How to Cut Costs in an eCommerce Business

Running an eCommerce business can be challenging, especially if you’re trying to maximize profitability over the long term. One path to greater profitability is reducing expenses and generating more revenue. What are the best strategies to cut costs without impacting the quality of your services or your internal processes?

Rely on Fulfillment Centers

Outsourcing your fulfillment to a dedicated fulfillment service provider could be the right move.

According to Sherpack Fulfillment Center, “outsourcing your fulfillment needs typically seems like an additional expense at first since you’ll be paying an external entity for various services. However, it saves you a lot of money in the long run, enabling you to save time and resources in many different areas.”

Some of these areas include:

Reducing inventory management expenses.

You won’t have to manage inventory on your own. Instead, your fulfillment center will handle most of your responsibilities. You won’t have to worry about losses due to poor inventory management.

Cut Costs in Shipping.

Because you’ll be able to take advantage of fulfillment centers nationwide, you’ll also see cut costs in shipping. Customers will get their orders faster, and you’ll pay less for shipping.

Cut Costs In Operations.

Also, you can cut costs on certain operational tasks because you’re working with a fulfillment center directly. You’ll need to hire fewer people, you’ll have less overhead, and you can focus your time and energy on the most important responsibilities for your business’s growth.

There are some fringe benefits as well:

Better customer experience.

Customers get products faster and more reliably when you use a fulfillment center. That means they’ll likely buy from you again and leave you a good review.

Easier accounting.

Working with a fulfillment center streamlines your accounting. You’ll have fewer numbers and entities to keep track of.

Higher scalability.

Working with fulfillment centers also grants you higher scalability. Expanding your business and reaching new people is much easier when tapped into an existing fulfillment center network.

Consolidate Positions (and Hire Lean)

Labor is one of your most significant expenses, so consider consolidating some of your positions. Additionally, higher lean, meaning you only hire the people you need – and you hire as few people as possible. Consider assigning multiple responsibilities to each team member, as long as you’re not overworking them.

Negotiate With Your Suppliers

If you’re a good negotiator, consider negotiating with your suppliers and vendors to score lower prices, bulk discounts, or capitalize on incentive programs. You might be surprised at the amount of money you can save by doing this. Also, consider looking for new alternatives if your initial suppliers and vendors can’t come down on price.

Automate What You Can

Automation is one of the best ways to save money in an eCommerce business because it saves you time and improves your performance consistency. Use advanced tools to automate anything that you reasonably can.

Improve Your Packaging

Are you spending too much money on packaging? If so, you can save money, improve sustainability efforts, and even look better in the eyes of your customers by focusing on leaner, more minimalistic packaging.

Streamline Your Marketing/Advertising Budget

Marketing and advertising are crucial for getting your eCommerce business off the ground. Unfortunately, they’re also commonly associated with wasted spending. Simply dumping money into the marketing and advertising category isn’t necessarily going to make your business more visible, and even if it does, there are probably more strategically valuable ways to use your money.

Run the following steps to audit your marketing spending and save money here:

• Analyze and audit your current campaigns. Take a snapshot of the performance of all your campaigns across channels.
• Reduce your findings to overall ROI. Run some calculations to figure out the return on investment (ROI) of each of your campaigns. Consider applying this to individual segments of each campaign, such as focusing on groups of keywords or individual landing pages.
• Cut what doesn’t work. Some of your spending will be more valuable than the rest. Cut whatever doesn’t work.
• Invest more heavily in what it does. Start investing the money you save in the channels and campaigns that provide you with the highest return. This will make sure you get the most value for each dollar you spend.
• Experiment. Continue experimenting with new channels and strategies to see if you can push that ROI even higher.

You should notice a substantial boost to your bottom line once you start cutting these costs in your eCommerce business. It’s true you have to spend money to make money, but if you spend just a little bit less, you can perfect the formula.