Profit Analytics Blog

Read expert articles with insights about e-commerce profitability from analyzing thousands of e-commerce businesses' data.
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Modkat BeProfit Case Study
Profit optimizationHow Modkat Achieved a Clear and Comprehensive View of Their True-Profit Modkat, a small business for cat lovers, started its journey with a clear mission - blend style with functionality. With their award-winning cat litter box designs, Rich and Brett had an all too familiar eCommerce growing pain. Like many businesses venturing into eCommerce, Modkat was dealing with multiple sales channels – Shopify and Amazon, across different regions, and achieving a holistic view of their financials was challenging and time-consuming. We had an overall sense of our numbers, but never had a clear view of cumulative numbers from all sales channels... there was never one collective place to view all of our platforms together". Brett Teper, co-founder The need for an integrated solution became more apparent as they had to struggle each week with manually manipulating spreadsheets and dabbling with different platforms, which took about 5-10 hours at least. And above all, working with spreadsheets didn’t allow them to handle their financial complexities and couldn’t offer the comprehensive insights they craved. “We tested a bunch of tools but the data was incomplete and their interfaces were so complicated and hard to look at. I'm a designer, I need to see data in an easily digestible way", Brett recalls. Modkat wanted a straightforward, visually appealing platform that would unify their data and provide them with insights into their overall financial performance and the profitability of each store. The Solution: Empowering Modkat's Multi-Channel Ecommerce Success with Simplified Eye-opening Financial Insights With multiple Shopify and Amazon accounts across different regions, Modkat found its match in BeProfit. The platform's ability to aggregate data from different accounts within each sales channel was a significant breakthrough. Adding to this, BeProfit's capability of integrating marketing platforms, advertising numbers, and 3PL logistics data made the solution invaluable. That was the first time I was ever able to see those numbers… It was really enlightening to see some of that information." Brett Teper, Co-Founder Compare Shops Feature by BeProfit A Simple Onboarding Journey BeProfit’s onboarding was "dummy proof", which suited Modkat’s desire for simplicity. The team was readily available, providing solutions and adding capabilities to their product based on Modkat's feedback. Seamless Integration BeProfit filled the void in Modkat’s data comprehension by integrating smoothly with its existing tech stack. As a tech-heavy eCommerce business, Modkat needed a solution that could handle multiple data sources and platforms without compromising accuracy or speed. BeProfit met this need by constantly developing more integrations and capabilities to serve the dynamic needs of businesses like Modkat. The Results: Becoming Masters of Their Financial Data with 90% Less Time Spent on Analysis Now Modkat is able to collect, view and compare data dynamically across all channels. BeProfit became their go-to platform for understanding their business and seeing their full financial picture, in real time. Modkat gained the ability to see their business costs and understand where they stand in relation to industry benchmarks. It gave Modkat the confidence of being on the right track, knowing they’re making the right choices. Profit Optimization in No Time Modkat now saves precious time (5 to 10 hours a week) by using BeProfit’s ready-made reports to guide them with their business decisions, making every decision data-backed, and pushing for more profits. "BeProfit is like a Shopify dashboard for your whole business. The analytics in Shopify has always blown me away and been super helpful to us. And I find BeProfit to be very similar if not way more advanced than Shopify's analytics. And being able to trust it like I trust the Shopify dashboard is just awesome for me." BeProfit's Dashboard Exceeded All Expectations For Modkat, BeProfit not only met but exceeded their expectations. It instilled confidence in their numbers and provided invaluable historical data, showing the story of their business. I'm most surprised by how much the numbers don't lie... I'm blown away by how accurate it is." Brett Teper, Co-Founder
BeProfit x Suntouched Case Study
