The possibilities with ecommerce business are endless. Business profit margins for ecommerce businesses are usually pretty high. The trends of revenue years have proved how people's buying behaviour has shaped the retail industry.
People prefer to make their purchases through websites and now even directly from social media. This is why all businesses have realised the power of being digital. Nowadays every business has online stores or at least social media pages being run to simplify the buying process.
The concept of social commerce has also improved chances of higher business profit margins. Now, with apps like Markaz small businesses simply have to leverage their own social circle to sell their products.
They simply have to choose a category from a list of thousands of wholesalers and choose their logistics plan. The rest, including the delivery process and online payments are handled by Markaz.
What is ecommerce business profit margin?
Business profit-margin in ecommerce businesses must be understood before you start your business online. Profit margin can be divided into two categories to explain what it is. First comes net profit which is defined as the total sum of the profitability of your business. It is calculated by how much money is left aside after sales that is not included in the costs. It is net income divided by the net revenue of a business.
On the other hand, when it comes to gross profit, you can calculate it by subtracting your revenue from the cost of developing your product. Then divide your income by it and multiply it by one hundred. Thus, business profit-margins calculate how much your business is earning from every sale of your products. Wondering about what good business profit margins entail?
Well according to research, 51.8% is an approximation of how much a business should have in terms of profit margins. If your running an ecommerce retailer business who is running their shop online then your profit margins could be approximately 6.5%
Another important concept is profit satisficing. It moves away from the traditional concept of profit margins and allows business owners to set a minimum level of profit for their business. When it comes to profit before tax, profit satisficing will help you maintain adequate levels of business profit-margins rather than looking to maximise them at all times.
This strategy has worked for businesses during the pandemic where there were not enough opportunities for many industries to scale their profit consistently. So they set a minimum level to improve their revenue rather than just increasing prices.
5 Ways to increase profit-margins
Here are five ways you can increase your ecommerce business profit-margins:
Manage your operational costs
Managing your production costs is the most straightforward way of increasing your business profit margins. Although it is different for every business, cutting down on production and business processes could mean different things for every industry.
For example, if you're a reseller looking to improve your business profit margins then using the power of social commerce can help. Leveraging social media to sell your goods and services will help you reduce the cost of maintaining a website if you're running a small business.
Apps like Markaz allows new business owners to use their catalogue of thousands of products directly to their customers. This is the biggest factor which will help you scale your business. This way you will also be able to manage your shipping and deduct overhead costs for managing and running your own warehouse.
Improve your customer retention
When it comes to scaling your business and improving your business profit margins, your best bet is improving your customer retention. Motivating your customers to make repeated purchases and choosing your business every time is essential.
This can be made possible by reducing the shipping fee. For example businesses usually set a price range beyond which the shipping is free. This is the most common method that would motivate your customer to add multiple items to their cart.
Other assured ways of improving customer retention is to make your customer journey seamless. Improving your profit margins is not all about increasing the prices of your goods.
Your customer facing teams should work together to ensure that your customer receives their order on time, faces no issues with online payments and receives timely updates on incoming launches. All of these are ways you can improve your profit margins.
With social commerce platforms, you can leverage the power of your social media pages to run campaigns in order to retain customers. Posting relatable content and making it easy for your customers to order online is an assured way of improving retention.
As mentioned above customer retention can also be improved with better customer service so make sure that you exhaust the best resources to connect with your customers. Using chatbots and customer management apps to streamline your customer's journey is essential in this improving business profit margins.
Create bundles and upsell
This is a more creative way of improving your profit before tax and enhancing your profit margins. When it comes to bundling, it means suggesting an item which is related to the ones your customer already has ordered or on their cart.
The point is to add as many items with added value to your customer's cart as possible. However, this is done by reducing the prices of these products and hence increasing how much they spend per cart as compared to if they had purchased these products separately.
When it comes to upselling, it implies selling in bundles without having to price each product separately. Essentially creating bundles will allow you to see more products.
You can also create loyalty programs by offering special registration cards to launch discounts and offers on certain items. This will motivate your customers to stay loyal to your business.
Launch subscription programs
Another creative way of improving your chances of better profit margins is to design subscription boxes and services. Designing the ideal subscription plans for your customers would start from a smaller to a higher price range. A recurring revenue will allow you to improve your business profit margin. Allowing your customer to add minimum and maximum items to their subscription boxes will also optimise their customer journey where they don't spend hours making their perfect cart. Simplifying and innovating the user journey through your brand is easy when you have multiple ideas for how your subscription plan would work.
Embrace the power of social commerce
This point especially holds true for small businesses who want to improve their business profit margins without having to spend a huge amount of money on marketing campaigns. Running paid advertisements might not be ideal for micro entrepreneurs at a certain stage in their business. This is why they can optimise their social media pages to launch products and services.
Then use applications such as Markaz to ship their products directly from wholesalers to them. Markaz will also allow you to manage the logistics plan efficiently as well as offer seamless online payments.
With social commerce, you can also use extensions on Instagram to sell products that customers see in real time without breaking the momentum of their social media surfing. This way you will not have to worry about generating traffic to your ecommerce website.
As a small business, you can simply make an account on Markaz and get started without any investment.
Scale your ecommerce business, the Markaz way:
Markaz is an ideal partner for your reselling business. Our app is designed to help reselling businesses flourish by simplifying how you sell products. We have a catalog of thousands of products from hundreds of wholesalers from all around the country. Moreover the business profit margin is far more than if you would source your products from wholesalers to store and sell products.
Our services are offered based on three major factors. First of all, your business will have access to a catalog of thousands of products sourced from hundreds of wholesalers. Secondly, there are opportunities for huge business profit margins because you can directly source the order from our warehouse to the customer's address. You will be able to establish a smooth delivery process with our logistics partners who will handle the returning process if needed, as well.
The best part which will help your business improve your business profit margin is that your business is in complete control of what channels you want to work on and what products to sell. Moreover, unlike social commerce applications, with Markaz you do not need to make an investment at all. You can simply leverage the power of your social circle to generate demand and we will manage the supply process. To increase your profit before tax and scale your business, choose Markaz today.