How To Reduce eCommerce Operational Costs – Solutions For Business Owners To Cut Costs

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It goes without saying that eCommerce businesses can be more affordable than brick and mortar stores. Without physical locations, these businesses can save on overhead costs like commercial leases, utilities, in-house staff, equipment, and supplies. Despite these savings, however, there are still a plethora of associated costs to keep eCommerce stores operational. In order to continue generating profits, it is, therefore, necessary for business owners to come up with solutions to cut costs. Below are some examples.

Renegotiate Carrier Contracts

eCommerce businesses rely on the services of shipping companies (carriers) to get their products to their customers. Shipping and transportation costs of goods, however, accounts for more than a third of eCommerce operational costs. Though this is a necessary expense, many business owners are unaware of how much money they’re flushing down the drain by sticking with service providers due to popularity and/or loyalty. By working with a company that specializes in carrier contract optimization, eCommerce companies can essentially get the quality services they need without spending more than they should.

Reduce Payment Processing Fees

Payment processors are necessary for eCommerce sites to be able to accept credit and debit card transactions online. For every transaction that is made, however, a payment processing fee is assessed. Though these fees may seem minimal, they can quickly add up increasing operational costs. eCommerce business owners would, therefore, be wise to find ways to reduce these processing fees. You can shop around for more affordable payment processors or talk with your existing processors on renegotiating fees for significant savings.

Reconsider Product Packaging

Most eCommerce site owners don’t realize how much product packaging plays into the cost of shipping. The size and weight of a package can greatly drive up the cost to ship. To drive costs down, businesses should reconsider the packaging. One idea might include opting for smaller package sizes. If your products can safely ship in an envelope or a small box instead of larger boxes, go with the smaller packaging options. Another suggestion would be to reduce the protective cushioning with each product. Instead of using tons of bubble wrap, wrap products in one layer of protective cushioning to reduce the package weight. A final suggestion might be to switch to eco-friendly packaging options which tend to be more lightweight and affordable than traditional packaging options.

Cut Back on Marketing Costs

Marketing is essential to the success of your eCommerce store. It is essentially the process of advertising your products to your target audience. Though this is an important operational cost, there are ways to cut back on costs without cutting back on your reach. For starters, look to free and affordable marketing platforms like social media, blogs, and emails. Utilize metrics and tracking software and applications to determine which marketing avenues are working best and eliminate campaigns that aren’t effective. Turn to influencers or your existing customers to help with marketing your products to your target audience by providing free merchandise, asking customers to post their purchases on social media, or utilizing testimonials and customer reviews on your website and social media pages.

Manage Inventory

Having the products on hand readily available for your customers to purchase is essential. However, ineffective management of your inventory can cost you big. Having an excess of a particular product is costly to store and it is also money wasted if it doesn’t sale as you’d hoped. Similarly, not having enough of a product could lead to shipping delays or lost business.

eCommerce businesses must effectively learn how to manage and track their inventory needs to reduce costs while keeping customers satisfied. This should include having regular audits, setting par levels, developing strong forecasting for future purchases, and creating strong contingency plans for unforeseen circumstances like a surge or decline in sales due to events beyond your control (for example, the coronavirus). There is inventory management software available as well as other digital resources you can utilize to make each of these processes easier.

eCommerce businesses certainly do have a financial advantage to their brick and mortar counterparts. That being said, there are still a number of expenses that must be covered in order for eStores to provide quality products and services to their target customers. As such, to keep profit margins high and operational costs low, eCommerce business owners are urged to utilize strategies such as those discussed above to save.