Profit optimizationHow Suntouched Double Their Profits and Cut Expenses in HalfSuntouched is a fast-growing eCom brand that specializes in hair lighteners. Founded two years ago by Charlotte St-Germain, Suntouched has expanded its online presence from Shopify to Amazon, reaching customers in the US, Europe, and Canada. One of Charlotte's biggest challenges was managing cash flow. She used to ignore the numbers and focus on the products, but as the business scaled up, she realized she needed to track her return on investments, especially for paid advertising. She wanted to know how much she was spending and earning on each channel and campaign. That's why she decided to look for a solution that could help her optimize her cash flow and gain more visibility into her financial performance. She wanted a tool that could simplify her accounting, automate her reporting and provide insights into improving her profitability. If I had to sum up BeProfit, I would say this tool is a must-have for any founder trying to scale and make the right business decisions for their brand’s profitability." - Charlotte St-Germain, Founder & CEO of Suntouched Making Short-Term Decisions Based on Inaccurate Data Charlotte admits that juggling endless tasks as a solo eCom founder can be draining — and that finances are her least favorite responsibility. Early on, she got away with very basic startup analytics to stay afloat. Soon enough, the company’s reliance on inaccurate financial data led to premature expansions, rushed decisions, and a dwindling financial runway. They wound up expanding the team too soon based on Shopify sales numbers, rather than true gross margins or net profit. Her brand’s challenges with nailing profit margins eventually led Charlotte to BeProfit. As a solo founder, you take care of everything, and finances are just not my favorite aspect of the job. It got to a point where, although the sales were coming in as our top line increased, we didn’t know where the money was truly going.” From Data Confusion to Data Visibility The Suntouched team tried a handful of analytics tools, such as Triple Whale, but found these were ultimately incompatible or overpriced when the brand needed to be cutting costs. Fortunately, Charlotte was eventually connected to BeProfit by friends in the eCom founder space. “They just sounded so happy with the real-time insights,” she explains. From there, BeProfit and Suntouched hopped on a call, tailoring the platform to meet the brand’s unique needs and omnichannel setup. After an easy sync with their commerce and ad profiles, Suntouched was ready for more data visibility and accuracy than ever before. The team at BeProfit has been super responsive and optimized everything for my brand’s needs. I’ve received really amazing support in our experience together.” Suntouched has leveraged BeProfit to dramatically boost profitability — in three steps: Gaining an accurate & comprehensive view of current finances Before BeProfit, Charlotte received monthly P&Ls, which were often confusing and inconsistent, from her accountants. Now, Suntouched has seen “a huge difference” in data accuracy. As a result, the brand has been able to come to terms with the reality of its finances. Despite believing they were profitable, BeProfit shed light on the fact that Suntouched had been in the red for several months and unfortunately needed to reduce the size of their team. “It was so hard,” Charlotte emphasizes, “but it showed me the resources we had to work with and helped us spend within our means.” Slashing Expenses After teaming up with BeProfit, Suntoched has gained a clear, accurate view of its finances. Suntouched has more than halved its expenses for a roughly 60% reduction. They save anywhere from 5–10 hours per week of manual data analytics labor. Reduced expenses and data-informed budgeting have doubled their profits. I expected BeProfit to give me a stronger understanding of my basic numbers. What actually happened is it completely transformed my business for the better.” Identifying profit centers to allocate runway accordingly Suntouched turns to its profit analysis dashboard to know its numbers and make the highest-ROI decisions on a daily basis. For instance, if returns are climbing for one social channel, Charlotte will ping her buyer to start scaling that creative. Or, in another instance, Charlotte was surprised when BeProfit demonstrated that Amazon was the Suntouched team’s greatest profit driver. While the brand’s top line is higher on Shopify, factors like cheaper ad spend mean they receive ample organic traffic and sales on Amazon. As a result, Suntouched used the data and put more funds toward maximizing that profit center (as opposed to focusing on Shopify for ultimately fewer returns). Saving time & money Thanks to BeProfit’s dashboard, which provides a centralized look at all of your real-time eCom data, Suntouched can easily view their Shopify, Amazon, and ad performance on one screen. No more switching between endless tabs, sales channels, and ad managers to understand your net profit, revenue, gross margins, and much more. “It’s a huge time-saver,” says Charlotte. In addition to time and effort, Suntouched also saves on people's costs. Previously, Charlotte had to hire staffers to manually manage financial data, and delays in communication led to delays in course-correcting their spending. Today, Suntouched can instantly view its data and make informed, profit-driving business decisions. I definitely use BeProfit on a daily basis. When I open my laptop [or phone], I go to my dashboard right away. It’s made a huge difference in terms of just knowing where to put more funds and focus.” Growing with Their Financial Partner Looking forward, Charlotte has an impressive vision for the growth of Suntouched. And she anticipates scaling with BeProfit as her financial partner all the way. She calls the platform “a layer of security” for her company, always keeping operational costs lean while opening up Suntouched to maximum profit margins.
Effective use of techniques can boost profits per sale.
