How to maximize profit in e-commerce?
During the Covid-19 times, e-commerce boosts. Only in 2020, it grew by 44% year by year in the U.S. . This is an incredible increase in only one year. On the one hand, it gives great opportunities for e-commerce businesses to grow. On the other hand, the number of competitors grows as people are attracted by a vision of easy money. In such circumstances, online stores have to find new ways to keep their current customers with them, but also to find new ones, ideally faster than competitors.
Source: own elaboration, based on Digital Commerce 360, U.S. Department of Commerce
Total retail figures exclude sales of items not normally purchased online such as spending at restaurants, bars, automobile dealers, gas stations and fuel dealers
To maximize profits is the aim of the majority (if not all) companies. Nowadays, the status quo is not enough. If you don’t develop your business, you will lose. You have to be competitive, smart, always a step ahead of your competitors. To achieve this, you have to gather information about them and use it in a proper way, taking advantage of solutions already available on the market, which will help to boost your sales and increase your profits. Below you will find 5 things you can do to get to the group of top retailers in your industry. They require some effort from you but the results will be significant.
1. Know your competitors
As trivial as it sounds, it is often disregarded. When I talked to our customers, a lot of them were surprised when they saw the competitors report for the first time. They thought that the number of offers on the market was similar for all their products. Surprisingly, the numbers differed a lot between their products. As they expected, for some of the products they had to compete even with 60 companies, however, there were products with only 2 or 3 competitors. After this verification, they knew exactly who they compete with, and, what is also important, which products have almost no competition.
Only when you know who your competitor is, you can make sure that your offer is better than theirs. And if you don’t have competitors on particular products, your strategy toward them can be different.
First thing? Search for who offers the same products and list them.
2. Know their prices
There are many factors customers take into account while choosing the offer most suitable for them. It can be the ease of returning of products, free shipping, item’s photos, description, etc. But according to studies, for 70% of customers, the most important is price . For this overwhelming majority, it doesn’t matter if your description of the product and photos are better. They look for the cheapest option available.
What to do? Check prices of your competitors and compare with your prices.
What to do when you have too many products, too many competitors and too many channels to check? You can use a price monitoring platform, which will gather for you all the offers and prices in one place.
3. Be reactive
Having the information gathered, it’s time to act. There are two possible scenarios.
First, you are not the cheapest one. Check how much you would have to decrease the price to be the first one in the listing. Calculate how much you would have to decrease your margin on a single product, but also, take into account what will be the increase in sales if you are in the first position. In Google searches, around ⅓ of people looking for the search term entered the first result, 15% enter the second result and 9% the third one . Sometimes a slight price decrease will result in a huge sales growth thus the increase in profit.
There is also a second possibility- you are the cheapest retailer. If this is the case, check what is the price of the second cheapest retailer. Maybe there is still some room to increase your margin, keeping the first position in a listing. Keep in mind that being reactive doesn’t always mean reducing your prices.
What to do if you have too many products and the market is too dynamic to adjust prices manually? You can always use dynamic pricing solutions, which based on your pricing strategy and market situation automatically adjust prices, according to your needs. Thanks to such a solution you can be always one step ahead of your competitors, always the one a few cents cheaper than the others.
4. Be visible on marketplaces and e-commerce platforms
Having an offer in your online shop is often not enough. According to studies, 90% of people, even though they found an offer in your shop, will still look for the product on Amazon . It is worth being present on marketplaces like Amazon or eBay through which you sell your products. However, it is also worth considering aggregators, like Google Shopping, Idealo or Shopzilla, which compare prices and show customers links to your shop. Recently, one of the best growth in popularity made Google Shopping, even though not many people heard about it. It uses the most popular web browser in the world, showing products offers as people search for products, having an immediate matching and being visible before a customer can check any other source. This gives a huge advantage to Google Shopping.
Check your competition on e-commerce platforms and marketplaces and the minimum and average prices of the products you sell available there. As customers choose from the cheapest offers, if your offer would be above the average price, try to find another product you will promote on a chosen platform. Also, if you see offers which prices are below your purchase price, it can indicate a necessity to negotiate your conditions with a product provider, as apparently, some people buy products cheaper, not leaving you an opportunity to fight.
Check what kind of fees and provision you would have to pay. If they are ‘Cost per Click’ or you have to pay only after a product was sold. Maybe you will find a niche and be able to increase your sales by offering your products there.
5. Choose which products are the competitive ones
You don’t have to be competitive with all your products. Choose the high-runners and concentrate on them. People who come to your shop to buy these products most probably will buy something else as well. Use the chosen products to attract customers from aggregators and marketplaces. Treat these products as an advertisement for your shop.
Make sure that the chosen products are on the top of listings. A huge influence on this has a price of a product but also your rating as a seller on the marketplace, cost of shipping etc. If you decide to sell on Amazon, try to get your product on Buy Box, as the majority of customers don’t even realize that there are different offers than the ones in Buy Box.
You are not sure which products you should promote? Use the list from the 1st point. Choose products with high demand and a low number of competitors. It will be much easier to compete with 2 companies than with 60.
Unfortunately, this is not a one time process. After you set your strategy, decide which platforms you want to be visible at and with which products, you still should verify if the choice was the right one, if conversion is satisfying you and if there are better products to promote. As on many e-commerce platforms, one has to pay for every click, even if a customer doesn’t buy a product, make sure that the products offered outside your e-shop will convert properly. To find products with the best conversion, you can use A/B testing, choosing different products, increasing your profits and minimizing costs of promotion. Remember that leaders on marketplaces, most popular products and prices can easily change, so it is important to repeat the verification process to based on current data.
Even though the competition in the e-commerce market is increasing, there are solutions to be competitive, keep the position of a leader, and maximize profits. To achieve this, you need to have your price strategy in place and learn how to find and use opportunities that are available on the market. If you know your competitors and their offers, you can always be a step ahead of them. Use the potential of marketplaces and aggregators. Let people see your offers there and bring them to your shop.
Last but not least, constantly repeat the process of verification and testing to keep up with changing trends and to look for the best possible opportunities. Only by constant development you will optimize your strategy and maximize your profits.
Would you like to act right now but still don’t know where to start? You can use a free Shop Analysis report. In the report, you will have listed who is your cheapest competitor, how big is your market and if there are opportunities to increase your profit.