6 Quick Strategies to Increase eCommerce Profit
Every store owner, big or small, wants to know how they can increase eCommerce profit as quickly and efficiently as possible. After all, sales mean nothing if you’re not actually earning off them.
When it comes to profit margin improvement, this post highlights six key things you will want to do today:
- Boost trustworthiness
- Update product sorting and merchandising strategies
- Reduce operating costs
- Invest in loyalty program updates
- Think long-term profits, not short-term gains
- Increase value while raising prices
Let’s jump in!
1. Boost Trustworthiness
Your product can have precisely the right features a new potential customer is looking for, but if they don’t trust your brand, they won’t buy. This is particularly important if you’re trying to convert new audiences early on in your buying journey.
Therefore, one of the first things you can do to increase your ecommerce profit is to audit and upgrade your trust-building strategies.
Why? Portraying trustworthiness is a vital part of converting shoppers and increasing profits.
To do that, you should be looking at every digital touchpoint in your buying journey — assessing every element. Ultimately, you want to ensure they are instilling a level of trust in first-time shoppers.
Optimizing your onsite visual merchandising can actually go a long way to doing just that. This includes streamlining your shopping experience and putting visual trust signals on your home, product, category, informational, cart, and checkout pages.
The bottom line: You want to aim to build trust as quickly as possible to ensure you can convert more shoppers for your ad spend, therefore improving sales and profits.
Here are a few ways you can boost store trustworthiness:
- Ensure all information is accurate and well-displayed while avoiding any misleading CTAs
- Optimize your product pages so that information is accurate and matches up with searchers
- Invest in your homepage to ensure it makes an excellent first impression
- Include social proof in your merchandising strategy
2. Update Your Product Sorting and Merchandising Strategies
Yes, as we mentioned above, your online merchandising strategy plays a crucial role in your trustworthiness — but it doesn’t stop there. It also is a vital stand-alone strategy for boosting profits and ensuring long-term growth.
This is where advanced product sorting comes in.
Yes, you want to first show potential customers products that they are actively looking for. However, you also want to ensure those products offer the most amount of profitability for your brand. To do that, you should be factoring in multiple parameters — well beyond best-selling and personalization.
Therefore, to ensure you are able to boost sales while also maximizing profit, you should be factoring in retail and marketing KPIs such as:
- Margins and real margins after discounts
- Days to finish inventory
- Days in store
- Days since back in stock
- Variants stock ratio
- Conversion rates
- Product reviews (ratings and total amount)
- Customer preferences (personalization)
You can read more about creating this advanced strategy here.
3. Reduce Operating Costs
Another way you can increase eCommerce profit overall is by reducing your operating costs. Even the most minor optimization can help boost efficiency while reducing costs, ultimately ensuring more margin earned for each sale.
Before reducing any costs, you want to look at your backend operation as a whole and ask yourself questions such as:
- Which tasks take the most person-hours, and is there potential to invest in automation to relieve the load and free up hours?
- Can optimization, outsourcing, or reshuffling reduce your warehousing, inventory management, and storage costs?
- Is your inventory planning resulting in higher-than-average dead stock, costing you operational expenses and lost earnings?
The bottom line is that you are looking for ways to add automation and eliminate wastage on your backend operations, which, combined with advanced inventory optimization, can reduce costs and improve profits.
4. Invest in Loyalty Program Updates
As we know, CACs (customer acquisition costs) are much lower when remarketing to existing customers. Therefore, when aiming for long-term growth, online retailers should be focusing heavily on improving retention rates.
According to one study, a 5% increase in customer retention can correlate to as much as a 25% increase in profit. Therefore, when aiming for long-term growth, online retailers should be focusing heavily on improving retention rates.
Why? The higher your retention rates are, the better your profits. And loyalty programs go a long way in improving retention rates.
So, how can you nurture brand loyalty? With the right programs and initiatives. This can include a host of tactics, including:
- Rewards points
- VIP sales
- Free gifts
- Exclusive new product launches
- Personalized product suggestions
An excellent example of a winning rewards program comes from one of the top online retail stores, Chubbies.
However, you will also want to focus heavily on messaging as much as the incentive. Values and causes, for instance, are significant loyalty drivers. According to a YotPo survey, highlighting like values can be hugely beneficial.
5. Think Long-Term Profits, Not Short-Term Gains
As the marketing cliche goes, you have to spend money to make money.
It’s easy to get bogged down obsessing over daily earnings, but sometimes you need to reduce short-term profits to maximize long-term eCommerce profitability. Black Friday sales, for instance, are a good example of doing just that.
But this applies year-round. A well-timed discount, coupled with a well-optimized customer experience, may mean fewer profits for a specific sale. However, a happy customer will shop with you again, raising retention and improving profitability long-term.
That doesn’t mean you need to give that initial product away for peanuts. It’s about investing a business budget into a well-optimized customer experience and sales journey to ensure long-term profitability and success.
Additionally, it is sometimes vital to cut profits to focus on domination. This is particularly important when breaking into a highly saturated market — and a strategy that Amazon has adopted since their launch.
6. Increase Value While Raising Prices
Sometimes, there comes the point when — after streamlining operations and merchandising, and all other profit strategies have been implemented— a brand needs to raise prices to increase profits.
This is particularly relevant this year as inflation is increasing around the world at a rapid rate. However, one can’t just raise costs — you need a well-thought-out strategy in place. This includes factoring in:
- Saturation and competition to determine fair market value
- Loyal customers and LTVs (lifetime values)
- Customer retention goals
Therefore, the best way to raise your prices is by also increasing brand and product value. Here are a few ideas to get you started:
- Create product bundles
- Launch an upgraded product version
- Offer premium product variants
- Optimize messaging to communicate product features (value)
- Segment loyal customers and offer exclusive discounts to counteract increases
Whatever strategy you choose, you want to ensure you are clear and transparent about any price increase you implement — communicating clearly with your customers.
There you have it, six things you can do today to increase eCommerce profits without costing you sales — and customers. Ultimately, you want to trim the fat where you can and only raise prices as a last resort.
Have questions? Reach out to our eCommerce marketing gurus here.