10 Ways to Reduce the Operating Cost of Your E-Commerce Store

Ann Pichestapong
April 9, 2019
E-Commerce Operations
Operaciones de e-commerce

Running an e-commerce store can be deeply gratifying. Whether you consider it a hobby, a side hustle, or your primary career, knowing that something you have developed is paying the bills is a feeling rarely matched. Unfortunately, that e-commerce store is also the source of a lot of bills. Between hosting fees, credit card fees, gross margins, shipping costs, and marketing, it can feel like your e-commerce store is costing more than it’s bringing in.

To cut your operating e-commerce store operating costs and feel more empowered in your business, try these 10 strategies.

Save Abandoned Shopping Carts

Somewhere between 60-80% of shopping carts are abandoned before a customer makes a purchase. That’s so much money left on the table! The good news is that recovering abandoned carts is relatively simple. Just create a trigger sequence in your email server that contacts people to remind them of their abandoned items. For some people, a quick reminder will be sufficient. For others, you may need to offer an incentive like a discount or free shipping. But even with these small costs, you’ll come out on top.

Invest in a Firewall

Like it or not, fraud is a big problem in the online world, and it can cost your e-commerce store greatly. From payment and shipping fraud to thieves stealing your digital content, these are sunk costs you may never get back. That’s why security should be a part of your budget. Think of investing in cybersecurity for your store like you would think of investing in health insurance for yourself. It’s not a fun expense, but it can save you a lot of money in the long-run.

Reduce Packaging & Shipping Fees

You may want to show off with fancy packaging, but it’s a big expense that can easily be cut to reduce your operating costs. To cut the cost of shipping, consider buying packaging materials in bulk from places like The Packaging Company or your local Costco. If your product is small enough - like cosmetics, jewelry, or other small items, you can ship them in padded envelopes instead of more expensive boxes. Finally, go easy on the bubble wrap. One layer of bubble wrap is enough for most fragile items. By cutting back, not only will you spend less on packaging, but you’ll save on shipping fees since each package will weigh less.

Choose the Best Payment Processor

It’s tempting to use a simple payment processor like PayPal, but the high cost of credit and debit card fees can quickly eat into your profits. Instead of choosing a payment processing system, consider using software that allows you to invoice without added fees. Sites like Quickbooks allow you to invoice your customers at no extra cost. Other payment sites, like PaySimple, allow you to process an unlimited number of transactions for a manageable monthly fee. To determine if a monthly fee payment service is right for you, calculate 3% of your sales. That’s the average amount you’ll pay in fees to sites like PayPal. If the monthly service fee is lower than 3% of your monthly sales, this route will save you money.  

Boost Customer Retention Rates

It’s more expensive to get a new customer than to keep an old customer. This means your customer retention rate is a very important factor in keeping your operating costs low. You may think there’s nothing you can do about your CRR, but that’s just not true. To start, consider sending every customer an “exit survey” after they have completed a purchase. Ask them about the buying process, your prices, the quality of the products, and their overall experience. Then, take the time to evaluate these reviews and take action on anything that comes up consistently. For instance, if enough people are upset with high shipping costs, it may be worth it to incorporate the shipping fees into the main price and offer “free shipping.” You’ll ultimately get paid the same amount, but your customers will be happier and feel heard.

Negotiate Prices with Manufacturers & Suppliers

If you sell private label products, you may be able to negotiate with suppliers and manufacturers. Consider asking for a bulk discount or signing a contract to buy a certain amount over time. Some vendors may even offer prices breaks if you pay in advance or allow for automatic payment upon product arrival. The most important thing is to ask. You never know what kind of deals they may be able to offer you.

Use Viral Marketing Campaigns

Advertising can get expensive, but a good viral social media campaign is free. Take advantage of the power of social media by using “Stories” on Facebook and Instagram to push traffic directly to your store. You can also host challenges to engage your audience and get them to share your site. Create a branded hashtag to get the word out, and use popular, trending hashtags to get your content in front of a bigger audience.

Reduce Customer Returns

Returned merchandise is one of the fastest ways that cash can slip through your hands. Thankfully, there are a few things you can do to reduce the number of returns you have to manage. First, extend the timeframe that returns are allowed. Human nature dictates that we’re more likely to take an action when we feel that the issue is urgent. If making the return is not urgent, your customers will likely put it off. Eventually, some will forget. It’s a quick way to instantly decrease the return rate. Of course, leaving people feeling “stuck” with your merchandise is hardly a plan for long-term e-commerce success, so you also need to educate people on what they’re getting so they’ll be more informed before they make a purchase. Consider creating an FAQ section prior to checkout, covering any common issues or reasons customers initiate returns. Finally, when customers do return items, always ask them why. Over time, you’ll be able to change your processes to cut the return rate.

Own Your E-Commerce Platform

When you’re first getting started, it can be tempting to build your e-commerce store on a site like Etsy or Amazon, but these platforms take a portion of the profits that could go into your pocket. Rather than give away a percentage of your cash, consider building a site on a platform like Squarespace or Wix. Sure, there’s more work involved up front, but with the right strategy, it can be a good way to save money that could otherwise go to marketing efforts.

Make (and Stick to) a Budget

This might be number 10 on this list, but it’s a vital step to managing your expenses and keeping costs down. Create a budget and stick to it. Make sure to track everything you spend on marketing endeavors. Little things can add up quickly if you don’t pay attention.

One of the best ways to be budget savvy when building out your e-commerce store is to build a website that actively engages users to lead them to a buying decision. After all, with more money coming in, you’ll be less concerned about the cost of marketing. DataCue can help with this by making your website react differently to each viewer and showing him or her only the content that they are most interested in. Want to learn more? Check out this video to see DataCue in action.

Find out how DataCue can increase your store sales

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About the author

Ann is the co-founder and CEO of DataCue. Her unique background as a data scientist and an ex-management consulting helps her use sophisticated technology to solve real business problems. Her passion is to open up the power of personalization from only big tech companies to everyone.

Sobre el autor

Ann es co-fundadora y CEO de DataCue. Su experiencia única como cientista de datos y consultora la llevado a usar tecnología sofisticada para resolver problemas de negocio reales. Su misión es extender la poderosa herramienta de la personalización, hoy relegado a grandes compañías, para todas las empresas del mercado.

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