While e-commerce is only going to keep growing as time progresses, constantly proliferating categories across products and services, whether B2C or B2B and remaining an integral part of our modern lives, e-commerce firms now need to constantly stay vigilant about cost and profitability pressures that they encounter due to increased competition and cost of operations.
In this article, we look at some leading methods, including automation and clever use of promotions, for e-commerce firms to stay competitive and profitable.
Why have e-commerce companies needed to rethink their operational costs lately
It used to be E-commerce iswas the cheapest way for both consumers and retailers. Due to a rapidly changing ecosystem over the past decade, including frenetic competition with the supply side of e-commerce companies like Amazon, Whole Foods (etc.), as well as offline stores offsetting the online stores with their own strategies, the renowned e-commerce player now has narrow margins. So they must constantly find new ways to improve their value for money to stay in business.
While the basics remain the same, e.g. choosing the right eCommerce platform first, choosing the right 3PL (etc.), let's look at the best ways to reduce operational costs and while improving efficiency for an online store.
Top 7 Ways to Minimize Operational Costs for Ecommerce Stores
1. Automation: Unproductive (or wasted) time is the greatest loss of profitability. So reduction through automation is a good way to improve efficiency. servers (etc.), are just some of the ways an e-commerce company automates its processes today.
The use of new technologies such as AR (Augmented Reality) is another new method
However, this should be done in a planned and phased manner based on your business needs.
2. Negotiate with suppliers: Order size and payment terms are the two key levers that determine your relationship with your suppliers. So if they are to your advantage, for example if you are a fast growing business or already a large company, make sure you use them to your advantage. Your suppliers will also happily accept your suggestions if you give them a significant portion of your business!
Early Pay Discounts, Early Pay Discounts, and Freight Free Deals are just a few of the ways you can leverage economies of scale in their favor.
Don't forget to calculate the freight cost versus the volume discount. You shouldn't end up paying more for storage space to take advantage of volume discounts!
Negotiating Credit Card Fees: While some credit card fees are non-negotiable, others can be negotiated. The longer you are associated with them, the stronger your position will be.
3. Reduce Product Returns: Order returns are an unavoidable reality in the world of e-commerce. And while it will never go away entirely, you could certainly put policies and procedures in place to reduce it to a negligible minimum.
Product returns in the world of e-commerce aren't just "in-house returns". " ”: You pay for return shipping, labor, repackaging, use of infrastructure, product refurbishment (etc.).
And of course you have an unhappy customer who probably won't come back!
But how do you reduce product returns? Here are some points to keep in mind.
- Be transparent with the end customer so they know what they are getting
- Offer extended timeframes for product returns
- Scan and avoid high-risk customers
4. Use Dropship: The most effective way to reduce Ecom costs is with Dropship.
Here, the dropshipper buys products directly from the wholesaler or manufacturer and ships them to the end customer.
Since dropshippers do not own or maintain their own inventory, they save significantly on operational costs, overheads can sell a wide range of products and offers large Flexibility.
5. Spend Marketing Money More Effectively: Obviously, a natural advantage for ecom businesses is that they exist online. And leveraging
Online promotion and advertising methods is something to take advantage of.
If you don't, you're missing out on a major strength.
It's important to analyze ROI across different digital advertising channels and figure out what works best for your product. For example, Instagram and Facebook may not be your most rewarding channels if you're a pure B2B player.
6. Reduce handling costs with strategic promotions: Judicious use of sales, seasonal discounts, coupon codes, BOGO programs, and other similar promotions can help keep inventory empty on a regular basis.
While your best sellers are likely to always sell fast, other SKUs in your product mix that you need to hold onto for various strategic reasons may need a little nudge from time to time. Using it strategically will reduce inventory management costs.
7. Use more efficient packaging: A common area of neglect at Ecom is packaging and the costs involved!
If your packaging is too heavy, unwieldy or too bulky, not only are you costing yourself too much, you are also inconveniencing your customers.
The "one size fits all" theory definitely doesn't work here. Always find your smallest and lightest option when it comes to packing.
For example:
Use only the necessary protection. Otherwise, you'll buy too much bubble wrap, overpay for the extra weight, and use boxes that could be smaller. economies of scale.
Consumers are increasingly demanding ecological packaging. It works well because it's lighter and mostly makes up for the slightly higher cost of the
They are also gaining a reputation for being an eco-friendly brand, which is an important factor in today's consumer purchasing decision.
Conclusion: It lies It is clear that in order to remain profitable and to be able to offer their customers competitive prices and tariffs over the long term, e-commerce companies must constantly keep track of critical operating metrics, as mentioned above. The use of automation, including modern automated software for last mile delivery, is one of the key tools here.
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