6 Tactics to Make Your E-Commerce Store More Profitable

Brands are struggling with fresh pressures on their bottom lines as online revenues reached new heights in the pandemic. Here's how they can hold costs down, from smart inventory distribution to bundling items.

Brands are struggling with fresh pressures on their bottom lines as online revenues reached new heights in the pandemic. Here's how they can hold costs down, from smart inventory distribution to bundling items.

The direct-to-consumer business model has enabled brands to reach new customers and heights by cutting out retailers and other middlemen, and keep a greater share of the profits. But for many online brands, these fat margins remain just above the horizon. E-commerce includes hidden costs of its own, from consumer acquisition, technology management to inventory and delivery. During the pandemic, when online sales were on the rise, retailers welcomed the extra sales. But many realize there are additional costs involved in the fulfillment of such orders.

Below, we review six tactics to boost e-commerce and Shopify profit margins.

1. Keep Inventory Low

The goal for most companies is to store as much as they can sell: more is wasted money, less is lost revenue. There's a delicate balance, and for online brands, the former is worse than the latter, because when there is surplus inventory, businesses are forced to deliver steep sales at lower margins, eroding their brand value. 

Some brands operate their own factories and other elements of their supply chains, giving them direct control over inventory. 

2. Spread Out Inventory

Small brands can rent short-term space in fulfillment centers during their peak sales seasons, or to explore a new market. In recent years, warehouse start-ups have been launched in major cities around the US, targeting DTC brands that do not have enough business to warrant opening up their own long-term space. Brands can also ask retail partners to deal with the delivery out of their stores.

3. Predict Demand

We recommend that merchants take constant stock of how your products are performing so you can make decisions while you still have inventory to buy more, or do nothing, or maybe even cancel a similar item that’s in the works that hasn’t sold well Companies can work with third-party providers that use predictive analytics to forecast demand. These programs use artificial intelligence to project what and how much buyers will buy by linking a multitude of variables, including the brand's historical data on sales and weather in key markets.

4. Bundle Products - The Benefits of Bundling

Bundled products will help you increase your average order value, boost your sales and sell your less popular products. Bundling the right items together can also spark a spike in your own sales. This is because bundling can help increase the perceived value of the products to your customer. If the goods are bundled, they can be packaged and shipped together which saves on the cost of fulfillment. Bundles may also persuade consumers to spend more money.

5. Reduce Your Returns

A 2019 survey of 2,000 American shoppers by the e-commerce marketing platform Yotpo found that 88 percent said they’ve returned fashion items bought online in the past year, and 66 percent said they’ve ordered more items than they intended to keep. This is troubling news for d2c eCommerce brands. 

In order to minimize the cost of return, brands should add as much detail on their product pages as possible – including for example, inseam dimensions for pants with waist size. In addition to size charts, displaying your return policy on the product page is important, as detailed in this post. Crystal clear, high resolution Images are also important, we recommend that all of our clients display a mix of traditional product photos as well as editorial/lifestyle images on their product pages. Learn more about writing an effective Shopify return policy here.

6. Personalize Your Product Assortment

Personalization is the holy grail of eCommerce right now — knowing or predicting exactly what customers want and being able to present to them what that is, is powerful in many ways. Online retailers who personalize recommendations create fully dynamic shopping experiences that lead to more engagement, higher conversion rates, a larger ROAS, and more revenue overall. Apps such as Nosto can help merchants integrate personalization into their Shopify stores.

Looking to build or redesign your Shopify website? Check out the Exhibea Website.