The recipe for a profitable ecommerce operation has just three key ingredients; price, cost, and quantity. Why then do so many companies struggle in the online marketplace? Their products are available online, 1 out of every 4 people in the world is an ecommerce shopper, and that number continues to grow each year. Where is the disconnect?
Webgility and Elevate Growth Group are here to provide you key insights on how to drive growth across all ecommerce channels. There are a number of levers to pull when it comes to running a successful digital sales operation. Let’s dive deeper into price, cost, and quantity.
The first ingredient is price. It may seem like a simple aspect of selling: something that you can calculate, set, then forget. However, depending on the product you’re selling, how niche it is, the competition in your market, and who your audience is, your prices may rise or fall.
A lot of companies position themselves as best-in-class, and some earn the title. Marco Lalau, founder of Groomers Pro, has taken his business a step further. Since its founding in 2005, Groomers Pro has provided buyers top-tier pet products. However, Lalau also carefully curates the company’s Amazon inventory, selecting specific products that have little to no competition in the marketplace and filling that niche. Using this strategy, Groomers Pro grew orders 200% in just two years.
But your product itself is not always enough. According to Web Retailer, the average shopper reads 20% of words on a product page, but looks at every image, and 63% of consumers say product image is more important than the description of the product. The same rings true for product videos. If your visual marketing is falling short, then you have to entice potential customers another way, which generally means lowering your price.
That is not to say your written copy is not valuable. Think of your copy as an opportunity to focus on search engine optimization, driving traffic to your website or Amazon product listing. A clever keyword strategy can help maintain a healthy price point, while also capturing buyers.
Consumer reviews are also vital. If buyers see only a few reviews, or unfavorable reviews, they are more likely to view your product as a risky purchase. That means your prices will have to be more competitive so buyers can better justify taking that risk.
“Improving product listings is of paramount importance,” Emily Wilcox of Elevate says. “The Amazon platform is a marketplace, so your products are side-by-side with competitors’ products. This is hugely important for conveying quality and creating the perception of having a real brand behind the product. That allows you to have sustainably higher prices and still move the volume that you want.”
There are a number of ways to cut costs to improve your margins. Cutting costs does not have to be an insidious thing. Oftentimes it is about becoming more efficient.
Comparing carrier rates to find the best distribution partner for your business is a great place to start. Webgility’s shipping module provides side-by-side carrier breakdowns so you can find the best rate for your business, and pass that savings on to your customer.
Once you gain an understanding of your inventory throughout, forecasting can help cut inventory costs by keeping your stock numbers low and saving on warehouse space. Automation can take this a step further, especially when it comes to order fulfillment. An ecommerce accounting automation solution like Webgility inputs transaction information and inventory counts into Quickbooks, saving you time, and the headaches and failings of manual data entry.
Understanding the cost structures of selling on Amazon is also key to keeping costs low. In addition to the base vendor fee and referral fee, you may also encounter fulfillment fees per unit, monthly inventory storage fees, or an unplanned prep fee. Experts like Elevate can help you navigate potential hidden costs of selling on an online marketplace and optimize your supply chain.
Don’t forget to keep an eye on your ecommerce marketing spend as well. Between website hosting, Google Ads, and paying your social media manager, the margins from your own website may not be as accurate as you think.
The fastest way to scale your orders is to expand to more channels. Once you have done the hard work of building your website and developing a customer base, maybe it is time to take your product to the millions of shoppers already on Amazon. Or, maybe you got your start on Amazon. Could there be an opportunity to further your brand, deepen the customer relationship, and better control your margins by selling through your own website?
Selling online is becoming more competitive each day, making a multichannel approach crucial. But expansion has its growing pains, and business owners need to approach it with the right mindset.
“I’ve seen brands and business owners have too much focus on profitability when they’re expanding to new channels,” Wilcox says. “Typically any channel expansion is going to be an investment, meaning there won’t be any profitability, you’ll lose money for a while. While it’s good to know the numbers, you can really hinder yourself if you’re focused so much on profitability that you’re not able to increase quantity,” Wilcox advises.
Another approach is product expansion. A strategic evaluation of what products would complement your existing catalog could increase sales and differentiate your business from the competition. If you are already selling on Amazon, there is a trove of data available for you to leverage when weighing product expansion. Tools like JungleScout are also available when researching competitor sales data and keyword search volume to help you make informed decisions.
Efficient, effective marketing helps propel channel and product expansion forward. Because your marketing strategy can change from channel to channel, knowing the most appropriate space to advertise a given product will set the stage for a positive customer experience, and repeat buyers.
So if expansion likely leads to an initial loss, how are you supposed to gauge profitability? How are you supposed to grow intelligently?
Start by tracking your SKU. Tracking costs by SKU allows you to see all the expenses associated with each product; seller fees, overhead, return rates, and more. This provides an honest look at your portfolio to better guide business decisions.
Once you understand profits on a SKU level, start tracking by order, customer, and channel. This will provide a holistic view of your ecommerce business and reveal where you are driving the most profitability and where your margins are healthiest.
But all this data lives in different places, so capturing a unified view can be difficult. That is where Webgility comes in. Webgility automates your accounting procedures by posting orders, fees, taxes and revenues into QuickBooks, or your chosen ecommerce accounting software. Over time this automated procedure unites your data into a single repository, providing you unparalleled insight into your profits and expenses. Insight that you can use to overcome complexity and make informed, effective decisions about the growth of your business.