An age-old question for eCommerce merchants is how to reduce expenses and increase profitability.
In eCommerce, profit is what matters. Your Shopify store may be generating huge amounts of sales from Google Ads or social media marketing, but if you’re not seeing the difference on your bottom line, it’s not worth anything.
Instead of becoming overwhelmed trying to figure out profit margins, net vs growth, and other profitability factors, it’s time to leave the profitability calculations to someone else and actually learn how to increase your business’ profits.
Perform a Profitability Analysis
Metrics. Everyone wants them, and everyone needs them.
Measuring your online store’s profitability factors can help you figure out what strategies are worth spending time and effort developing.
Many eCommerce businesses determine profitability with the help of a profitability analysis such as BeProfit, which calculates your costs and profits, and provides insights into how you can improve your Shopify store and make it more profitable in the long run.
Through a profitability analysis, you can determine your outgoing costs, such as:
- Employee Wages
Analyzing your outgoing costs, revenue, and profit enables you to direct your focus to customers, campaigns, and products that are bringing you the largest profit.
With the right analytics, you can ensure your budget is spent on strategies that will generate a positive return on investment.
5 Tips to Improve Your Store’s Profits
1. Increase Your Store’s Trustworthiness
Being a trustworthy brand is essential for generating sales and increasing profit margins. Building trust between you and your customers encourages them to make purchases from your Shopify store which, in turn, increases your profit.
In today’s world of misleading privacy practices and misinformation, establishing your online store’s trust is essential.
For example: Customers might abandon their shopping carts if they see hidden charges when they reach the payment page.
If you are transparent and earn your customers’ trust, your profits will grow tremendously.
Customers are more likely to trust your store if you:
- Share your brand story to help customers feel like you’re an authentic and relatable business.
- Show social proof such as reviews, user-generated reviews, photos, and customer statistics.
- Be transparent about costs and pricing.
- Clearly display contact information to show that there is a real person behind the screen who can be approached with questions and concerns.
Building a good eCommerce site that functions well and communicates your message is essential, and gaining your customers’ trust will have a huge impact on your conversion rates and profit.
2. Automate and Outsource Time-Consuming Tasks
Time spent doing repetitive (yet essential) tasks is time that could instead be used to generate more business such as figuring out how to reach new customers, executing marketing plans, and expanding your business.
So how can you keep the wheels of your business turning without having to spend large amounts of your day on basic repetitive tasks?
The answer is automation and outsourcing.
Many parts of your eCommerce business can be automated, from return management to customer service to data management, saving you considerable amounts of time and money that can be devoted to more effective tasks.
Additionally, you can outsource tasks such as order fulfillment, advertising, and administrative work, which saves you the time and effort that you would need to spend if you managed everything in-house.
3. Write Detailed Product Descriptions
A well-written product description has the power to propel your customers through your sales funnel. Incorporating creativity and product benefits into your product description, your store becomes more likely to convert first-time shoppers.
The goal of product descriptions is to give the customer enough information to make them want to buy the product immediately.
When writing your product descriptions, some questions to take into account are:
- What do customers gain from using your product?
- What problems does your product solve?
- What separates your product from others on the market?
Providing your customers with all the important information about your products reduces your customer service inquiries and helps them decide whether the product is right for them, which in turn helps lower your return rates and saves you time and money.
4. Offer Perks to Loyal Customers
Incentivizing customer loyalty is an important aspect of your eCommerce business because it’s cheaper to retain existing customers than to look for new customers.
Offering rewards can increase customer retention by keeping customers engaged with your brand. 75% of customers say that receiving an incentive increases the likelihood of making another purchase.
Rewards can be discounts, free shipping, or exclusive access to new products. Offering loyalty rewards can have a significant impact on the customer experience by evoking an emotional connection with your customers.
Offer rewards to loyal customers to show that you appreciate them and to keep them coming back to buy more.
5. Use Data to Optimize the Customer Experience
Data is essential for making smart business decisions, especially in eCommerce, where good data enables you to significantly increase sales, margins, and profits.
Tracking your data helps you always be on top of what customers prefer, what’s selling, and what’s not moving.
With the advantage of data analytics, you can set the right pricing for products and target high-value customers to increase profit for your Shopify store.
Data can provide insights into how customers behave and what they prefer, which can show you which products you need to focus on and where you need to provide better service.
Identify Your Weak Points and Take Action
Doing a profitability analysis can provide you with information that you can use to optimize your eCommerce store.
Once you know where your costs are highest, you can take action to reduce those costs by automating or outsourcing certain aspects of your business, and increase your profits by focusing on your customers and giving them what they need.