What Steps Can You Take to Improve Your E-Commerce Profitability
E-commerce has revolutionised the way we shop and do business, enabling entrepreneurs to reach a wider audience and expand their customer base beyond geographical boundaries. However, with the increasing competition and constantly evolving market trends, running a successful e-commerce brand has become more challenging than ever. One of the biggest challenges that online businesses face is maximising their e-commerce profitability while keeping their e-commerce operations costs low. Fortunately, there are several steps that e-commerce businesses can take to improve their profitability and stay ahead of the game.
In this blog, we will discuss some actionable steps that large, multi-channel retailers and brands can take to increase their e-commerce business’s profitability. From optimising their online channels such as their website or mobile apps and improving customer experience, to reducing shipping costs and leveraging social media marketing, we will cover a range of strategies that businesses can implement to drive sales and increase revenue.
When it comes to strategies to improve e-commerce profitability, there are two things that you need to focus on — maximising revenue and improving profitability.
Understanding your business’s financial health
You can only understand what improvements are required if you first take the time to evaluate where you are at present.
After all, to chart a course on GPS, we require the starting point and the ending point. Why should this be any different? We are, after all, charting a course to improve your e-commerce profitability.
- Conduct a thorough financial audit to help take stock of your current position. This is the first step in the process.
- In the next step, we move on to identify the costs and inefficiencies in various parts of the business. You don’t have to think of a solution yet, just mark the potential areas for improvement.
- Analysing revenue and profit margins is the third step to evaluating your business’s financial health. Ensuring a healthy profit margin is the most prudent way to creating a sustainable business.
- Developing effective strategies to manage competition is the last step. Here, you are essentially creating a competitive moat that will help you stay ahead of other similar brands.
What is the best strategy to improve e-commerce profitability?
This is the key to success in the e-commerce industry. If you crack the formula to generate consistent profits in your e-commerce business, then you can rest happily. Some of the things that you should consider are listed below.
- Improving product and pricing strategies
This will be a solution that is unique to your particular business. Every e-commerce brand is different and it is important that you find a product and pricing strategy that works best for you.
- Upselling and cross-selling
Upselling and cross-selling are two methods that you can use to encourage customers to buy more products or upgrade to a more expensive product. They help increase the value of each sale and improve your overall e-commerce profitability.
Upselling involves encouraging customers to buy a more expensive version of the product. For example, if a customer is looking at a basic set of coasters, you could encourage them to upgrade to a more expensive version — a set of hand-engraved coasters made of cork.
Cross-selling, on the other hand, is when you encourage customers to buy related or complementary products. For example, if someone is buying a pair of shoes, you can also nudge them to add a set of socks to their shopping cart.
- Expanding product offerings and market reach
According to the formula, revenue is the product of the selling price of each product and the number of items sold. If you increase the range of products on offer, you automatically increase the chances of increasing revenue.
Please note, it’s important to make sure that the products you offer are relevant to your target audience and consistent with your brand image.
- Leveraging data to drive sales
With the help of data, businesses can uncover hidden opportunities and gain a competitive edge in the marketplace. By using a smart order management platform, you can gain access to powerful insights that can help you optimise your business operations and increase profitability. The platform can generate automated reports based on various data points, such as customer purchase behaviour, order volume, and product performance, which can help you identify areas where you can improve your operations and sales strategies.
What are the best practices for improving e-commerce profitability?
Implementing the most current digital technologies for managing e-commerce operations
The power of technology is immense, especially when it comes to a process-driven industry like e-commerce.
Every order placed through an e-commerce website needs at least 4-5 different processes to fulfil completely. It takes a retail outlet one process to do the same thing. If you try to do the entire order fulfilment process on your own, you will take a lot of time and you might make several mistakes along the way.
Don’t compromise on technology solutions for your e-commerce business. Use a good platform for managing e-commerce operations. Ordazzle, for example, enables brands and sellers to manage the entire process of managing product catalogues on a single platform with multiple integrations – from listing of products and inventory management to processing orders and shipment.
Continuously monitoring and tracking progress using data-driven systems
One of the most important things you can do to improve e-commerce profitability is to analyse your data. This involves tracking your sales, expenses, and other key metrics to identify areas where you can improve.
For example, you might notice that certain products have a higher profit margin than others, or that certain marketing channels are more effective than others. By analysing your data, you can identify these trends and make data-driven decisions to improve your profitability.
If you integrate a platform for managing e-commerce operations, then you can automate the data analysis and report generation process. The time that you saved here can instead be utilised to implement the report’s findings.
Being proactive and innovative in meeting customer demands to improve retention and repeat business
Improving your customer experience can have a significant impact on your e-commerce profitability. Don’t underestimate the power of a happy customer. They are the ones who are most likely to become repeat customers and recommend your business to others, which can help you grow your revenue and improve your profitability.
Now, you can only be proactive if you have the correct information. You will need the data from your customer’s past purchases and demand patterns. Only then can you identify the demands and innovate your products accordingly.
There is no one fool-proof strategy for improving e-commerce profitability, but rather it differs from business to business, and segment to segment. The different stages of growth your business is in also plays an important role in this. However, the above activities and approaches can help you build a blueprint based on the segment your e-commerce business operates in and the growth stage it is in, to ensure long-term cost optimisations and boosting profitability.
“Speak to our experts to learn how Ordazzle can improve your e-commerce profitability with end-to-end enterprise e-commerce management.”