How eCommerce Companies Can Cut Costs in 2021

Editor's Note: Take a look at our featured best practice, Ecommerce Financial Model (Excel workbook). Model Options: This template is a detailed and user-friendly financial model that considers an e-commerce business's specifics. By Taking into account key assumptions such as traffic from different sources, conversion rates, the average purchase value for different product categories, and the [read more]

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2020 was a challenging year for all types of businesses, including some eCommerce companies. Although some eCommerce companies saw an increase in purchases, particularly those that sell essential goods like groceries, others lost potential customers who cut down on luxury spending because of decreased or lost income or fear of losing their job.

To ensure your eCommerce company’s survival in 2021, you may need to cut some costs and boost your marketing strategies. From ordering custom made cardboard boxes that simultaneously protect your products and advertise your business to improving your customer support, here’s how you can cut your costs in 2021.

1. Streamline Your Shipping

A big part of many eCommerce companies’ costs is shipping. To attract new customers or compete with other businesses, eCommerce companies often offer low or free shipping. However, while that might bring in a new customer for a one-time shop, it can also eat away at your profit, especially if those new customers don’t return.

To reduce your shipping costs, there are several steps you can take. First, consider how far you must ship your products. Most shipping companies charge more for longer distances. To cut costs, ensure that the shipping companies you work with have multiple locations across the country.

You should also ensure that your boxes are not too large, as many carriers, such as USPS, charge more for oversized packages. Too-large boxes, besides costing more, also allow the product more room to toss around, increasing the risk of damage in transit. To reduce damage and save costs, use air pillows for shipping in your custom boxes to give your product maximum protection during shipping.

You can also negotiate with different shipping companies to get the best possible freight rates. Inquire with multiple shipping companies to learn what they charge for the same services. You can then come back to your current company, asking to lower the price.

As you become more successful, you may want to consider working with a third-party logistics company (3PL). Instead of storing and shipping your products, a 3PL company can offer a warehousing and order fulfillment service and use its vast network of connections to get you lower shipping rates.

2. Improve Customer Support and Service

While many eCommerce companies focus on increasing sales revenue and attracting new customers, it’s often more cost-effective to focus on keeping your current customer base. To keep your existing customers interested, you can offer them deals, ensure you have excellent customer service and immediately resolve any complaints.

Send out exclusive deals.

A fantastic way to keep past customers interested is by sending them exclusive deals. You can either create a loyalty club that customers can join or simply have them opt-in to a mailing list. However, make sure that when you add customers to a mailing list, you follow the GDPR concerning data collection and privacy if you have any customers in the EU. These deals don’t need to be extensive, but receiving regular discounts can entice customers to return to your website and make a purchase they may not have planned on.

Because these customers have already purchased something from you, you don’t need to convince them of the quality or value of your products, making it easier to attract them.

Problem solve.

If you receive a complaint, immediately take action. Whether someone complains they didn’t receive their product on time or it was damaged, or they report a seemingly minor problem, you should take it seriously. An annoyed customer can damage your business’s reputation with a bad review or accusatory posts on social media.

Although you can’t eliminate bad reviews, promptly addressing complaints can help reduce them. You can also gain a customer’s trust and create a repeat customer by providing excellent customer service, regardless of the issue.

3. Investigate Your Transaction Costs

Another high cost for eCommerce businesses concerns transaction fees. Depending on how you take payment, you may incur higher fees as you increase your transactions. Some payment options charge a fee per transaction, while others only charge for credit cards.

If you’re looking into ways to reduce your costs, closely examine how you handle payments and what costs you incur. The best options for your company will depend on where your customers are located. If you mainly work with customers within the U.S., you could save money using online bank transfers. However, if you have customers worldwide, you may need to consider other options, such as Stripe or PayPal.

4. Lower the Number of Returns

While you can’t eliminate returns, you can lower the likelihood of a customer wanting to return something. First, ensure your product descriptions are accurate and have a recent photo attached. If you sell products in different sizes, like clothing or shoes, ensure you have a sizing chart specific to your products rather than a generic one. For certain products like bras, you may want to offer an online chat option to ensure customers choose the correct size.

You can also extend your return window. The longer the customer has the product, the less likely they are to return it.

Last, you can also analyze your returns and determine which customers are more likely to send a product back. Once you learn that, you can target your advertising at customers who are less likely to return something.

5. Focus Your Online Marketing

You don’t need to advertise everywhere. Either work with a digital marketing expert or invest in a social media marketing management tool so you can target your marketing efficiently. If most of your customers are older women, you might want to focus on Facebook marketing. However, if you mostly attract millennials, you may have more success with paid Instagram and Twitter ads.

You can save money by selectively choosing your paid ads. Your social media management tool can give you information about how well your ad or post performed, and you can use that to create a long-term marketing strategy.

Grow Your Business in 2021

By cutting costs, you can continue to grow your business even if the economy continues to suffer. Using these tricks and tips, you can reduce your expenses without affecting your product’s quality.

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