9 Ecommerce Mistakes That Can Bleed Your Profit To Death
Table of contents
- Rushing Your Business Math
- Product Returns and Fraudulent Purchases
- Not Understanding Your Target Audience
- Fixed Shipping Costs And Using The Wrong Packaging
- Making the Wrong Investments
- Inconsistent Ecommerce Branding
- Choosing The Wrong Platform
- Underestimating the Power of User Experience
- Brushing Aside Customer Feedback
Running an eCommerce store can be one of the most profitable endeavors you can venture into.
But it can also turn into one of the deepest, black holes you’ve ever seen when it comes to your profits.
There are some mistakes that can absolutely bleed you of all your profits, leaving you scratching your head and even considering throwing in the towel.
If you’ve been struggling to maintain a consistent profit month-to-month, you could be making one (or several) of these mistakes.
But you can overcome every single one of these mistakes.
Here’s a list of the most common eCommerce mistakes that could be killing your profits.
1. Rushing Your Business Math
Expertise in math is one of the most important skills you can ever have as an ecommerce business owner.
The good news is, business math is relatively easy to do.
You can calculate your possible business profit with this formula: Potential profit = Demand x (Revenue - Expenses).
You can also look at your weekly profit margins through platforms like Shopify:
Knowing the figures on your profit margins helps you project what’s likely to happen in the weeks ahead.
Let’s say 10,000 shoppers visited your site last week, and 2 percent of them converted into paying customers. At that rate, you landed 200 sales. Assuming your average order value is $100 and your average net profit margin is 25 percent, you’ve profited $5,000.
Any number of factors might come into play, influencing what happens differently this week from last week in your business. But by tracking these metrics over time, you can gain a solid sense of the patterns at play and plan accordingly.
By computing your expected profit, you’ll have a good idea how well (or poorly) you’re doing financially. This in turn, puts you on a better direction towards the steps you’ll take to grow your business.
Oftentimes, if you don’t know your numbers, you can lose profits and be on your way to the gutters while being unaware of it. When calculating for the prices of your products, don’t forget to include shipping, overhead costs, and returns, so you don’t end up killing your profit margins.
In addition, here’s what you can do to help you reach your online sales goals:
Set your revenue goal. You have free reign over your revenue goal, so whether you want it to be high or low is totally up to you. However, let’s focus on a simple formula for now. Let’s say the revenue you want to earn is $100,000 per year.
Compute your number of orders. Divide your revenue goal by the average order value. For this example, let’s say it’s $20.00. This helps you calculate the number of orders you will need for the year. It will look like this:
(Goal) $100,000 / (AOV) $20 = 5,000 (Order/year estimated at 11 per day throughout the year.
- Calculate the number of visitors. To find the number of visitors that are needed to achieve this sales level, we will “solve for x” (brings back fond memories of algebra class, right?) Assuming a 2 percent conversion rate, the formula will be:
(Number of visitors) “X” x (Conversion Rate) 2% = 5,000
So now we solve for “X.” If you’re starting to get intimidated, don’t be. It isn’t simple but it’s not too complicated either, plus, knowing how to do this will be a big help to your ecommerce business.
The next step is to divide both the conversion rate and the number of orders by your conversion rate like this:
X x 1 (since 2%/2% equals 1) = 250,000 (number of visitors)
So assuming your conversion rates don’t change dramatically, your total visitors over the course of the year should be 250,000 if you’re going to reach your revenue goal. The formula can aid you in identifying metrics and other aspects of your business that you need to tweak to hit your target and increase your revenue.
Learning this formula can also give you a better understanding of how your business is doing and know if you’re heading towards the right direction.
2. Product Returns and Fraudulent Purchases
Another area where your profits can disappear is in product returns and fraudulent purchases. eCommerce stores are more susceptible to problematic product returns and fraudulent purchases than their brick-and-mortar counterparts.
To minimize your need to process product returns, you should make sure that your product descriptions, images, and videos are as thorough and clear as possible. If a customer still doesn’t understand what they are getting, revisit your description, images, and/or video to make sure you’ve covered that aspect/angle.
As far as fraudulent purchases go, you need to have some sort of order monitoring system in place. The right eCommerce platform will either have this built in, or it will allow an add-on/plugin that can help. Most of the times, a shipping restriction can protect you from fraudulent purchases.
