How To Increase Profit Margins From Your eCommerce Store

Last Updated: 

July 18, 2023

No matter how successful your eCommerce store is, you are likely to want to increase your profit margins. Increasing your profit margin is far easier said than done. For many eCommerce business owners, understanding the data, the profit margin ratios, operating profit margins, and net growth is complicated enough, let alone actualising that information to increase profit margins. This guide is here to help you understand how you can increase your profit margins for sustainable financial success now and in the future.

Key Takeaways on Increasing Profit Margins for an eCommerce Store:

  • Understanding Current Metrics: Before trying to increase profit margins, it's important to understand current business metrics. Tools like the BeProfit Shopify app can provide access to valuable financial data and help identify the current working profit margin.
  • Cut Back on Operating Costs: Reducing operating costs can quickly boost profit margins. However, it's crucial to avoid cutbacks that could potentially impact product or service quality negatively.
  • Increase Your Average Order Value: Various strategies can be employed to increase average order value, such as product recommendations, offering discounts for bulk orders, or creating purchase bundles. These methods incentivize customers to buy more during each transaction.
  • Create a Loyalty Program: Loyalty programs encourage return purchases, reducing the costs associated with acquiring new customers. Ensuring that these programs offer real value can strengthen the customer-brand relationship, increase sales volume, and subsequently boost profit margins.
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Understand Your Current Metrics

Before you can begin increasing the profit margins of your eCommerce store, you first need to assess your current position. Understanding your current metrics can be a very daunting prospect for any eCommerce store owner, but luckily there is a solution at hand. If you run your site on a software as a service platform, like Shopify, there is likely to be an inbuilt app that can help you. As the world’s biggest eCommerce platform, Shopify has identified the need for business owners to be able to access profits reports, order metrics and expenses, which is why it has created the BeProfit Shopify app. Using this application is one of the easiest ways to identify your current financial position and access your current working profit margin.

How to Increase Your Profit Margin?

Of course, the particular way in which you go about increasing your profit margin will depend on the specifics of your business. The list below is designed to act as inspiration for ways to increase your profit margin.

1. Cut Back on Operating Costs

Reducing operating costs is a fast and effective way to increase your profit margin. However, for the benefits to continue long term, you must be careful with the specific cutbacks you choose to make. Cutting back on anything that will impact the quality of the product or service that you can offer your customer is likely to end up hurting your business long-term.

2. Increase Your Average Order Value

Another way to increase your profit margins is to increase your average order value. There are many ways that you can incentivise customers to increase order value, for example:

  • Include product recommendations – including recommendations of relevant products on product pages or at check-out is a great way to motivate customers to made additional purchases
  • Offer discounts – offering discounts for orders over a certain amount motivates purchases. You could offer a percentage off or free delivery.
  • Create purchase bundles – offering a product bundle (a reduced price when multiple products are bought together) is another way to increase average order value.
  • Implement subscriptions – Incorporating Shopify recurring payments in your store not only ensures a steady stream of revenue but also increases customer loyalty. This can significantly contribute to improving your profit margins by providing stable and predictable earnings.

3. Create a Loyalty Program

Creating a loyalty program is another great way to increase your profit margins as it is a very successful motivator for return purchases. This helps you to reduce overheads, as you do not have the costs associated with finding and introducing new customers to your brand. For your loyalty program to yield the highest return, you need to make sure that you are offering real value to your customers. This will help to increase the relationship between customer and brand, increase the volume of sales and increase your profit margin at the same time.

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