Find out how to increase the profitability for your internet business. No matter where you are located or which shop platform (Shopify, Magento/Adobe Commerce, BigCommerce, WooCommerce etc.) you are running on, you can always find ways to increase your profits.
Some practical methods to improve your bottom line are initiatives like lowering overhead costs, identifying your most profitable goods, or simplifying operations.
1. Lower overhead expenses ⬇️
Overhead refers to the ongoing costs to operate a business but excludes the direct costs associated with creating a product or service. Depending on your business, overhead expenses include everything from accounting fees up to utilities. Other examples are advertising, insurance, interest, legal fees, rent, repairs, supplies, taxes, telephone bills, travel expenditures to utilities.
Conclusion: If you reduce overhead costs, you will immediately boost your profits. Just start thinking about how to optimize them - or see if you can cut some completely.
For example, maybe there are ways to reduce your required space in a warehouse by optimizing storage, thus also reducing storage cost.
Other potential options to lower your overhead costs are negotiating better terms with current business vendors and suppliers or auditing your software subscriptions and then switch to less expensive (software) providers.
2. Get rid of low-value-producing processes ⛔
Create an overview of all your operations and processes. Then measure what you spend and how much you gain from each process. After this, rank and rate everything by the economic benefit it provides for your business.
For instance, software to communicate with customers in an easy and personalized way might be one of the high ranked items because it helps you manage your customer relationships more effectively. You can handle more inquiries, which will in turn lead to more orders and sales, thus increasing your profit. In addition, also your customers will be happier, and you will benefit from higher retention as well.
On the other hand, what about your marketing channels? Is the money and time that you invest to align with an external marketing agency for this high-quality video worth it? How much will it return? Can you measure that? Therefore, this could be something that will be at the end of the list.
(Idea: thanks to all the great apps, tools, and social media today – what about doing this yourself/internally with your team?)
Conclusion: To decide here, data are the key to success. To analyze your operations and processes with regards to their economic impact, you need data. But once you can measure it, you have a solid base to decide where to further invest and what to discard.
3. Identify your best- and worst-performing products 🧐
Your online business certainly has a wide variety of products, but the truth is that probably just a handful of them are making a sizable profit. Determine your most profitable products and concentrate your efforts on them to ensure that your bottom line is optimized.
Particularly, marketing efforts should focus on products with high profit margins. This is especially important as online shoppers have an average return rate of 30%, much higher than the 9% return rate for items purchased in stores. So, items with only a small profit margin might even result in a loss when returned.
Conclusion: Profit margins can make the difference between loss or profit. Focus on the products, that add significantly to your profitability.
4. Get ready for seasonal trends and seasonality ☀️📊🎄
Whether or not your company sells seasonal products, you might have experienced a certain sales volatility throughout the year. Often, reasons for this are simple explanations like the weather or holidays (e.g. Christmas). But no matter what the reasons are, you and your business need to determine the precise impact of such fluctuations in sales. Only then you can set up your company to deal with them.
Conclusion: Tracking and examining the past performance of your company can help you prepare for whatever dynamics may occur. This includes tracking the demand for specific items, number of customer enquiries you get per channel, reviews and ratings, earnings and profit margins. Knowing that the shift is coming won't be enough; you'll need precise data so you can make data-driven decisions to keep your company operating at its best.
5. Evaluate your product pricing 🛍️💵
When defining prices for your products, always keep in mind that your pricing strategy is more than just expenses/costs plus a profit margin. It is about the actual value that you provide. What about the level of service/support you offer to your customers to make their experience as good as possible? Is that reflected in your prices? Consider taking factors like this into account as well!
Conclusion: Keep in mind that many consumers value the whole customer journey – from initial contact to checkout. The level of service and support you provide plays an important role. If you excel in this, customers will have a great experience, trust you, and are happy to spend little additional money.
6. Cooperate with team members, suppliers, external parties (like influencers, agencies etc.) 💬🤝📱
Success in eCommerce depends heavily on effective and regular communication. Keeping in touch with your team members, suppliers, and customers is critical for achieving success as a team and a company. If team members do not have all needed information, they won’t be able to assist customers or to place orders at your suppliers on time. This might result in lost revenue by losing customers due to poor service or sold-out products.
Conclusion: Effective customer/team/supplier communication is crucial, especially for teams that operate remotely. Spend some time investigating several possibilities to determine which is best for your company.
7. Reduce rent expenses 🏬💲⬇️
In case you are running a physical store, try to reduce your rent. Most likely, this will be a significant portion of your overall business expenses. And as it is a monthly fixed cost, it’s worth a try to renegotiate! Alternatively, agree with your landlord on a set price that doesn't increase when renewing the lease.
Conclusion: The basic message is that negotiating for a better bargain is risk-free, especially when committing to a lengthy contract.
8. Improve the checkout process 🛒🛍️👨💻
One of the most common reasons for loosing additional profit are abandoned shopping carts. Often, this is due to issues when doing the payment or because customers are somehow stuck and would require help. In a worst-case scenario, this will cause them to buy somewhere else.
Conclusion: Ensure that your customers have a smooth checkout experience. If you guarantee that you can be with them and jump in in case it is needed, this will help a lot in ensuring a successful sale. Think about offering Chat, WhatsApp, Phone etc. as ways for customers to easily communicate with you. By doing so, you will also avoid bad reviews that might have a long-term negative impact on sales and profitability.
To Sum Up 🤗 :
There are many ways and opportunities to grow your profits. Even though the world of e-commerce might be evolving quickly, you just have look out for chances or procedures that might significantly reduce your bottom line. If you do this constantly and proactively, you will find opportunities to lower your costs and boost your profit across all departments: from operations, marketing, logistics, customer support up to even finance 🚀💰📈