Whether you’re a small start-up business or already have an online store, the key to becoming successful and making money from an online shop is to always put profit and product margins at the forefront of your decisions, especially whilst the business is starting up. Ecommerce has around a whopping 80% failure rate due to people diving in too fast and making common mistakes that can be very costly, and even deadly to your business.
That’s why we’ve put together a few pointers, to help you avoid these possible pitfalls before it’s too late and maximise your profits online!
5 Key Points to Consider Before Jumping In
1. Product Margins
Running a profitable eCommerce business takes a lot of time, effort and constant observation. One of the most critical elements is knowing what your product margins are. It’s vital to track the demand of individual products (as opposed to your shop as a whole) and calculate how much you can sell and earn from your orders. Some industries are now flooded with supply, which may suggest you’ll have a tough time producing profit and scaling your business.
With this in place, you can work out how much money your business makes per item and identify which areas are in need of adjustments to improve profitability.
2. Competitive Pricing
It comes at no surprise that pricing is a very important factor in online retail. According to Criteo, 83% of consumers say that price has the most influence on purchase decisions. If you get this wrong, you will have a very difficult time trying to shift your products.
Whether other merchants are listing products similar or identical to yours, be sure to compare your prices against theirs to make sure you’re not over or underpriced. Always remember “turnover is vanity and profit is sanity”. You don’t want to price your products too cheap as you won’t make money from it. Customers will also likely be discouraged from purchasing your products if the prices are much higher than competitors, regardless of the demand.
3. Calculate Your Costs
Don’t forget to manage your money! We know this can be a bit of an ongoing headache; however, understanding your outgoing costs is key for maintaining a profitable business.
Below are some of the costs you may need to account for if you haven’t already:
- Delivery fees – Try to determine a business model that’s right for your brand, whether that’s Dropshipping, Wholesaling, D2C, White Label, etc. Over the years, Dropshipping has become a competitive model for eCommerce businesses as this holds little risk and allows you to sell and ship products you don’t own or stock. While this has many benefits, it also comes with many drawbacks. For example, you’re likely to pay more for each item you sell due to the lack of bulk pricing – meaning you have to do a lot of business if you want to make a profit.
- Scalability – Can the business model you’re starting with be used to scale once your business grows? If you’re generating more sales, it’s likely you may need somewhere to store your goods to keep up with the high demands. Therefore, it’s important that you choose a platform that won’t charge you extortionate fees once your business takes off.
- Marketing & advertising fees – Investing in online advertising is a great way to increase your products visibility and boost online sales. But like many other things, this comes at a price. As a digital marketing agency, we know how important it is to ensure the return on advertising spend is not only enough to cover your costs but it’s essential you get the most bang for your buck!
- Staff fees – Based on demand, you’ll need to determine the amount of staff you’ll need and which employment option is the best financial fit for your business. You will also need to set a salary for your own time and efforts.
- Website fees – If you already have an existing website, you’ll need to consider a few technology expenses that come with it. These include website hosting, IT support and payment gateway fees, to name a few.
Okay, so as you can see there’s a lot to think about! Calculating your costs can be overwhelming at first, but our best advice is to create a forecast and plan to win.
It’s important to work out where you want to be and how you’re going to achieve it, to ensure that your hard work doesn’t go to waste. Unfortunately, we’ve heard stories of too many people jumping right in and put hours of hard work into their business, to eventually realise that it doesn’t have potential as there’s no room for growth.
4. Know Your Audience
Users need a reason to shop with you instead of large eCommerce giants such as Amazon. If you want to market your products effectively, you need to know who your target audience is and whereabouts in the world they are. To crack this, you will need to understand how to communicate with them in a language they can relate to and build a positive relationship with your customers. This will entice them to buy from you time and time again.
5. Identify Your Competitors
Finally, no matter how niche your business may be, you will near-always find competition from similar companies to your own. Everyone has competition, that’s why it’s important to identify who they are to ensure you stand out from the crowd. But how? Some quick wins are asking customers to leave you a seller rating or product review on Google. This will portray your business as trustworthy and increase the likelihood of a purchase. You may also consider providing discounts and promotional offers to attract new consumers and keep your existing customer base coming back for more.
It’s Time to Start Making Money
One of the best ways for any business to thrive in this industry is to learn from the mistakes of others, before learning from your own and to always keep your eye on the prize! Having an eCommerce business isn’t as easy as it may seem, but understanding the mistakes and pitfalls can help you avoid them in the first place, and most importantly, learn from them if you do. There’s always a solution!
If you get it right and create a scalable model, you can create an online profit generator that ensures future success. Take the time to get this right and you could be the next Jeff Bezos.
How can Echo help? We’re experts in the industry, have a wealth of experience helping businesses enhance their campaigns and really understand what it takes for an eCommerce website to be successful (we run our own!).
We will work with you to build an online store equipped with forward-thinking features to help you generate sales and revenue online, as well as a fully optimised strategy to help increase your business income and reach your long-term goals.
Get in touch with us today to see how we can help you take your business to new heights!Contact Us Give Us A Call