Selling online is easy, but growing your Ecommerce venture profitably is getting harder than ever. The online marketplace and Ecommerce industry is expanding quickly. Every day more retailers are making the move to selling online, while budding entrepreneurs are getting their start through Ecommerce ventures. Today, global Ecommerce growth records an average rate of 20% increase year-on-year since 2019. According to Statista, Southeast Asia’s Ecommerce revenues are predicted to reach US$172 billion by 2025.
As Ecommerce competition grows intense, your business needs to find ways to grow profits and remain competitive. The only problem? Growing your Ecommerce profits is challenging and you can easily get lost in trying to figure out your profit margin ratios or simply come to a standstill on where to start when it comes to reaching your potential customers. But don’t worry. We’ve got you covered here at Commerceplus. In this guide, you’ll learn about the ideal formula for Ecommerce profitability and tips on how you can create the perfect Ecommerce growth strategy to boost your brand and revenue.
How to double (or triple) your Ecommerce brand?
Scaling your business could be challenging at first. But all it takes is one simple equation to boost and control your online sales profitability. The evaluation and determination of the priorities of actions for our clients and our brands serves as the foundation and backbone for all we do at Commerceplus. You won’t believe how easy this formula is to use. But regardless of what you sell or the type of company plan you employ, it really does work. You can simply improve your earnings by using our Ecommerce Growth Formula, whether you’re drop shipping or selling your own goods.
The Ecommerce Growth Formula
Even if there are several KPIs available to measure your online business, only four are actually crucial to its expansion. The Ecommerce Growth Formula is a framework for guiding Ecommerce profitability growth and takes into consideration 4 essential factors that contribute to your revenue.
1. Visitors (V) – Drive More Targeted Traffic
Nobody’s going to buy your product if they’re not visiting where it’s sold, right? So the first thing we need to do is set up an effective product page, and drive people to it.
It goes without saying that having more visitors at your Shopify site or online store at marketplaces like Lazada, Shopee, and Amazon will result in more sales. But when it comes to traffic, you should not only be looking at numbers but rather people that are keenly interested in buying what you’re selling. So before you dive into any traffic strategies, know your audience.
Study your existing buyers and have a clear understanding of who you’re targeting, where they are from, what characteristics define them, what channels do they frequent? and so on. With more customer data and insights, the better you would be able to craft your marketing strategies and reach highly-qualified leads.
2. Conversion Rates (CR): Increasing Likelihood of Purchase
Conversion rates can make or break any advertising campaigns. You can have the highest volume of traffic, but if no one buys from your store, it would be useless. Your online store or website conversion rate decides your return-of-investment (ROI) and directly determines your profitability. To calculate, you can just take the percentage of your website visitors that make a purchase as compared to the total number of visitors.
Having a good conversion rate not only means saving your money and efforts, but it will also help you get better insights on what your audiences are looking for which will allow you to create a better product that meets your customer goals. Now that you have the ways to boost your traffic, here are some quick tips to optimize your conversion rate.
Customer reviews on the internet can strongly influence customers’ decision to purchase, so make sure to highlight your customer testimonials in your website and always encourage your buyers to leave a review after their purchase.
Content can help with conversion as much as traffic acquisition. Take for instance, content like real-life usage videos, store designs, and well-structured product listing pages can help evoke your audience’s emotions and get them to take action.
There are lots of details to consider when designing your sales page or an online ad, and this is where creativity and A/B testing is important. It lets you stand out among the crowd while using data to find out which version has better conversion.
Good user experience is critical to any business. Confusing design experience can frustrate users and cause them to drop out from the buying process. So make sure your audiences encounter as few obstacles as possible on their way to purchase to boost higher conversion.
Ad optimization is about creating ads that can catch your target audience’s attention. By optimizing your ads to increase its click-through rates (CTR), this can in turn lower your overall ad campaigns’ cost-per-click (CPC).
3. Average Order Value (AOV): Boost Your Revenue
Sometimes maximizing profit is about getting the most out of your existing sales. And this means increasing your customer’s average order value (AOV) The AOV is a metric that tracks the average dollar amount spent each time a single customer places an order. This is an important metric as it lets you know how much you can expect from a new, first-time customer to your Ecommerce store.
It can directly affect your Ecommerce profit as you are making more money when your customers’ AOV is higher. This also lets you know the long-term value of each customer which makes it easier to evaluate your overall marketing efforts and pricing strategy. Lifetime value (LTV), a metric that lets you know how frequently your customer might interact with your business, is considered a subset of AOV. As you get more repeated orders, the basket size will increase and hence LTV will also increase. Using this formula, you can calculate and identify specific customer segments that contribute the most profit to your business.
By breaking down your AOV, this should allow you to find the right audience and better manage your product SKUs, as well as creating more targeted promotions to make your customers happier. One quick trick is to create an email marketing strategy that fosters the relationship with your customers. By using the right email automation tool and a mix of sharing useful information and promotion, you can maximize your Ecommerce sales while building customer loyalty.
4. Variable Costs (VC): Reduce Cost Expenses
The key to maintaining a healthy profit is monitoring your costs. Variable costs, or variable expenses, is how much you spend to produce and sell your products. For example, variable costs may include the costs of raw materials and packaging or shipping and transaction fees which can rise or fall depending on the number of output and sales. This is different from fixed costs that remain constant such as rental fees.
You should never underestimate the impact of these expenses on your gross profit margin, particularly if your variable cost increases as sales goes up. In any case, this can also be an accurate representation of your company’s operational efficiency and effectiveness. That is if you find your Ecommerce business getting more sales but still maintaining the same profit or worse losing money, it’s time to look into your variable expenses.
Conclusion
Every company is looking to increase their profits. It takes a combination of creating growth and managing costs efficiently to build a sustainable and profitable Ecommerce business. At the end of the day, make sure you constantly monitor and improve these 4 core metrics in your business to generate better sales growth. Should you have any questions regarding the Ecommerce growth formula or are looking for expertise to bring your Ecommerce business to the next level, feel free to reach out to our team at Commerceplus to learn more.