7 Simple Yet Effective Ways to Reduce Ecommerce Operating Costs
Posted on June 9th 2021, 6:54:58 pm
Selling online has transformed almost every industry into a global marketplace.
Potential profits have gotten bigger than ever, which means competition is also getting hotter. Because of this, many ecommerce companies are only focused on getting ahead of the game, neglecting other important aspects of their business. Reducing operating costs is one of these aspects.
Little do they know, it can save them a huge chunk of money in the long run.
If reducing costs is a task you often neglect, it’s time you make it a priority.
To help you get started, here are seven simple, yet effective, ways to reduce ecommerce operating costs:
Focus on Existing Customers
Gaining a new customer is way more expensive than keeping the ones that you already have.
It’s always better to focus your efforts on customer retention, especially if you’re an established business. While customer acquisition is just as important, it’s going to cost you than keeping your existing customers.
Anyone who stays devoted to your business over time gives you the opportunity to provide more ongoing value, nurture a brand advocate, earn positive word-of-mouth marketing, and gain referrals.
Loyal customers are also more profitable, purchasing , spending 60% more per transaction, and are five times more likely to stick to the same brand.
Here are two surefire ways to retain your patrons:
Provide Stellar Customer Service
Folks love nothing more than an online business that offers quality service, one that genuinely cares about its customers.
Treat your customers with respect, listen to them, deliver beyond their expectations, and before you know it, you’ll receive good karma from them.
Also, you must keep your word. For example, if you tell a customer their order will arrive by Monday, be sure that it arrives on Monday. Nothing stains a customer relationship faster than breaking a promise.
Offer Deals and Discounts
Customers can’t say no to special deals, particularly those who regularly buy from you. By offering them exclusive discounts or promotions, you show them you truly care and appreciate their loyalty.
A good idea to reward their continued support is by making discount codes that are only available to them. Another is to , wherein they’re qualified for a free item if they reach the target number of purchases.
Reduce Product Returns
Don’t you find it frustrating when a customer returns a product you just shipped a week ago?
Product returns are an ongoing problem that nearly all ecommerce businesses deal with. They’re the bane of every online business owner’s existence.
Once an item is returned to you, there are a lot of exhausting (and costly) steps to undo the sale.
You’ll pay for shipping, packaging, and labor to transport the item between storage locations. Plus, there’s the possibility of a damaged product. Worst of all, you may have just lost a customer.
Product returns are inevitable, and they’re here to stay. The good news is, you can still lower the chances of returns. Here’s how:
Create Better Product Descriptions
happen because the item looked different in person versus how it was displayed on the website or app.
Provide multiple images of your products showing different angles. This makes it easier for customers to decide whether the item they’re viewing is really something they can use and enjoy.
Also, be as clear and detailed as possible when writing your product page descriptions so that potential buyers will have a more accurate idea of what the product is.
You can go the extra mile by posting product videos. You can fit clothes (or have others model them), demonstrate how to use a Bluetooth speaker, or set up a piece of furniture. This will give shoppers a realistic sense of what each item looks like in motion.
Extend the Time Frame for Returns
It may sound a bit unreasonable, but extending the allowed time frame for returns can actually reduce the number of returns.
By “owning” the product for a longer time, your customer will most likely become strongly attached to it, thus deciding to keep it instead. This phenomenon is coined by economists as the .
Another reason why this strategy works well is that longer return policies give buyers more time to rethink their decision and reduce buyer’s remorse.
Re-negotiate Payment Processing Fees
Payment processing fees are what you pay your processors for all card transactions.
Come to think of it, for every single purchase on your site, someone else is getting a portion of that sale. Imagine how big that percentage might be if you generate lots of sales!
To add insult to injury, credit card processors have all types of fees that you could be hit with. Whether it’s the mark-up fee, transaction processing fee, or assessment fee, it can definitely add up.
While some fees are non-negotiable, like charges from Visa or MasterCard, you can still do something about your processing fees.
