Why more sales do not equal more growth in your e-commerce business
2022 was a special year for the e-commerce industry. The speed at which the sales have bloomed was unprecedented. And, hands down, all credit should be given to the pandemic! In fact, 2020 saw a 42% increase in e-commerce sales. That’s almost double compared to 2019!
Restrictions pushed people to shop online, but they have increased fulfillment expenses too! In 2020, the average CPC on Facebook reached around $0.7 - $1.01. Looking back at 2015, CPC on the same platform averaged about $0.27.
And that’s not the only expense that went up, and that’s not the only reason why more sales for your e-commerce business don’t mean more profit. In this article, we’ll look at XX reasons why your e-commerce business may currently be failing to increase profit simultaneously with sales. We’ll also provide practical solutions to ensure you’ll be hitting the targets in 2023.
With no further ado, let’s get started!
10 reasons why more sales may fail to drive more profit for e-commerce businesses (and solutions)
Hosting platform expenses
Most e-commerce businesses rely on Shopify. It’s a fast and easy-to-use CMS. And the amount of support you get from the Shopify community and the developers is just… impressive!
BUT, Shopify can be exhausting for your pocket in the long run! It’ll be tiring and expensive to redesign your website, and it’ll be just as challenging to maintain it. Security breaches are another story to tell!
The best solution here is to invest in a custom-made store on a powerful website builder like Drupal or WordPress. The initial cost might be high, but you’ll save a lot more & you’ll grant your customers a unique shopping experience.
Still, if you’re doing just fine with Shopify… So be it! Only migrate to a different hosting and a different website builder if the expenses vs. service aren’t satisfactory.
Ebanks and transactions fees
Many Ebanks, including Paypal and Wise, have increased their rates in 2022. This came as a response to the current recession and global economic crisis… but shoppers who rely on those platforms to finalize sales may start to go to traditional brick-and-mortar stores.
Even when you increase your e-commerce sales, the fees cut from YOUR end would still be significant! While there’s no way around those fees, it’s at least good to be aware of them and how they affect your e-commerce ROI.
You can opt for free or inexpensive services like YouCan Pay and YouCan Store Builder when you are fed up. Both platforms provide great and inexpensive services.
Shipping is probably the first thing one thinks about when one wants to start an e-commerce business. Chances are, you’ve done your due diligence and found a good supplier (say, Amazon). But the struggle to ship products to clients… is another challenge!
According to WebsiteMagazine, 69% of shoppers will abandon their carts once they know it’ll take more than two days to deliver. This even narrows your choices; therefore, you may pick an expensive shipping company.
The bottom line would be higher shipping expenses vs. lower profits!
A suggested solution would be to work with small shipping companies with limited clientele. By doing so, you open the door for cost negotiations in exchange for continuous shipments from your end.
Returns or refund issues
Will it surprise you to know that 20% of shipped products are returned? The number is highly to go up as you increase sales… So, don’t be surprised to find that your returns go up to 30% or even 35% when you increase your marketing budget!
Well, here's the worst news in this regard: you can never get your returns down to 0%. But providing customers with better product photos, and more straightforward and detailed product descriptions, can help mitigate the impact of returns.
If your business’s big enough, you can establish a call center (or hire professional freelancers!) to call and confirm after each sale is performed. On average, it takes 30 seconds to 2 minutes to confirm a sale. At a rate of $15/1h, you can get around 40 orders confirmed. In other words, it costs you no more than $0.375 to reduce returns and request refunds by a staggering percentage!
Inventory management and bookkeeping
Inventory management and bookkeeping are yet another issue most growing e-commerce businesses face.
While many pieces of software, like QuickBooks, are excellent for keeping track of those things, it’s just as challenging to enter the data accurately. Yet, as sales grow, the time (and time is money) it takes to enter all the data rises up! It won’t be surprising if you’re paying 5 or even 6 figures a year just on bookkeeping!
The most practical solution would be to automate QuickBooks inventory tracking & bookkeeping with Connex. This saves most of our clients up to $80,000 on a yearly basis!
Unless you’re still good with bookkeeping and inventory tracking costs, contact us for a demo & free testing phase.
More sales mean more inventory out, and thus more inventory should be coming in. By default, more inventory would cost more for several reasons.
The first one would be space; more products need more shelves and larger warehouses. And the second one would be quality checking; it’s challenging to QC all the incoming products while maintaining reasonable costs. Thirdly, the quality-checked goods should be maintained in good shape, and tracked as they’re sold.
Establishing an inventory management plan ahead of increasing sales is essential to keep the expenses under control. During this stage, it’s never a bad idea to consult a mentor or a professional consultant.
One-third (32%) of successful cyber attacks are performed on e-commerce websites! And since you’re here and thinking about increasing sales, you definitely must’ve been around long enough to be aware of that!
So, how do you plan to maintain a steady profit when your website gets massive exposure?
We recommend contacting a professional and well-reputed cybersecurity firm to discuss the expected costs based on your special case! There’s no way around it!
Increased cost per sale (CPS)
Increasing sales would mean increasing advertising budgets too. And as you expand on the targeted demographics, whether on Facebook or Tiktok Business or any other platform, chances are you’re reaching a higher percentage of unqualified individuals.
These include underaged users, very old users, and other inactive demographics in general. How do you plan to cover those extra expenses!?
There are two alternatives or solutions to take into account in this regard. One is to opt for influencer marketing instead of paid advertising. That’s because you can request the influencer’s mediakit & see who composes their fanbase, and whether they suit your business or not.
The other method would be retargeting old buyers through both emails and retargeted ads.
More traffic and brand exposure will bring in fresh leads who are neither educated about your brand nor are ready to take action… They’re yet to ask questions, inquire about the process, and maybe, later on, make a purchase!
Having enough customer service power to meet this need comes at an extra cost. Thus, it’s another issue that’ll eat up profit. We recommend outsourcing such tasks to cheaper forces in developing countries… more details in the next section!
Hiring more staff
Remote work is the new normal thing to do. And planning to increase sales would simultaneously require adding extra staff to the team. While you can definitely onboard labor workers and have them managed in a physical space, it’s a little challenging to keep track of online employees… Think, the copywriters, social media managers, and customer services whom we just mentioned… how to ensure they all work their due hours and meet the sought-after productivity levels?
Well, you can use employee monitoring software and call it a day. But even in this light, you still have to consider the software’s fees & the extra staff’s salaries!
Reducing those charges may require outsourcing to individuals from the growing countries… You can, for instance, spot Top Rated talents on platforms like Contra or Upwork for a relatively cheaper cost than local employees!
There’s more than meets the eye when trying to increase profit. Your sales are key in doing so, but never overlook the rise in expenses too! You can increase your e-commerce ROI massively just by automating QuickBooks with Connex, for instance, and that’s something we can help with!