7 Ways to Increase Profit Margin for eCommerce Businesses

September 12, 2022
| by BeProfit - Profit Calculator

In an eCommerce business, profit margin denotes the revenue dollars flowing to your bottom line. It represents the money you are making and the overall financial health of any business. If you want your eCommerce business to thrive in the industry, you must stay focused on your profit margins and fiscal health.

Generally, profit margins depend on the type of products you sell. If you are a reseller (of other brand products), your gross profit margin could be 25%. 

For a direct-to-customer eCommerce business, the gross profit margin could be 40-60% or higher. The more the profit margin, the better for your business. 

There are various ways to increase the profit margin for an eCommerce business. Let’s get to know them: 

1. Brand Awareness

It’s estimated that there are 12-24 million eCommerce websites worldwide, with more stores adding up each day. Amidst such a high range, the competition is high too. So, you must focus on a branding strategy that raises awareness. 

The rule of thumb is to familiarise people with your eCommerce brand, so they buy more from you. These repeated purchases and leads can improve both incremental sales and market share. All in all, it can increase your profit margin and give you a better edge in the competitive market.  

2. Reducing Your eCommerce Return Rates

The average online purchase rate for an eCommerce business is 18.1%. Moreover, about 80.2% of returns occur because of damaged/broken products. With such statistics, you must know that high return rates have a huge impact on profit margins.

If it keeps increasing, you may soon face backlash in business-customer relationships. It may also discourage the buyers from returning to your website.

That’s why it’s important to reduce the return rate for your eCommerce business. Reducing rates will create value for both the shoppers and retailers. It will also ensure more profit and a happier customer base. 

The best way to reduce your eCommerce return rates is by ensuring that the products meet your customer expectations.

For that, you can analyze the customer return pattern, define return policy, and introduce exchange over returns. 

3. Try BeProfit, the Profit Analysis Dashboard

The best way to improve your eCommerce profit margin is by having a clear picture of where your business stands. And how could you do so? Through BeProfit

BeProfit is a top-rated profit analysis dashboard that can interpret your eCommerce data for better profits and business growth. It integrates all the performance KPIs on one board for a complete overview. Also, it helps to understand business metrics by breaking complex data into precise graphs/charts. 

BeProfit is trusted by the sharpest eCommerce minds and is quick to set up. You just need to get the app, sync the platforms, and start making data-driven decisions. It’s that easy!

Its precise profit analysis, full customizability, and seamless integration make this tool even more convenient. BeProfit can cut down your extra efforts and help you discover the true eCommerce profits at a glance. 

4. Customer Loyalty Programs

Customer retention is the base of earning good profit margins. The more customers you retain, the better sales you drive. So, you must introduce loyalty programs that engage the customers and encourage them to buy frequently from you. 

About 48% of shoppers say that the most critical time for any company to gain loyalty is during their first purchase. In that phase, you can try out several types of loyalty programs, including point-based, hybrid, and perk programs. 

You can also advance loyalty programs through gamification. Say, by offering badges to the members who log in multiple times (weekly).

Loyalty programs can encourage repeat consumers and reduce marketing spending. It can also increase revenue which can result in higher profit margins. 

5. Boost Sales by Selling High-Margin Products

Selling products with high-margin profit is better than low-margin ones. That’s because low-margin products make you work hard for fewer returns. Meanwhile, if you sell high-margin products, you earn greater profits with minimum sales. 

If you want your high-margin products to sell, you must increase the visibility for the same. For example, you can create a hybrid catalog that involves both high and low-margin products. But in the list, you can emphasize the high-margin products more, so they receive more exposure. 

You can work on your backend and configure the high-margin products to appear more commonly in the site search results.   

6. Work on Product Content

Did you know that 40% of consumers have returned an online purchase due to poor product content quality? Similarly, more than 90% of online shopping carts were abandoned, with poor product descriptions being one of the reasons. 

That’s why, as an eCommerce business owner, you shouldn’t miss on producing premium quality content for good profit margins. Customers are likely to buy products that seem legitimate. 

It should have proper information/details along with high-quality images. As people are buying your product online, poor product content is a big turn-off for the customers. You must also optimize your website to be mobile-friendly so that customers can stay longer.  

7. Right Number of Stock

As an eCommerce business owner, you know the importance of product stock for profit margins. Your inventory should have the right number of stock. It should neither be overstocked nor understocked. 

If it’s understocked, you might miss on loyal customers and good sales. Similarly, if it’s overstocked, you will be draining unnecessary cash. Moreover, there is the risk of products getting out of fashion or degraded over time. 

That’s why you should research your customers and stock up accordingly. You can add up some extra stock but do not go overboard with it.

Final Words 

These are the seven effective ways by which you can increase the profit margins for your eCommerce business. See how your profit margins improve when you combine all or a few of these methods!

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