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Reducing operational costs is important for e-commerce businesses because it can help improve profitability, competitiveness, and customer satisfaction, which are the key factors for success of an e-commerce business. This would help them to invest in marketing and other essential activities to increase their customer base.
Periodic evaluations are essential for increasing sales, improving returns, and increasing customer satisfaction. Adopting new technology and applying data analytics is another way to identify weak points and eliminate needless expenditures.
In this article, we will learn about the finest cost-cutting strategies that any E-commerce business should implement in 2023.
So many people start an eCommerce website and business without realizing that startup costs typically include a number of premium plugins, SaaS, and website features. If you are not a backend whiz, many of these are essential for running your business, but it is easy for people to fall victim to the endless affiliate marketing articles out there telling them they absolutely need x or y premium service. If you have a good understanding of your business and its needs, you should be able to get by with the free versions of many of these add-ons, at least while you scale and start gaining traffic.
You can cut your operating costs significantly if you are willing to teach yourself how to do a lot of the basic SEO work. Increasing your traffic and conversions requires a lot of effort in digital marketing, particularly link-building and content. Rather than paying an agency, spend some time watching and reading tutorials and handling the legwork yourself, at least during the early stages.
Leverage third-party platforms like Shopify, Woo Commerce, Magento, etc. These platforms offer online stores with industry-tested features at a fraction of the cost (and time) it would take to do it yourself or hire someone else to do it for you.
Sell older inventory quicker with marketing campaigns that prominently feature items that are on sale.
Charge return rates based on the product category and not by individual products to encourage a more diverse product line-up. For example, if a store sees 10% returns in apparel, but only 3% for other categories, it can lower its overall return rate by making its expensive clothing cheaper or lift up revenue by increasing the price of clothes that don't have as high a rate of returns–since those items cost less each.
Simplify design processes so digital assets come from fewer databases and use fewer resources when they're processed.
The first thing the business can do is outsource those operations which are non-critical. These usually include the support functions such as human resources or finance. Outsourcing is a credible yet cheap way to gain expert services while maintaining quality and reducing costs. In my case, when we shifted to an e-commerce website - I hired two virtual assistants who managed my operational tasks at a very minimal fee. This not only helped me focus on strategic decision-making but also lowered my costs!
The world is moving towards digitalization - and so should companies as well. Better yet for e-commerce stores, everything must be fully automated in order to ensure the smooth running of the business and reduced costs! These costs are not only financial but also eliminate the small human errors causing time and energy wastage which eventually lead to loss of productivity. Nowadays many software makes the whole process of reaching a customer to closing a deal seem like a piece of cake. Therefore, to reduce costs, organizations must move towards these platforms rather than manual work.
"Trim the fat. This means letting go of unnecessary products. Unnecessary products include those surplus or excess items that are unsold for a long time. You can get rid of these by selling them at lower prices or give them away as freebies to bulk buys. Letting go of these items helps free up space and reduces your storage expenses.
Outsourcing is another way to reduce operational costs for the eCommerce business. At most times, outsourcing some tasks is cheaper than hiring a regular employee for occasional tasks, such as payroll and bookkeeping. Many regular employees can be expensive for businesses as they need all the mandated benefits and taxes other than their salaries.”
"If you are shipping a large volume of products, the cost of making or purchasing shipping labels can be enormous. The best solution is to buy and use a thermal printer to print your shipping labels. Thermal printers do a quicker and better job than inkjet printers when it comes to printing labels in bulk. They are also more cost-efficient than their inkjet counterparts. Another alternative would be to buy shipping labels in bulk directly from the manufacturer rather than from a retailer. You are bound to get a much better price when buying the labels directly from the source. "
"E-commerce businesses can reduce operating costs in various areas, such as warehouses, distribution centers, and shipping.
Warehouse operations: With the help of automation solutions like robotic arms or conveyors, eCommerce companies can reduce the need for human labor in warehouses.
Distribution centers operations: E-commerce companies can invest in high-tech distribution centers to improve distribution performance.
Shipping operations: Ecommerce companies should consider investing in technologies like RFID tags or drones to improve their shipping performance.
