When building a business, the financial realities don’t always match the initial projections. According to Shopify, small business owners spend an average of $40,000 to set up their business in the first year. That said, some businesses cost more or less than others but assuming your ecommerce store can be set up on a small budget may not be a fair assessment. Many ecommerce and shop owners want to spend their energy focusing on generating more revenue. While increasing sales is one part of the equation, cutting down costs is another great way to save on margins and boost profits. Below, we explore four ways you can save money when running your online store.
Save money by reducing product returns
One of the fundamental rules of running an online store is - keep products in customers’ hands, and the profit is yours. 30% of all products ordered online are returned as compared to 8.89% in brick-and-mortar stores. Offering returns is important for customer service and sales, as 54% of customers prefer to shop online for this reason.
Despite how it can attract sales and new customers, returns can have a large impact on your margins. You could incur fees for shipping, packaging, labor for bringing the item back and forth from storage, and possibly customs or duty taxes. There are potentially additional costs to see if the product is damaged or if you can no longer resell it (if possible in the first place). On top of these fees, you have a customer who didn’t enjoy your product and may not shop with you again.
Reducing product returns can help you cut down costs and here are few ways to improve the customer experience with your product:
- Share a detailed product description and photographs from all angles
- Consider sharing a product video (ideally) in a setting where the product will be used
- Extend the time frame of returns - giving your customers extra time may make them change their minds about returning the product entirely
- See when you're getting the most returns. For example, you may notice that most returns come from right after an email marketing campaign or over the holiday season. You can adjust your marketing on these channels to see if that has an impact.
- Pay attention to the reasons for return and take repetitive feedback seriously
Save money by using affordable tools for your business and brand
When starting out, take advantage of all the great free and affordable tools out there. As an ecommerce shop owner, your'e busy, and you can't do everything. You do need tools to support your business, so spend the time finding the best and most affordable ones that allow you to accomplish your goals. Before you start employing a team or investing in expensive software, check out some tools to get an idea of what you need.
Here are some popular tools and apps that you could explore:
- LOGO.com helps you create high-end, professional-looking logos and social media assets without any design experience (you can also get a website builder and a free domain name!)
- Sites like Freshbooks offer invoicing, accounting, and payroll services and most offer free trials
- Burst, Unsplash, and many other sites allow you to browse and download free, high-resolution photos for your website
- Blush.design lets you to use and create great graphic design work for free for your site
- Add your shop to Metaranx for free to promote it - put your store on relevant directories
Save money by first validating your product idea before launch
With a good product idea in mind, you may want to leap ahead with production. While that can be exciting, it is best to do product research to validate your idea prior to launching into production. Remember that most factories have minimums and even ordering samples can add up. It's best to test the idea with a prototype (when possible) or by sharing your idea before going ahead.
Product validation better ensures that you’ll have paying customers for your product and that you won’t waste precious resources on something that won’t sell. Here are a few ways you can test your product ideas:
- Share it with your friends and family and see how they react
- Send out an online survey to see what feedback you get
- Ask for opinions on forums such as Reddit
- Launch a ‘Coming Soon’ page and see how much interest, opt-ins, or pre-orders you get
If you seem to get a lot of interest, you can order samples and sell them. Build a great relationship with those early customers and take their feedback seriously when making product decisions for the next stage of your business. You can use platforms like KickStarter or Indiegogo to scale production, too.
Save money by allocating your marketing budget thoughtfully
Digital marketing is your friend for your ecommerce business and thankfully, you can use a lot of tools for free. Our favourite free ways to start boosting your marketing online:
- Search engine optimization (SEO)
- Social media
- Influencer marketing (by finding influencers who accept samples)
- Using Logo.com, Canva, or other design tools for your brand
- Email marketing - platforms like MailChimp let you start building a list and making campaigns for free
You will have to know which avenues will help you the most out of your investment. Start by finding where your target market lives online and start building out a presence there. Some avenues may cost you a bit to get started or pursue and you'll need to determine which are the best for you. Calculating your return on investment (ROI) for each platform and campaign will help you determine the best way to spend your money. Here’s the basic formula to calculate your ROI:
net profit from investment / total investment x 100
Once you have the numbers, compare your high performers. Be mindful that some marketing channels (content marketing) take more time to produce results than others, but this is an excellent method to compare all your campaigns. Whichever channel you try, set specific metrics of success to check how well that platform is working for you. Start small - you can always invest more if a channel is working well.
Saving money while running your online store is key to sustainable growth
These are some of the money-saving tips for your online store. All these tactics boil down to one thing: how you plan your finances and focus on running a lean ecommerce shop and business. Your focus should be maximizing output from minimum input wherever possible. Evaluate all aspects of your business, get a budget in place, and you’ll be able to save some money while running your online store.