7 Ways You're BLOWING Money In Your Ecommerce Business
Jan 21, 2025
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Discover how e-commerce businesses can save big by rethinking their expenses. Learn about common pitfalls in advertising that can drain your budget and the importance of optimizing prices for better profit margins. Dive into cost-saving tactics like supplier negotiations and exploring multiple shipping options. This insightful discussion emphasizes experimenting with pricing and engaging virtual professionals to streamline operations—all aimed at maximizing your e-commerce success!
E-commerce brands can significantly improve profit margins by minimizing operational expenses and adopting lean operations with fewer resources.
Engaging with multiple manufacturers allows brands to negotiate better terms, potentially reducing costs by over 20% while enhancing product quality.
Deep dives
Excessive Spending on Operations
Many e-commerce brands incur unnecessary costs due to high operational expenses (OPEX), often referred to as being 'fat.' Spending more than 15% of revenue on salaries and fixed costs can indicate inefficiency, particularly for businesses generating over $3 million. To maintain strong profit margins, brands should focus on minimizing unnecessary expenditures and streamline their operations with fewer resources. This approach allows brands to be significantly more effective and profitable, especially for those with revenues below $20 million.
The Importance of Offshoring Talent
Not utilizing offshoring as part of a lean operations strategy represents a significant oversight for many businesses. Hiring talent from countries like Canada or the Philippines can lead to considerable cost savings, often ranging between 20% to 30% less than hiring domestically. Furthermore, there is a misconception that lower wages equate to lower skill levels; however, ample talented professionals exist globally. The capacity to secure high-caliber talent internationally creates leverage and efficiency while dramatically reducing costs.
Avoiding Ineffective Creative Testing Campaigns
Running traditional creative testing campaigns often leads brands to waste substantial marketing budgets without achieving desired performance outcomes. Brands that have spent large sums on these campaigns have frequently underperformed relative to their targets, resulting in lost contribution margins. Instead, launching ads with manual bids alongside other campaigns can help optimize budget allocation while allowing platforms to identify winning creatives more effectively. This strategy not only cuts costs but also improves the overall performance of advertising efforts.
Optimizing Cost of Goods Sold (COGS)
E-commerce brands frequently overlook the importance of engaging with multiple manufacturers, leading to inflated costs for goods sold (COGS). By reaching out to a broader range of suppliers, brands can negotiate better terms and reduce their costs by significant margins, sometimes achieving savings of 20% or more. Increasing the number of suppliers consulted can also empower businesses to improve the quality of their offerings while simultaneously lowering expenses. Understanding and leveraging manufacturing relationships is crucial for enhancing efficiency and profitability within the supply chain.
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