Many online stores never bother to re-negotiate their payment processing costs. They believe that reducing payment costs is no longer possible when in reality, it’s more than possible.
Sure, there may be vendors who aren’t open to the idea of re-negotiating terms, but that doesn’t mean you shouldn’t try discussing it with your processor.
Consider the length of time you’ve been doing business together. If you’ve been partners for a while now, there’s a big chance that they’ll provide you discounts. It’s one way they can repay you for your loyalty.
If they don’t, well, at least you tried. Now, it’s time to look for a new processor. Here are six of the very best, according to the.
For more tips to help you reduce your returns, check out our post on how you can!
Review Payment Options & Transaction Costs
In case you’re not aware, many payment outlets come with fees that will skyrocket as your order volume increases. They might charge you set-up fees, monthly fees, and even transaction fees on EACH unit sold.
How do you avoid this? By understanding your customers and business.
If most of your consumers are local, consider using offline payment methods, such as cash or ATM deposits, bank transfers, postal orders, or e-checks. PayPal might be your best choice if your company’s still in its early stages.
On the other hand, if business is already booming, then there’s no need to cut ties with your payment provider. Instead, contact them to negotiate your transaction costs.
By minimizing the number of fees now, you’ll be saving a fortune for your business in the future.
Optimize Product Packaging
While packaging has a significant role in ecommerce, it’s one of the most overlooked costs.
Fortunately, there’s a couple of things you can do to reduce packaging costs, like the following:
Use More Efficient Packaging
One size does not fit all for packages. If your packaging is too heavy or too big, trimming it down is the best way to cut costs.
A rule of thumb is to use the lightest and smallest packaging available that will still protect the items inside. If you can use a padded envelope, that’s even better.
Try to use as little protective cushioning as possible. If you’re packing non-fragile items, one layer of bubble wrap will do. You’ll save money not just on fewer materials, but on shipping weight as well.
Items that have no fixed shape, like a shirt, can be packed into a polyurethane bag with some packing tissue.
Save Money on Shipping Labels
Many ecommerce owners take shipping labels for granted. What they don’t realize is that these shipping labels can be their saving grace.
If you have a habit of shipping in high volume, it’s time you kick it to the curb. You might be in utter disbelief when you find out how much you’ve been spending on those sticky papers this entire time.
So, what’s the solution here? Buy your labels from a manufacturer. It’s way cheaper than buying them from a middleman.
It’s also worth suggesting getting a thermal label printer. Not only is it the most affordable way to print labels in bulk, but it’s also the quickest and easiest among the rest.
Source Packaging Materials
While it’s much more convenient to buy your packaging materials from middlemen, it’s also more costly. This is why we recommend you source them from low-cost vendors instead, or better yet, negotiate a bulk discount with your provider.
Another idea is to use inexpensive packaging for items that don’t need to be shipped in a box. For instance, padded envelopes can be a great alternative for shipping small items and clothing.
You might also want to . Since it’s lighter than most types of packaging, it’ll certainly help cut your shipping costs.
What’s more, identifying as a green brand has its own perks. Many consumers today, especially teens and young adults, as a top priority when deciding which brands to support. Nearly are even willing to pay more for sustainable packaging!
Automate Your Business
Cutting wasted time means cutting costs, and how can an ecommerce business owner do that? Turn to automation!
Business automation, , has become a necessity in today’s competitive marketplace. Because of it, companies of all sizes are able to save time, increase their sales, offer a better customer experience, and enhance their solutions.
The question is, how does it help reduce operating costs? Here’s how:
Manage a Smaller Workforce
You’ll have more man-hours available, so you won’t have to hire new staff members anymore.
Reduce Chances of Human Error
Its ability to reduce human errors is one of the reasons why companies use automation. Automation can assist you in eliminating mistakes that would otherwise cost you more money.
