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When an eCommerce sells large numbers of products but has a low profit margin, reviewing its costs and pricing policy becomes necessary. This is how you can identify possible shortcomings and problems that can be affecting your profitability as well as opportunities for growth or optimisation that aren’t being taken advantage of to make decisions about them. In general, the strategies and actions that you should implement to increase the company’s profit margin will be related to the pricing strategy. Below, we’ll analyse some key steps to achieve this:
Setting dynamic prices
Analysing your prices will allow you to implement a dynamic pricing policy with which you can increase the profit margin of your eCommerce. Dynamic pricing will allow the store to adapt to the constant changes of the online market. So, if demand rises, you can adjust to match it by raising prices and earning more revenue. It’s currently possible to use automated repricing tools to increase the speed of your response to different scenarios and meet the needs of your users more efficiently.
Secondly, dynamic prices also allow you to create personalised offers for different types of customers. These have proven to be more cost effective, especially with those loyal customers whose interests and needs you already know. Applying these prices in marketing campaigns aimed at a specific target audience will increase the average ticket for these users and with them, your profit margin.
Reducing eCommerce costs
You can begin by reviewing your logistics and analysing the possibility of implementing new models, such as drop-shipping, where third-party companies are in charge of managing both stock and shipment. If this option doesn’t fit your business model, you can modify the prices and conditions for shipping so that, without affecting the trust of your customers, you reduce the logistics burden on your company. At the same time, you can use IT tools that unify stock management and ordering to save time and better optimise processes in your store.
On the other hand, even though reducing your investment in marketing and organic positioning isn’t a good idea, given that these are the main methods of attracting customers, we recommend verifying that your strategy matches the characteristics of your customers and that your brand has a presence in the correct media. Use metrics to decide whether you should be on all channels, such as all social networks, or only where your buyer persona is located.
Finally, through a detailed examination of your business, you can identify the profit margins for each item in your catalogue and make strategic decisions based on them. The financial performance of each of your products will be key to your business’s sustainability and capacity for growth. To estimate how to improve your profit margin, you can monitor the prices of your competition and the offers or discounts they apply based on demand. With help from new automated software with learning capabilities, this monitoring becomes quick and easy.
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