How well you can manage your overheads plays a huge role in the long-term viability of your online store. If you don’t limit your overheads when the store is going well, you risk being unable to pay those bills when your sales numbers go down. On top of that, reducing overheads also increases your return on investment, since money that isn’t going towards your various bills is money you can pocket as profit.
If you are interested in lowering your overheads, here are some tips that can help you get started.
1 – Keep track of all your expenses
It’s easy to get lenient and not write down some of your operational costs, especially when it comes to cheap items like packaging or even how much electricity you use in your home office. But you won’t know for sure how important or unimportant the cost of an item is unless you can keep track of it across months and years. So it’s a good idea to have to keep track of all your costs.
There are many ways to go about keeping track of various expenses. Business management software is a popular choice, but you can also make use of apps, spreadsheets, and even pen and paper. If you have an accountant, ask them for recommendations, they can suggest a software solution that will make filing taxes paperwork easier down the road.
Another feature to keep an eye out for is expenses overviews and trend analysis. These are tools that can make it easier for you to spot trends and identify areas where you should cut back on spending.
2 – Reduce how much you store
Demand for warehouse space is on the rise, and making sure you make the most out of your inventory space has never been more important. Not least because renting storage space for your goods can be a huge source of costs.
The good news is that there are many ways to reduce how much you need to keep in storage. Warehouse management software can look at customer demand and trends across the years to help you identify how many products of each category you need to keep in stock at any given time. Advanced applications of this solution can even predict rises in demand around major world events, such as Black Friday and consumer holidays.
Implementing such a solution can be complex, and the predictions may not be very accurate until you have collected enough data across months and years. But once your warehouse management software is operating at full steam, it can work to reduce warehouse costs without having products going constantly out of stock.
If a software solution isn’t a practical option for your store, you can also get similar benefits by hiring a warehouse management consultant to help optimize your operation.
3 – Consider removing products from the store
You can further cut down on storage costs by removing items that are underperforming from your online store. This must be done with care, as changing your inventory can have unintended consequences or upset regular customers. But it is an option worth looking into, especially if the items that are underperforming also happen to be bulkier than average. Selling fewer items can also make order fulfillment easier, which can reduce delays during big sales periods.
4 – Invest in customer retention
One of the advantages of regular customers is that they are generally easier to advertise to. This means you need to spend less on marketing for each sale, making loyalty campaigns very valuable. SMS marketing and email marketing are both affordable ways to drive up customer retention, and offering long-term customers loyalty bonuses and special discounts can also be effective.
5 – Optimize your shipping operation
There’s much to consider when it comes to shipping your goods to customers. You need to weigh not only the rates charged by different courier services but also the auxiliary perks they provide. For example, some courier services make it easier to ship goods overseas. Others offer to pick up packages at your door or warehouse, which can save time, money, and make things simpler on your end.
All this is to say that while cutting costs on shipping is desirable, the cheapest courier won’t always be the best. You may also find that working with various courier services might be best for you, especially if you ship goods at the national or international level. Working with courier companies that specialize in different types of delivery may logistic more complicated, but it can save a lot of money over time.
Keep an eye out for price comparison tools that help to compare courier quotes in your area easier. And you might be able to save a little more by calling your courier service provider and trying to negotiate a deal on behalf of your company.