Boost Employee Productivity
When you automate your business, you free up your employees and allow them to focus on tasks that only humans can do, such as customer service and brainstorming.
Having your team spend more time on important tasks results in more productivity, which, as we all know, translates to more money coming in.
Here’s how you can automate your ecommerce business:
Automate Abandoned Cart Emails
An abandoned cart email is triggered every time a customer abandons their cart or the checkout page in your online store. Normally, the email contains the items left in the cart, as well as a link to the checkout page where the purchase can be finalized.
Thanks to automated abandoned cart emails, you can capture more sales from customers who weren’t able to press “purchase.”
It can be frustrating to request payments, especially if you have to perform everything manually. Fortunately, that’ll change when you use automated invoicing.
Many accounting and payment platforms are now allowing you to create recurring invoices and receipts within minutes.
Automate Inventory Management
As an ecommerce owner, you know very well how tedious inventory management can get. Luckily, ecommerce software like ecomdash can help you simplify this task. You can easily automate purchase order tracking, updating the number of products in stock, calculating the real-time valuation of your inventory, and more.
Spend Marketing Funds More Effectively
Without a doubt, funneling your marketing budget into digital strategies is your best choice as an online business.
To determine the most effective ways to spend your money, calculate the ROI for each of your marketing campaigns. This is the formula: profit – investment / investment x 100.
Compare the ROI percentages once you’re done calculating all avenues. Allocate more funds to the higher performers.
It’s important to remember, however, that some channels may take more time to produce a profit than others. Still, we encourage you to use this method whenever you need to.
You can also experiment with digital marketing tactics that are already known for their effectiveness, such as influencer marketing, social media marketing, and SEO-friendly blog posts.
Reduce Shipping Costs
As an ecommerce business owner, you know very well that shipping costs kill revenue.
Customers are always ecstatic to see low or free shipping costs on their purchases, and we can’t blame them. Unfortunately, the feeling’s not mutual. The thought of spending so much to get your product to their doorstep just pains you.
Then again, it doesn’t have to be this way forever. Follow any of these tips and you’ll be in no time.
Negotiate Rates with Your Carriers
Just like you, your carriers would also hate to lose customers, which is why you shouldn’t hesitate to negotiate with them. As long as you make a compelling case, they’ll be keen to listen.
If you ship frequently, try negotiating lower rates with multiple carriers and see which of them provides the most cost-effective offer.
Look Into Hybrid Services
Hybrid services like UPS SurePost and FedEx SmartPost can slash the cost of your shipping by up to half. The catch? Delivery times are longer and they have restrictive policies in terms of package size and volume.
Use Reputable Shipping Companies
How can you tell if a shipping company is reputable? Here are the top qualities to look for:
Flexible Courier Service
Always look for a company that provides many courier options. Shipping companies that offer fewer services might fail to accommodate your needs. Better be safe than sorry.
Exceptional Customer Service
Providing high-quality customer service can bring big reputable points to any business. Be sure to choose a company whose employees prioritize the needs of their customers.
Quick Delivery Experience
Delivery speed should be at the top of your list when searching for a courier service. Hire a company that’s willing to go the extra mile to ensure that a package arrives as scheduled. Never hire a company that has a reputation for being late.
Value for Money Services
Cheap usually means poor services. Poorly paid drivers may perform low in the customer service department. Unless you’re extremely tight on budget, hire a courier that provides the most value.
Are You Ready to Use These Tips to Reduce Operating Costs in Online Business?
The next time your online business experiences issues in rising operating costs, you know what to do. Apply these seven cardinal rules and you’ll be in for a treat when you discover how much money you’re able to save. Good luck!
About the Author – Shay Berman is the founder and president of Digital Resource, a full-service located in South Florida. Shay’s clear-cut approach to internet marketing has driven his clients’ businesses to new heights and allowed Digital Resource to land on the Inc 500 list two years in a row and be named as No. 49 on Entrepreneur magazine’s Entrepreneur 360 list.