Depending on your settings, you can restrict orders from being processed and/or shipped if they exceed a certain value, or if they come from certain people and/or countries. A returned product generally can’t be resold, which means you lose the value of that product and the cost of the return itself.
If you haven’t installed a plugin to monitor your orders, you can download one by Etoile Web Design for your Wordpress sites:
Its key features include the ability to update status of projects, orders and other items, alert customers of order updates via email, and choose which status information to display.
A fraudulent purchase can absolutely devastate your profits for the week, month, and/or year depending on how large the purchase was. Either way, these are two aspects that can absolutely kill your profits.
3. Not Understanding Your Target Audience
Another area where eCommerce stores like yours bleed out is in their marketing campaigns. If you don’t understand your target audience, you are basically just throwing darts in the dark and hoping to hit the target.
This is a bad practice - and costly!
If you are having trouble understanding your target audience, you can check out Facebook’s Audience Insights:
Here you will find out a plethora of audience information that will help you laser-focus your marketing campaigns.
Expensive ad campaigns can quickly deplete your marketing budget, leaving you scratching your head. If you aren’t careful, you’ll throw even more good money at a bad problem.
Take the time to understand your audience, cater your advertising campaigns to them, match your content to their needs, and you can quickly stop the bleeding.
4. Fixed Shipping Costs And Using The Wrong Packaging
This is an area that tends to get overlooked. Shipping costs and packaging materials are just the cost of doing business, right? Wrong!
While there are always going to be costs involved whenever you have to ship any product, there are some areas where you can rein in these overhead costs.
First, stop using $7.99 fixed shipping options. While this works great for a widget that only costs you $2.99 to ship, it could seriously hurt you when someone orders 100 of those widgets. Now, you’re losing on the cost of shipping, as it greatly exceeds $7.99. If your store is based on Magento 2, you may want to try shipping rules extension or multi flat shipping rates extension to implement some more advanced features to your checkout. Using these modules can help you save time and resources yet improve the effectiveness.
What’s more, using the wrong packaging can cost you in multiple ways. If you use a box that is too big, you can be charged more for shipping it. Not to mention you have to put more protective material in it to keep the product safe. And you’ll end up using more tape to secure it.
As you can see, it’s easy to lose money on fixed shipping and improper packaging. While using a fixed shipping option makes it easy for your customers to predict their final cost, it can end up costing you. And spending on product packaging materials can suck you dry. So find a way to use the smallest packaging option, while still maintaining product safety during transit.
Fix these two problem areas, and you can instantly boost your bottom line.
5. Making the Wrong Investments
Investing in the wrong things (at the wrong time) can bleed your profits to death.
It’s not bad to invest in marketing, software, employees or equipment for your ecommerce business, but you need to make sure that you’re acquiring the right asset at the right time.
For instance, is banner advertising, Facebook ads, or Google search ads the best way to promote your product considering the present situation of your ecommerce store? Or is buying the latest model of a laptop or digital camera really necessary to run the business?
Even if your answer to the questions is a “yes,” you’d still need to consider how much budget you can really prepare for it; otherwise, you’ll only overspend, crippling your business needlessly.
To see if your budget can accommodate the additional investments you want, use online budget tools like Omni Calculator:
Through this tool, you can enter your expenses, income, and salaries to have a good overview of how you’re doing financially, and decide on your spending.
Proper planning and balance between what, when, and how much to invest should be justified to maintain your business’s health — which is your top priority.
6. Inconsistent Ecommerce Branding
Many ecommerce store owners make the mistake of selling products and selecting domain names that are not consistent with each other.
When selecting a name, make sure that your brand reflects not only what you are selling now, but also what you can possibly sell in the future.
For example, “Eco-bags USA” tells of a specific product and geography. But if you’re planning to add other types of products or sell in other locations, it might prove confusing for your audience.
Remember that a confusing and inconsistent brand can easily turn off segments of your audience, which can easily impact your bottom line negatively.
In contrast, take note how Alp-n-Rock consistently exhibited their brand:
Their domain name is rightly suited to their store name.
More importantly, their love for the outdoors and experience of delight and freedom in it are manifested itself in functional and fashionable apparel designed for mountain climbing, yoga and other such adventures.
