Top Actionable Ways To Reduce Operating Costs Of An E-Commerce Store

The e-commerce industry is a force that no investor can afford to ignore - Cushla Sherlock The future of eCommerce is promising with no signs of failing. The global eCommerce retail sales will reach 3.4 trillion Dollars in 2025 from 2.7 trillion Dollars in 2021.

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However, running an eCommerce website is a tricky business. One thing that can set you back is the cost of running an eCommerce store, which can be expensive. You need to pay for acquiring customers, the infrastructure costs, the human resource costs, inventory, and shipping costs.  In this blog, we will look at top ways to reduce the operating costs of an eCommerce store.

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1) Lower product returns

Important research says that at least 30% of all products ordered online are returned as compared to 8.89% in brick and mortar stores. Most eCommerce returns happen by post and generally at no cost to the consumer.

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On top of delivery costs, there are also expenses associated with processing the item once received, such as reselling the item, which increases the overall cost to online retailers. It makes customer returns the biggest threat to brands of all sizes. Let's look at some proven ways to lower product returns:

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A) Share every detail of the product to the customer

Make sure every listed product on the eCommerce website has 

• HD quality zoomable images of the product with 360-degree views

• Size chart with different measurement guidelines of the product

• Product highlights & details like description, features, specifications, and other info

• Similar products to compare with all their features

• Detailed video information showing the product

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B) Ask for customer reviews and reward them for it

You can utilize reward programs to review products used by the customer. It can be a discount voucher, prepaid card, or credit card offer.  Relevant customer feedback enables retailers to improve the overall brand experience and identify flaws in their returns management process. Retailers can gain valuable insight into their products by collecting customer feedback from product returns. 

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2) Lower your inventory costs

Inventory carrying costs add about 20%- 25% of the actual cost of products. Here are some great ways to reduce inventory costs in eCommerce.

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A) Use a sound scanning system: Scanning products whenever they are received, moved, shipped, or altered in any way is a recommended inventory management practice. An eCommerce business is vulnerable to human errors, mistyped SKU numbers, and inaccurate inventory data if you do not have a scanning system.

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B) Drop shipping: As drop shipping eliminates the stage of purchasing inventory, eCommerce businesses can offer customers a wide range of products without any worry about inventory stock. Not only that, you can directly ship the product to the customer from the supplier without paying the inventory cost.

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Must Read – How to start a successful dropshipping business in 2021?

C) Use ABC analysis: Based on Pareto’s 80/20 rule, ABC analysis identifies the 20% of goods that deliver about 80% of the value. ABC analysis ranks items based on demand, cost, risk data and assists business leaders in determining which products or services are highly critical to their organization's financial success.

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3) Outsource essential eCommerce business functions

eCommerce businesses looking to reduce operational costs should identify the critical business function that can be outsourced and should also consider whether outsourcing can save money for them or not. eCommerce functions that can be outsourced are

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Listing, optimization, and catalog management: Many eCommerce stores have more than 500K products. Listing, managing, and optimizing these 200 SKUs can be outsourced.

Seller onboarding: An expert can help eCommerce platforms onboard experienced sellers hassle-free by outsourcing seller onboarding to another industry.

Sourcing & Manufacturing: eCommerce platforms can outsource sourcing and manufacturing processes to industry leaders and build a strong array of manufacturers.

Customer service: Quality customer service requires an extensive understanding of various metrics such as NPS, CSAT, and churn rate. With outsourced customer service representatives handling all communications via email, chat, social media, and phone, e-commerce platforms can concentrate on procurement and delivery.

Product photography: Photographing more than 500K products is no small feat. A large workforce will be required to click multiple product images from different angles Building an in-house team of photographers will require infrastructure investments by eCommerce platforms and the provision of tax liabilities and pension details by HR professionals. Outsourcing product photography can assist eCommerce stores in better managing their growing business requirements.

