How to reduce the overall costs for your new e-commerce business
It used to be so simple. You opened an e-commerce store in a popular niche, followed specific strategies, and made a profit.
But times have changed. Now, the competition’s fierce.
According to a 2020 Statista survey, Amazon alone accounts for 50% of all e-commerce sales, with that expected to rise significantly in 2021. And with the flood of e-commerce stores increasing by the day, you need a strategy to stay afloat.
So, what are your options? You can’t stop the competition. But you can adopt actionable ways to reduce your e-commerce store costs.
This post is about self-empowerment. It’s about doing what can be done, right here and now, from the comfort of your laptop. We’re going to tell you how to reduce overall costs for your new e-commerce business. Doing so will instantly make your business more competitive, giving your new e-commerce store the edge it needs.
1) Create a marketing plan
How to reduce cost in e-commerce is a frequently asked question, and the answer starts with you creating a market plan.
You become competitive by reducing costs, and that’s what a well-researched marketing plan does. It ensures every marketing dollar you spend provides the best return on your investment. A marketing plan contains a list of actionable steps you take to successfully engage and convert your target market. And outlines your monthly, quarterly, and annual marketing strategy.
An e-commerce marketing plan includes:
- A well-researched overview of your marketing and advertising goals
- An assessment of your current position in your market (that’s easy if you’re new)!
- An achievable timeline for completing tasks and goals within your marketing strategy
- KPIs (key performance indicators) that you can track, so you reach your goals
- And a description of your target market and their pain points and needs.
But for marketing to work, you must first form a brand identity.
2) Form a brand identity
Your brand identity is how you communicate to your audience using design elements that differentiate you from your competition. It also portrays an image that represents your company to encourage consumers to engage with you.
Ultimately, it makes you unique and stand out within your niche.
And when you do, it becomes easier to organically attract, engage, and convert leads into lifelong fans of your brand. Saving you money on advertising to acquire new customers.
A brand identity must be:
- Distinctive: So, it stands out in your crowded marketplace
- Memorable: People use brands they recognize, make yours memorable by using visuals, such as a well design logo. (more of this in a sec)
- Scalable: Your brand needs to evolve as your business grows
- Cohesive:The design elements you use must work together to create a consistent brand identity.
At the start of your ecommerce journey one of your first branding port of calls is your logo design. And to help you stand out from the crowd it’s worth investing in some money in a log design that really speaks to who you are as a brand. While, you might be tempted to use a logo creator app(they are a lot cheaper), it’s better to have a designer make a logo for your from scratch.
3) Build a good website
One of the best tips to cut costs for your e-commerce store is to build a good website. Because having one increases your chances of converting visitors into consumers, which provides you with the highest return on your marketing investment.
A good website has a clean, friendly UX (user experience), is screen-responsive, fast-loading, and brand-oriented.
You only have milliseconds to engage users with your website. And once there, people expect ease of use and to find what they need with minimal hassle. If your website doesn’t provide that, your visitors will bounce, and that will affect both your sales and your organic search engine rankings.
Building a good website with optimized design elements is now affordable and easy to do.
4) Negotiate with suppliers on order quantities
Your ultimate e-commerce operational cost reduction strategy might be more straightforward than you think. All you do to decrease costs is reduce your PPU (price per unit).
Usually, when starting a business, we’re ordering a minimum order quantity, resulting in suppliers charging us the highest PPU.
However, this is negotiable by requesting a quote on a higher order quantity. I’ve convinced suppliers to agree to a lower PPU on my first order by telling them I need to test the market, and if successful, I’d order a higher quantity next time around.
Another tactic you can use to gain a lower PPU is to pre-agree a higher up-front payment, as we all like to have money in the bank.
5) How effective packaging helps you, your image and your bottom line
Packaging plays a vital role in your branding strategy. But today’s consumers frown upon unnecessary waste, often find over-elaborate packaging distasteful, and leave negative reviews because of it, regardless of how good the product is!
You can avoid negative feedback and reduce your product packaging fees by ensuring it’s as minimalistic as possible. And if you explain why to customers, they’ll love you for it.
6) Apply for a business shipping/delivery account
You can reduce your e-commerce business’s operational costs by choosing one shipping company and registering a business account.
The old saying “it pays to shop around” is correct when you’re first researching delivery companies. And you should choose one based on your e-commerce delivery needs, delivery speed, and overall customer satisfaction, not price.
But what most small e-commerce owners don’t know is if you register for a business account with your shipping/delivery company, you’ll be appointed an account manager and more favorable rates.
7) Avoid unnecessary transfer fees
Here’s where a little bit of research could save you a lot of money down the line.
First, establish which payment methods your target audience are using most. It could be PayPal, Google Pay, Apple Pay, credit card, or bank transfer. It’s often determined by the product or service you’re providing and your target market’s location and demographic.
Once you’ve identified their preferred payment methods, ensure you have them on your e-commerce store. Then contact each supplier and inquire about any possible fee reductions or waivers they can provide.
If you don’t ask, you don’t get; it pays to be bold.
8) Don’t bank on foreign transfer!
Want to know how to reduce your transaction costs? Don’t use your bank for foreign transfers.
If you’re buying stock or selling on a third-party website overseas, you’ll have transfer and foreign exchange fees. Bank’s charges for these services are ridiculously high, and their exchange rates notoriously low.
You could save yourself a lot of money by using a forex company/ payment service for all your transactions. Just as with your freight service, by having an account manager, you’re in a position to negotiate the best deal available at any given time.
These companies always start high, but if you persist, you’ll be amazed at the savings you can make.
9) How to reduce operating expenses with this one strategy
Keeping customers might sound too simple to be an effective cost reduction strategy. But think of all the time, money, and effort you put into locating, engaging, and converting a lead.
Now look at these statistics:
- Acquiring new customers costs 5 x more than retaining an existing one
- An Increase of 5% in customer retention can increase your profits from 25-95%
- Success rates of converting an existing customer are 60-70%
- But fall to only 5-20% for a new one!
See why you must retain your customers?
Several ways of doing it are:
- Prioritize your customer service
- Use personalized content for product recommendations
- Give customers exclusive perks, such as discounts and free shipping
- Develop an irresistible customer loyalty program
- Always use a retargeting ad campaign
- Follow up with abandoned cart emails
- And provide multiple communication channels
What are you waiting for?
Any of the above strategies will reduce overall costs for your new e-commerce business. But together, they’ll enable you to become highly competitive within your niche.
And believe me, the satisfaction you’ll get from making a deal that reduces your costs is priceless.