Learn as much as you can about brand consistency from stores like this and apply them to your ecommerce so you can avoid this fatal flaw of inconsistent branding.
7. Choosing The Wrong Platform
Too many people jump into eCommerce without having done sufficient research about the different platforms. And it can really cost them! Choosing the wrong platform can cost you tons of customers and profits. And headless is where today’s top eCommerce platforms are headed.
Many eCommerce businesses today are changing to “disconnected CMS” solutions like headless eCommerce systems, which rely on APIs and other cross-channel integrations to implement and push changes in environments that are siloed from everything relating to your product line, inventory, shopping cart, sales and fulfillment tech.
One of the main benefits of headless commerce is the ability to make changes without directly affecting the business infrastructure of your website.
Websites like Amazon and Netflix trust headless solutions on a massive level. Amazon actually pushes out new code changes roughly every 11.7 seconds, while Netflix pushes out thousands of coding changes each day.
By decoupling your content infrastructure from your commerce backend, you are able to make changes without risking the functionality and/or accessibility of your website, which makes fixing customer issues easier and customizing user experiences more efficient.
8. Underestimating the Power of User Experience
Ecommerce stores often build complicated storefronts and expect plenty of orders to simply pour in. When these orders don’t flow in, however, they blame the shoppers or think that ecommerce as an industry simply isn’t working for them.
They’re mistaken on both points, of course. When operating an ecommerce shop, user experience (UX) is imperative to generating sales. Take your navigation system of your online store as an example of how much UX is important for preventing store abandonment. All along the way, you may want to employ some excellent tools to improve the UX.
Empowered shoppers nowadays expect to have a painless and seamless experience when on a website. If they have trouble finding the product or info they’re looking for, they simply won’t buy.
If your ecommerce website is difficult to navigate, you can’t expect shoppers to spend a couple of minutes to explore your site just so they can find what they’re looking for — they’ll just leave your site in frustration.
Bear this is in mind: Shoppers’ expectations are determined by their own buying experiences from more renowned, established, and advanced ecommerce stores around the globe.
If you want to give your customers a “good enough” experience in your website, see how stores like Amazon built a satisfying UX:
When you explore their site, you will find how easy it is to find what you are looking for. Any Magento 2 stores can copy the way Amazon builds their navigation system by using Layered Navigation, especially with stores selling tons of products
Take all UX elements you can learn from Amazon and apply them in your store. It’s not enough for your site to be visually appealing only. It should also be functional and easily relatable to your audience.
9. Brushing Aside Customer Feedback
Feedback from your customers can either make your ecommerce store, or break it.
Customer feedback and reviews not only help other customers decide if they should trust your products, but it also helps you determine or revise your strategies. It helps you evaluate if your products and processes are effective and efficient, and the aspects of your ecommerce store that you may need to stop or improve.
Some online stores motivate their buyers to leave reviews on purchased products by rewarding, giving away samples or gifting. No matter whatever method you want to use, make sure you always have a good system of review reminders to send to customers after every purchase.
If your customers, for instance, are always complaining about delays in product deliveries, know that it’s high time you sign up to a higher performing shipping service provider.
On a different note, if your packages are constantly delivered ahead of the planned schedule, then it is safe for you to maintain your agreement with your provider, and enhance other aspects of your ecommerce business.
To get customer feedback, you can use simple online tools like Feedbackify:
You can edit the questions or button text as you wish and preview your drafts.
Once you’re done, you can copy the code and paste it into your website’s HTML to start receiving feedback.
Adding your store’s contact details and messaging or chat apps on your site helps you hear from your customers firsthand about their concerns and suggestions. Their inputs can greatly help you turn your profit situation around.
As you can see, all of these mistakes can be corrected and/or prevented.
Remember, you need to:
- Pay attention to your overhead costs (packaging, shipping, returns, fraudulent purchases).
- Make sure you are using the right eCommerce platform.
- Understand what your customers want.
- Avoid price matching your competitors.
By avoiding these common mistakes, you should easily be able to restore your dying profits.
An eCommerce store isn’t worth it if you aren’t making any money.
When you started your eCommerce store, you didn’t do it because you enjoy wasting time – you did it because you wanted to make money (and to secure your financial freedom). Don’t let these expensive mistakes cost you.
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