"You may progressively establish a tighter and more trustworthy connection with your suppliers if you can prove to them that you're a strong seller over time. However, this is a two-way street; suppliers require your business just as much as you require their services. To get better rates from your suppliers, use your past as a successful e-commerce company as a bargaining point. They don't want to lose your business (especially if you're exceptional at selling their stuff!) at the end of the day. There's nothing wrong with incorporating your knowledge into your operational cost-cutting approach."
"If you want to cut costs, dropshipping is one of the most effective methods. Dropshippers save a lot of money since they don't have to keep any goods themselves. They save a lot of money by not having to own, manage, and maintain a warehouse (or even several warehouses). In a broader sense, dropshipping is a popular e-commerce model because it offers minimal overhead expenses compared to other forms of e-commerce enterprises, a virtually unlimited amount of items you can sell, and a lot of management freedom."
"Do you have a cybersecurity plan in place for your small business? If not, you should keep in mind that the average cost of a cyber assault on a small firm is around $35,000. Implementing a cybersecurity plan might save you a lot of time, worry, and money in the long run. If, on the other hand, you already have a cybersecurity plan in place, you may still save money by incorporating cost-cutting measures into it. Look into pricing negotiations with cyber security service providers; educate staff on how to take cybersecurity into their own hands, and regularly back up your data to minimize big losses if a system breach occurs."
"Using the power of technology to reduce operational costs is a viable option. This does not necessarily imply that employees will be fired and replaced with robots. By offering innovative tools to assist simplify your team's work, on the other hand, you may give them a significant advantage. Automation may be used to decrease online shopping cart abandonment, reply to reviews, handle customer support inquiries, and much more. Automation can also assist maintain the high-quality customer service described earlier on the list as a cost-cutting technique."
"The biggest way to offset operation costs for any e-commerce business is to reduce unnecessary services/products that you offer. This is easiest by first going through your company’s budget, and realizing what expenses exist that are tying you down in an unnecessary way. Talk with your accountant to help you pinpoint these costs. Once you know where they are, you can implement a protocol to eliminate them from your operation. You want to optimize productivity for your business to run as efficiently as possible, so take advantage of the many resources available for smooth operation."
"Avoid making the error of merely ‘getting by' with items and services that are ‘good enough'. High-quality goods and customer service will not only help you decrease returns, refunds, and unsatisfied consumers, but they will also help you meet your operational cost-cutting goals. In the short term, it may cost your company more time, attention, and money, but in the long run, it will save you more money."
"The easiest way for e-commerce businesses to reduce operational costs is by outsourcing the tasks that are costing them more than they should. Hiring a new member to perform a specific task can cost you way more than outsourcing it to an e-commerce development agency. However, you need to analyze your business situation to list down the operations that could use outsourcing.
Another way is to centralize your production space. Try to keep your office and warehouse in the same building. It will help you cut down some transportation costs.
Determine which of your company operations may be outsourced. Businesses wanting to cut operating expenses should evaluate whether outsourcing services might save them money. Marketing, advertising, and communications are frequent company tasks that are outsourced. There is so much competition in the market and choosing a result-driven outsourcing company may save you a lot of money. Outsourcing non-critical tasks are especially beneficial for small-to-medium-sized firms that may not require a full-time marketing team or advertising resource. Outsourcing services might be found at a lower cost or on an hourly basis.
One of the most logical solutions to expense optimization is assessing which business functions you can outsource and what you can retain. You can determine this by choosing operations that are a part of your core business and leaving what you can’t best do. This will help free up time and resources for your employees to focus on key processes. Outsourcing can help you get high-quality services at a very low price because you can find vendors in developing countries that have a different wage pattern than in the states. This can help companies save on investments such as infrastructure. This is beneficial for SMEs that would do better without having to work on their marketing ventures or logistics. You can find such services at cost-effective rates. Outsourcing also helps cut down costs regarding recruiting and development of talent, which frees up a major chunk of your operation cost.
