Even the most successful businesses can grind to a halt if the expenses exceed the income. Therefore, to stay afloat, you need to balance your e-commerce earnings with the running costs and strive to increase the profit margins. You can either increase or maintain it at the average gross margin of 40%, to ensure that your business scales. Here are practical tips to boost your profit margins:
Optimise the Prices of Your Products
Most e-commerce products have a thin profit margin. With the fierce competition in the industry, charging the right prices can be challenging. If you lower the selling price, you will not make any profits, but if you charger more than your competition, your sales will also drop. How can you optimise the rates to work in your favour? Dynamic pricing helps you to match your product prices with those of your rivals. Therefore, you can charge slightly higher or undercut them to make more sales. Besides, dynamic pricing helps you to control the profit margins and achieve your business objectives.
Cut Down Expenses
A profit margin is a difference between your income and expenses. That gives you two ways to maximise your margins; you either increase revenue or reduce costs. Minimising your spending is viable since it is within your control. Carry out a cost analysis to figure out where your money is going. For instance, how much are you paying for parcel delivery and digital marketing campaigns? After a quick review, start trimming the excess costs.
Upsell and Resell to Existing Customers
Research shows that the probability of selling to a prospective customer is 5-20%, while that of selling to your current customer is 60-70%. That means you should focus on reselling products to customers who you have gained their trust. Leverage their trust and personalise your marketing campaign to suit their needs. You can also increase sales by encouraging bulk purchases. For instance, if your buyer is looking for shoes, offer a variety of accessories like socks and laces as upsell items.
Focus on Customer Loyalty
For your e-commerce business to thrive, you need to look for new customers regularly. However, if you are losing more than you are attracting, then your margins will not improve. If you focus on making your customers happy, you will increase your sales because they will be receptive to your marketing. Besides, loyal customers are also likely to recommend your products to their friends. To boost customer retention, you can offer discounts, implement customers’ feedback, and ensure they receive high-quality services. Prioritising customer loyalty will stabilise your profits and scale your margins.
Sell Across Multiple Channels
Since you can sell directly across multiple channels, you need to use it to your advantage. Ensure your customers can shop at their convenience by making it possible for them to order directly from social media. If the selling process is short, your sales will shoot through the roof. With the range of multi-channel e-commerce platforms, you do not have to worry about additional management costs.
Knowing how to maximise profits ensures that your business grows gradually. You can achieve this by either scaling the average sales or reducing costs.
