How to generate more profit from your e-Commerce operations?
Everybody in e-Commerce has heard of the impact and importance of smooth user experience, SEO, Google Ads, mobile-first, etc to attract users and make them go through the purchasing flow as fast as possible. Undoubtedly, these keywords (some might even say buzzwords) are important for the growth of your e-Commerce business, raising visibility and beat the ever-rising competition for consumers.
All these channels have one shortage – their primary focus is on revenue of the e-Commerce business, not so much on making the business more profitable – and that is the bottom line that every business owner/top manager cares about. So what to consider to raise profitability and what potential steps you can take today? The following are some ideas I’ve gathered working with companies making innovative moves with their e-Commerce business.
What are the general paths to raise profitability?
Of course, there are numerous ways to raise the profitability of your business – whether it´s through negotiating better terms with the brands you’re representing, or the logistics provider that takes care of your parcels, or try to scout for novel products only making their way to the market (and have a trending potential). All these processes require a good deal of negotiation skills and very often come with a strong precondition – you need majority market share and volumes in your domain to dominate such negotiations. For the majority of smaller or medium-sized businesses, that is not the case. But you still want to get more profit from your operations today as opposed to only relying on growing revenue, right? What is the alternative, then?
The answer lies in the following word combination – back-office digitization & automation. That means getting more done with the same amount of people as you have on your payroll today. Responsibility for repetitive (and usually manual) tasks like purchasing decisions/orders, product information management, product availability management, putting together product campaigns could be handed over to machines to a great extent. That means, on one hand, you can potentially manage HR-related costs more effectively, but on the other gives an opportunity and time to your e-Commerce team to really shine and focus on coming up with new and innovative ways to address the customer, make your business model more competitive against the big players or take more time to be personal with your cus tomers. All these aspects add up to higher revenue and more profit in the end.
What to do next?
There are a couple of things you can do today to analyse your next steps. Here they come:
Think about the processes you have in place to keep your e-Commerce engine alive and working – what tasks your team is dealing with daily? How many repetitive actions are they doing? How much time is spent on tasks like data entry/management, phone calls and e-mails?;
Once these processes (and potential bottlenecks) are listed, call out to a partner with experience in digitizing and automating processes. You can not do everything on your own and a partner with versatile e-Commerce background and references can help you a great deal here;
Meet the companies and present them with your business challenges. Don’t present solutions that you see right away as it may hinder the feedback and out-of-the-box ideas you get;
Let potential partners come up with suggestions for solutions to your challenges. From there you get a feeling of the company, their mindset and how they “click” with your aspirations;
Make a partner choice and focus on one or two initiatives. Take this as a hypothesis-testing, where you use a rational amount of resources to test out whether some new approach or a solution works for you. That way you mitigate risks and have better control over the cost/investment as well.
Hope the thoughts and ideas presented in the article help you along in your journey to a smarter and more profitable e-Commerce. If the topics discussed sparked your interest or raised new questions, feel free to share your thoughts with us.
Anders Abel Head of eCommerce Domain at Net Group Ltd
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