"If you notice that your business has several activities that cost it money, but you can do without, it is good to eliminate them. You can even put them aside and only spend on them once you have covered expenditure on the more important services. An example of costs to eliminate is office yoga sessions. They may be important for team building, but they are not essential for the survival of the business."
"Engage with your customers to make sure that expectations are met. This will help you lessen the returns of products from them. You might be asked to pay for re-stocking fees from suppliers and we want to avoid that.
Exert effort on looking for good suppliers and distributors within the market. Make sure that you a getting an amazing deal from them. Every single penny is valuable in this sector. We don't want to waste them.
Hire some Virtual Assistants for your company. These people can assist you with your administrative and non-core tasks which will help you free up your time so you can maximize your business results. You might want to also consider hiring them because you don't need to pay for their benefits - unlike hiring a regular or full-time employee.
With costs rising it’s become more challenging for us as e-commerce business owners to boost profits while keeping prices competitive. It is vital that we reduce our operational costs to maintain a healthy, self-regulating, and growing business.
For us, by hiring a virtual assistant we are able to drive down costs as compared to a regular employee because a virtual assistant costs less as we don’t have to pay any benefits. An effective virtual assistant can make the difference between a positive or negative outcome. If you're looking to boost results and maximize business efforts, outsourcing admin tasks to a virtual assistant is a great way to reduce operational costs.
One of the biggest costs an eCommerce business has is its administrative expenses. Menial tasks like scheduling calls and sending emails need a dedicated person to do them so that there are no hiccups in the workflow.
One way to reduce these costs is to replace your administrative worker with a virtual assistant. A VA can help complete these tasks much more efficiently than a human. By delegating administrative tasks to a VA, business owners can focus on the more technical tasks without worry. With a virtual assistant, you also do not have to worry about a drop in productivity, and you only pay for the amount of work in the VA does, saving you a lot of money.
"Ecommerce companies might not easily realize it, but their packaging might be adding to their operating costs. Shipping companies consider the size (dimension) and weight of the packages they carry, and an increase in these factors leads to an increase in costs.
On way of reducing the shipping charges is to make the packages as small as possible. Items should be stripped down (when possible) to fit in the least possible package in terms of length, height, and width. A small package takes less space and will cost less.
The second way is to use lightweight material for packaging. This is especially relevant for companies that ship in high volumes. If you have lifted a ream of A4 papers, then you understand what multiple single sheets can add up to.
"Online businesses can save a lot of money by analyzing their marketing channels and keeping those that have better ROI. A Google Analytics script, when properly installed, shows critical info that can be used to make informed data-based decisions. If a business is using any form of paid advertising like SEO, email marketing, Google AdWords and so on, this script can be useful in gauging their effectiveness.
By analyzing the marketing channels, a business should be able to tell which ones are bringing profit and which ones have failed. From this, they can stop paying for the nonperforming channels or optimize them for better ROI.
"One of the most important parts of having an e-commerce store is the fulfilment of your orders and delivery to your customers. Today consumers are heavily influenced by the speed and quality of their delivery and so ensuring your orders arrive with them swiftly (and in one piece) should be one of the top priorities for the business.
Many retail businesses start off as ‘one-man bands’ and often do their fulfilment in house. To begin with that is manageable and cheap but as your business grows it will become labour intensive and drive your profits down.
This is where e-Fulfilment comes in. It sometimes seems counter-intuitive to employ the services of a 3PL (3rd party logistics) however it will most likely be more commercially viable, smoother operationally and more efficient than your competitor!
Using the knowledge, intelligence tools and systems of a professional e-fulfilment company, alongside highly trained staff can result in quicker deliveries = happier customers = repeat customers, better reviews, great brand reputation and ultimately more orders and more profit!"
"Let's say for example you sell t-shirts. That's all you sell right now. You're a t-shirt company. The company you order the blank shirts from sells lots of other apparel, but because you only ever buy shirts, they don't cut you much of a deal. The printer who prints your designs also has bulk discounts that you don't qualify for.
And most importantly, your customers are asking for hats and socks, and tote bags. So, you decide to bite the bullet and give it a try. Suddenly your apparel vendor is giving you 25% off on bulk orders and your printer is cutting you a nice deal, too. You're moving more products because not everyone wants to buy shirts. And you're saving money overall to make that profit.
