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How to Cut Costs at Your E-Commerce Business

e-commerce business models

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Shopping habits around the world suddenly changed after the COVID-19 pandemic broke in 2020. Global lockdowns caused many people to stay in their homes for lengthy periods, only occasionally going to stores. During that time, online shopping became more prevalent than ever. 

Many people responded to this by opening an e-commerce business. However, e-commerce business models have expenses like any other. Your business must increase its profit margin to sustain your business and beat the competition.

One way to do this is to reduce costs for your business. E-commerce expenses can become costly, making it difficult to earn a substantial profit.

Fortunately, we have some secrets that can help your business cut costs. If that sounds appealing to you, keep reading! You’ll discover several ways to reduce costs and make your business more efficient. 

Consider Your E-Commerce Business Models

Choosing the best e-commerce business models can be the best way to reduce costs upfront. Various e-commerce business models entail differing expenses. So, carefully choosing your model can help you save on initial costs and focus on turning a profit. 

Two of the cheapest e-commerce business models to start are dropshipping and print-on-demand businesses. Both of these models cost little money to start because they don’t sell original products.

How does that work? Dropshipping businesses act as middlemen between customers and manufacturers. As a dropshipper, you sell products on your e-commerce business. 

From there, a third party handles the inventory, packaging, and distribution of the products. This way, you become responsible for fewer tasks as a dropshipper. 

Print-on-demand businesses follow a similar model. These businesses sell patterned items like clothing or phone cases to customers. Once the customer places the order, you pay another company to print the design onto the item. 

This third party becomes responsible for stocking and distributing the products. So, once again, you spare yourself these critical responsibilities. 

Reduce Costs by Reducing Product Returns

Like any business, an e-commerce business relies on selling products to earn a profit. Your goal is to keep those sold products in your customer’s hands so you can keep yours on the profits. 

However, this becomes a challenge if customers constantly return the products they buy from you. A lot of work goes into a return that makes it expensive. In addition to undoing the sale, you’ll also pay for shipping, labor costs, and packaging fees. 

Doing this for several products leads to a rapid depletion in funds. So, how can you ensure customers keep your products?

First, ensure customers know what they’re getting before finalizing the purchase. Include detailed product descriptions along with photos from several angles. Depending on your product, you may find videos to be more helpful.

Second, extend the time frame for returns. Let’s face it; people are lazy. They’re less likely to return something quickly if you give them an extended time frame to make the return. 

During that time, the endowment effect can kick in. This effect suggests that people become more attached to an item the longer they own it. 

Finally, isolate high-risk customers and stop advertising to them. Use data analysis to identify the customer segments that return the most items. For example, you may notice that Facebook referrals return more products. 

Likewise, sort through the most common reasons for returns. For example, if somebody returns the item because they don’t like the style, don’t send them promotions for items in similar styles.

Negotiate Prices with Suppliers

Dropshippers and print-on-demand businesses rely extensively on their suppliers to get work done. Indeed, most of their critical costs pay suppliers for distribution, stock, and packaging. 

So, if you can get lower prices from distributors, you can reduce costs. The trouble is deciding how to negotiate with those distributors.

Generally, you can open discussion by negotiating two factors with businesses. These factors are your payment times and order sizes. 

These two features are the things that most concern your suppliers. If you can make these more manageable for suppliers, they may make their prices more affordable for you. 

Many suppliers offer early payment or prepayment discounts. Suppliers are especially open to these discounts for customers they’ve already established relationships with. 

Another option is to see if your supplier offers fixed price breaks. These breaks are preset discounts for orders that surpass a set amount of money or number of products. 

If so, you can save money by buying more items in bulk. Each of these options makes running your business a little more affordable. 

Spend Your Marketing Funds More Efficiently

Businesses that are just starting out may struggle with learning where to spend their money. As a general rule, it’s best to spend money on online marketing. After all, you’re an e-commerce business!

But, not all digital marketing methods are created equal. Each may yield a different ROI for your company. Your task is to determine which offer the highest ROI for your campaigns. 

You can discover this by using the following formula:

net profit from investment / total investment x 100

While you calculate your ROI, consider investing in affordable digital marketing techniques. For example, you can purchase social media ads to make your products more visible to people across the Internet. 

Alternatively, you can write blog posts that target SEO keywords. These keywords help your content rank higher on search engines like Google or Bing. This way, your content becomes more accessible to people on the Internet. 

Another option is to try influencer marketing. Several influencers advertise products they like after receiving a free sample.

Learn How to Start a Business

As you can see, there are several ways to cut e-commerce expenses. However, it’s much easier to save costs when you go into business with an educated business plan. 

So, how can you build this business plan? One way is to work with us!

We’ve helped several people build successful e-commerce business models. We offer valuable information in courses that can introduce you to the leading trends and methods in the e-commerce industry. 

You can access all of that information by taking our course today. If that appeals to you, contact us to sign up!


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