Top 8 Ways To Reduce ECommerce Operating Expenses
Reducing eCommerce operating expenses is vital because it allows you to optimize your profitability margins. In this article, we’ll discuss the top 8 ways to keep your operating expenses under control. Main types of eCommerce operating expenses Operating expenses are expenses that a business incurs through regular business operations. In other words, these are the costs related to a business’ day-to-day activities to trade, including the cost of resources the organization uses to maintain its existence. An eCommerce business regularly has these common types of operating costs: Website building and hosting Platform payments Permits and licenses Utilities Shipping Returns and refunds Equipment and asset maintenance Inventory costs Marketing and advertising Subscription services Transactional costs Cybersecurity Insurances & taxes 8 ways to reduce your eCommerce operating expenses 1. Reduce product returns 30% of shoppers purchase more products than they need with the mind that they will make a return. The main reasons for this are as followed: 23%: Wrong item 23%: Damages 22%: Differences from the product description or portrayed online When customers return your products, you stand to lose a lot. Besides the shipping costs and labor, you have to pay repairing costs for damages. Thus, if you reduce returns, you might decrease your eCommerce operating costs. Here are some things you can do to reduce the rate of product returns. Help customers understand clearly about the item If customers know exactly the product they are going to buy, they will choose a more suitable one with them, then the ability to return the product will lower. You can provide adequate information on the product pages, with images and videos from different shapes and angles, or provide detailed scale or sizing charts if you can. For instance, if your products are clothes, let’s provide detailed information such as material and sizes, as well as images or a video with a model wearing the item in different colors and angles. Control quality Control every process to assure your products’ quality, from manufacturing, packaging to shipping, so that your customers won’t return your item due to faulty or damages. Segment customers with the highest rate of returns Let’s have a look at your sales data and find out which segment of customers has a higher rate of returns. With these customers, you can try other suitable marketing approaches, or avoid them. Have a clear and transparent return policy A clear and reasonable return policy may help you reduce the number of returns. Make sure the return policy is appealing to customers but not costing. Have a great customer service A 24/7 customer service to immediately provide information customers require or deal with their issues may decrease the returns. Moreover, it will increase customer experience, then they will come back to you in the future or won’t tell others what negatively affects your business. 2. Reduce shipping fees Shipping fees are among the main costs of every eCommerce business. The higher the shipping costs are, the bigger your operating costs become. Therefore, if you can lower your shipping costs, you may save a lot of money. Let’s look at some tips which can decrease your shipping fees. Negotiate with carriers You can negotiate rates with shipping carriers as they virtually change their prices based on volume: higher volume, lower price. Try to negotiate with them to have a better bargain. Look for discounted supplies Big carriers usually offer discounts or free packaging suppliers. Hence, you should consider doing business with these companies. Use packages that are given by your carriers Using your carriers’ packages is not a bad idea to reduce shipping costs because if you use your boxes, they regularly charge a higher dimensional fee. Use third-party insurance Opting for insurance from a third party instead of from the shipping carriers is often cheaper, so you can save an amount of money. Choose hybrid services Some shipping companies offer hybrid services which include picking up the packages and shipping to the post office closest to the destination at a lower cost. Despite a small amount of money, it may help to reduce your operating costs and improve profitability. Opt for poly mailers If your goods are non-fragile, you can use poly mailers instead of boxes to reduce cost as this material is cheaper. Choose prepaid shipping In case you have money that needn’t be used for other purposes, you can use it to pay for the shipping in advance. Carriers often offer a discount for prepayment. 3. Lower transaction costs Transactions fees are fees relating to your payment process you have to pay to the credit card processors and other payment platforms for debit and credit card transactions. There are some common credit or debit card processing fees such as the interchange, mark-up fee, assessment fee, transaction processing fee, etc. Transaction fees achieve a considerable portion of your operating costs. So you should try to reduce this type of fee. Negotiate with processors You can negotiate with your credit card processors on annual fees, statement fees, or setup fees. Even a small reduction can go a long way in reducing your eCommerce operating expenses. Moreover, establishing a long relationship with them will enhance your ability to get discounts or reductions. If you fail to negotiate with your processors, consider a new partner. 4. Decrease inventory costs Inventory costs are a common concern of every business, whether it’s brick-and-mortar stores or online stores. That is the reason why all businesses always focus on inventory management and consider it as an essential activity. If you want to reduce your operating costs, you may decrease your inventory costs. Here are some ways you can save money on inventory. Eliminate deadstock Storing out-of-season products costs money. You can offer them at a discounted rate, offer coupons, or seasonal deals to sell them. About 50% or more off is aggressive enough to liquidate them. You can also bundle slow-moving products with more best-selling items. Offering unpopular items as a gift to more desirable items