" We have been working on reducing product returns as the first step in reducing our operating costs. This move is because one stands to lose a lot from already incurred shipping costs and labor or still be required to repair any damaged goods. To achieve this, provide adequate information on the product pages to provide customers with more reliable and accurate ideas on what they are buying.
Another great way to reduce eCommerce operation costs is to leverage automation to minimize human errors, manual work, and time wastage. Technology workflows have been known to enhance productivity, efficiency, and business continuity. Automation can also allow one to hire virtual assistants who are much cheaper, unlike regular full-time workers who might cost more in wages and other employment benefits.
"Ecommerce businesses can save on operations costs by purchasing and using highly useful software that can properly organize documents and other items online
With this, the company doesn't need to hire bookkeepers and other people to document and fix the records of the company. Aside from that, it will make the filing of taxes even easier as the documents are already filed and fixed properly. With that, the company will also not pay penalties for late income tax filing as everything is already organized. "
One of the most effective strategies to minimize operational costs is to streamline the supply chain and distribution process It means incorporating supply chain management measures such as Just in Time Inventory (stocking only the products that are required), integrated supply chain methods, and vendor managed inventory are just a few of the ways that online e-commerce companies can streamline their supply chain process and earn above-average returns on investment.
Inventory counting on a regular basis aid in the reduction of eCommerce operational costs. Firms can use inventory counting to decide which products can be given at a discount to clients and which products require replacement. eCommerce organizations can discover sales patterns that can aid them in placing orders in the future by combining accurate inventory counts with sales trend software.
Paid advertising is one option that firms should examine. This is a means for businesses to reach out to more potential customers and potentially generate more revenue than before. There is a myriad of tools and applications available to help decode the statistics of your advertising and where you should focus your investment to better serve your organization, thanks to an ever-expanding market. The minimal cost involved in advertising would in return generate larger revenue.
Use the lowest possible bundle. Dimensional weight, which comprises a width, length, and height, is charged by carriers. Reduce the extra shipment weight fees by using lightweight packaging materials.
The crucial aspects that businesses should focus on are:
“E-Commerce development sectors can cut their business expenses through -
Quality content is available in excellent eCommerce WordPress themes. If you want to stand out from the crowd, choose premium themes for your website. There are many free eCommerce themes available on the market, but only a few quality themes that can provide your eCommerce business an attractive and straightforward design. You must choose quality themes if you expect Responsive Design. Nowadays, people use numerous devices to browse, therefore every screen supports your theme and great site view.
Themes are the only thing that users see when they search for a website. The interface, colours and the entire outlook of the vibe has to connect with the user. For example, the colours cannot be too dark to put a strain on the eyes or too light to make it look too dull. You cannot have a bright and happy theme for let’s say a morgue.
Mobile will not die. In fact, it's primed to dominate casual computing, which includes shopping. Despite this, the bulk of purchases are still made on desktop computers. So, your site must be optimized for both contexts. A responsive design allows your store to achieve this. It also improves its search engine ranking. So, when looking for themes, start by removing non-responsive ones to narrow your options.”
The continuation of this part can be found here, where we have discussed some more shocking yet valuable cost-cutting strategies to help you reduce needless expenses in your eCommerce business.
The main aim for an e-commerce business is to offer a seamless and intuitive shopping experience for customers, which leads to increased business sales and customer satisfaction. Hence, it is critical to have periodic reviews, identify weak points and resolve them to get increased sales, good returns, and enhance customer satisfaction. Adopting new technologies and employing data analytics are other ways to identify and eliminate unnecessary costs.
Overall, implementing cost reduction strategies can help your e-commerce business run smoothly and remain competitive. This article has gone through the best cost-reduction strategies every E-commerce business should follow in the upcoming future.
A passionate Technical writer and an SEO freak working as a Content Development Manager at iFour Technolab, USA. With extensive experience in IT, Services, and Product sectors, I relish writing about technology and love sharing exceptional insights on various platforms. I believe in constant learning and am passionate about being better every day.
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