers
Another way to generate traffic and sales for your e-commerce business is to use paid advertising. Paid ads can be a great way to reach new customers and promote your products or services to a wider audience. They can be targeted at specific demographics, interests, and even locations. This means that you can tailor your advertising campaigns to reach the people who are most likely to be interested in what you offer.
By placing ads on popular websites and search engines, you can exponentially increase your visibility and reach new potential customers who are looking for products or services like yours. Not only does paid advertising help you reach more customers, but it can also be extremely profitable. When done correctly, paid ads can generate a significant return on investment, helping you to grow your business and achieve long-term profitability.
For paid advertising, there are several options to choose from. These include search engine ads, social media ads, and display ads. Each option has its advantages and disadvantages, so it’s important to select the one that best fits your needs. Additionally, it’s important to monitor your campaign closely and make adjustments as necessary to ensure that it is successful. By using paid advertising, you can reach more customers and boost your e-commerce business.
In conclusion, we believe that by following the tips we’ve outlined in this blog, you can make your e-commerce business more profitable. It may take some effort to get started, but with a bit of work, you can see a significant return on investment. Are there any other strategies that have worked well for you? Do let us know.