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4) Streamline supply chain management

Streamlining the supply chain and distribution process is one of the best ways to reduce eCommerce business operating costs. Effective Tips to streamline supply chain management:

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Look for dependable suppliers

Choosing dependable suppliers allows you to deliver top-quality products in a shorter time. Here is what to look for in a supplier for eCommerce business:

Shipping: It is critical that suppliers can ship and deliver orders on time. Before signing a contract, ask for referrals to other customers to ensure that a supplier can do so.

Price: Research the market and reach out to several suppliers with many quotes. The degree of the price difference between different suppliers may surprise you.

Attention to customer service: Make sure your suppliers value you enough to provide excellent customer service. Request a dedicated contact at the company, someone to whom you can reach out directly anytime, if any questions or issues arise.

Product availability: It should not be difficult to see exactly what a supplier can offer you. You can ask for a catalog or a link to their online listings for checking product availability.

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Use Centralized Management Software

If you use the right inventory management software, the inventory, finances, and sales systems can work together. The centralized management software enables various business departments to access relevant transnational, financial and customer data securely.

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For example, your logistics partner can quickly identify the ordered products they need to pick, pack, and ship today. On the other hand, they can automatically update the inventory reflected on your e-commerce website.

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Decrease shipping costs

Most customers expect you to be responsive when getting their orders and at lower shipping costs. That's where local fulfillment centres come in handy, which help reduce the shipping cost to the customers and make product deliveries faster, the same day.

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Tips to reduce shipping costs:

• Third-party package insurers are usually cheaper than going with your shipping carrier. Shipping insurance through a third party is one way to save on shipping costs.

• Negotiate the shipping costs, as the higher the volume you ship, the lower is the shipping rate.

• Use lighter and smaller packaging to save money on shipping costs.

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5) Use automation

As ecommerce business scales, the demand and complexity add up, making the systems increasingly inefficient. eCommerce automation intelligently executes tasks, processes, and campaigns within your business exactly when needed, thereby eliminating errors and saving processing time.

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Example of eCommerce automation:

Order Fulfillment: When an item is ready for pickup, send an automated email, SMS notification, or Facebook message to the customer.

Inventory levels: Unpublish out-of-stock products and notify your marketing team via Slack or email to pause advertising.

Abandoned cart emails: Automated abandoned cart emails help bring customers back to your eCommerce site

Segment your customers: Segmentation can assist you in better understanding your customers. Using a CRM, you can segment customers based on demographics, number of orders, milestones, or membership.

Automate Invoicing: You need to integrate the relevant plugins, which will allow you to automate invoices and receipts after orders.

Automate customer support: AI-driven Chatbots help automates customer support without writing a single line of code.

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 6) Use sustainable packaging

It's crucial to find the right balance between offering high-quality packaging and sticking to a budget. Here are some excellent tips for providing distinctive and eye-catching e-commerce packaging without breaking the bank.

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Cardboard boxes: One effective way to use cardboard boxes for e-commerce packaging is to manufacture them in-house. A wide variety of box-making machines are available that enable businesses to create corrugated boxes of any shape and size to suit their entire product range.

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Custom sleeves: Another good way to provide personalized e-commerce packaging without customizing your actual boxes is to use sleeves instead. Customized sleeves can be designed and ordered in bulk, allowing businesses to use plain boxes while saving a significant amount of money on printing.

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Inserts: Packaging inserts allow you to add extra customization, thank you notes, and even call to action to your e-commerce packaging. Using inserts in your e-commerce packaging can be inexpensive and help you save money in the long run, as you will receive fewer returns or complaints due to damaged products during the shipping process.

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As you can see, there are many great ways to reduce the operating costs of an eCommerce store. We hope that this blog post helped you get an idea on how to reduce your eCommerce store expenses. 

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Get your eCommerce business online with us! Fynd Platform is a complete solution for retail brands, startups, homepreneurs, and entrepreneurs who want to go online and launch a sales-ready eCommerce website in 30 minutes flat.

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Our one-stop solution also helps integrate your offline POS system and helps in listing and managing your products on marketplaces like Amazon, Myntra, Fynd.com, Flipkart.  If you have any questions or concerns, Schedule a demo or Contact us now.