Profit optimization5 Simple Advertising Techniques to Increase Shopify Incremental Profit MarginsShopify is a dominant platform in the e-commerce market. It holds 10% of the global e-commerce tech market and, in 2022, had a total revenue of $5.6 billion. But poor advertising can lead to low sales and missed profits. So, Shopify businesses can revamp their advertising strategies to reap their own successful revenues, help boost reach, and increase incremental profit margins. What Are Incremental Profit Margins? Incremental profit margins refer to the additional profits earned by increasing sales or changing product offerings. The incremental margin formula is as follows: Incremental Profit Margin = (Ending Profit Metric - Beginning Profit Metric) / (Ending Revenue - Beginning Revenue) Good e-commerce profit margins can vary depending on industry and business size. For instance, Shopify's gross profit margin in 2022 was 49.2%, and the average for online retail is 42.78%. Let's look at an example. An e-commerce store adjusted its advertising campaign from one quarter to the next and wants to know how its profit margin changed incrementally. In the first quarter, they earned $6,000 in revenue and $2,000 in gross profit. By the end of the second quarter, their revenue was $24,000 and the gross profit was $10,000. Incremental Profit Margin = (Ending Profit Metric - Beginning Profit Metric) / (Ending Revenue - Beginning Revenue)= ($10,000 - $2,000) / ($24,000 - $6,000)= $8,000 / $18,000= 44% (rounded down) The advertising campaign roughly generated a 44% incremental profit margin, which indicates that the ad spend was effective at turning additional profits. » Find out the mistakes to avoid when calculating profit for your Shopify store Track Your Store's Profitability Easily Evaluate complex ad, sales, and profit metrics in real time with intuitive charts and custom reports. Uses cohort analysis for detailed insight into ad performance.Analyzes and optimizes all social media, online ads, and email campaign traffic.Accessible from anywhere via mobile or desktop devices. BeProfit can help you monitor your profit margins and discover actionable ways to improve them for all your Shopify stores, all from one dashboard. Advertising Techniques for Maximal Incremental Profit Margins Effective advertising can drive incremental profit margins and also increase costs and decrease margins if not targeted well or if the ROI is too low. Different ad metrics, like CTR, CPC, and CPA, can impact how much profit each campaign generates. Some techniques to try and boost profit margins include: 1. Email Marketing Built-in email marketing tools and native apps allow Shopify store owners to create targeted campaigns and send automated emails based on customer behavior. Email marketing can help increase incremental profit margins as follows: By reminding customers of abandoned carts and encouraging them to complete purchasesAttracting new customers and retaining existing ones by offering exclusive promotions and discountsStrengthening customer loyalty to help boost Shopify sales » Learn about loyalty programs for Shopify to boost sales 2. Interactive Popups On-site pop-ups can help businesses do the following to improve incremental profit margins: Grow their email list and help boost customer loyaltyRetarget customers with personalized experiences and maximize customer satisfactionIncrease sales with exclusive customer discounts or incentives For example, a Shopify activewear store can use pop-ups to offer a 10% discount to those who sign up for a newsletter, as well as introduce personalized product recommendations based on customers' browsing habits. Tip: Shopify's built-in discount code feature allows for percentage-based discounts or fixed amounts and can be offered through various channels. 3. Engage On Social Media Social media ads can target specific demographics and interests, so using social commerce can help businesses: Increase conversion rates, brand awareness, and reachDrive traffic to their businessImprove profit marginsEngage with customers on a more personal level Let's say a Shopify store sells handmade jewelry. Using targeted social media ads and discount offers on those who previously interacted with the brand on Instagram and Facebook can lead to more sales and increased profit margins. 4. Upselling and Cross-selling Suggesting complementary items, upgraded products, or product bundles to customers can improve profit margins and customer satisfaction since businesses can: Encourage additional purchases, resulting in higher order values and increased revenueOptimize the overall shopping experience through personalization and offering relevant recommendations For example, a Shopify store selling clothing may use upselling to suggest higher-priced items that match a customer's preferences or cross-selling to recommend accessories that complement their purchase. 5. Referral Programs Referral programs can help boost incremental profit margins by focusing on customer acquisition and incentivizing conversions. Some benefits include: Having existing customers refer their friends and family, therefore lowering acquisition costsBuilding customer loyalty and engagement since customers who participate in the program may feel more invested in the brandHelping improve customer retention For example, a Shopify store selling subscription-based meal kits may offer a discount on the next order to both the referring customer and the new customer they referred. » Want to know more? Check out the ultimate guide to effective e-commerce ads Leverage Advertising to Improve Your Incremental Profit Margins Making the most of Shopify's built-in tools and combining them with simple advertising techniques, like economical acquisitions, incentives, and social media interaction, can help up your sales and incremental profit margins. And monitoring your ad performance can help sustain your positive profit margins. BeProfit offers powerful profit-tracking and can easily integrate with multiple Shopify stores. Staying on top of your data can help you find advertising areas that need reworking so you won't have profits lower than your ad spend.
Man with revenue statistics on paper with pen in hand and a laptop to analyze revenue
Profit optimizationRevenue Analysis in E-Commerce: Benefits and DifficultiesWhether you’re an established online business or new to the space, the importance of revenue analysis cannot be understated, as it's used to determine whether the venture is feasible or will continue to be. This analysis should include an evaluation of the company's assets, liabilities, and cash flow. By doing this, business owners can get a clear picture of a business's financial status and make informed decisions about how to move forward. Most importantly, though, a financial analysis can help identify areas that may need improvement and how to go about rectifying them. What Is a Revenue Analysis in E-Commerce? In the context of e-commerce, a revenue analysis is a way to measure and track the amount of money a business makes from its online sales. This information can be used to help make decisions about pricing, marketing, and product development. The revenue analysis can also show how well a company's e-commerce strategy is working and identify areas where improvements should be made. By understanding how a company's revenue is generated and what influences it, businesses can make more informed decisions about where to focus their efforts to grow their business. A revenue analysis is important for all businesses, regardless of size, as it helps them to understand their sales and profits over a ‌given period. By analyzing revenue, a company can identify trends and make changes to increase sales and profits. Additionally, a profit/revenue analysis tool can help a business determine its overall financial health. Benefits of a Revenue Analysis A revenue analysis report can help you in the following ways: Benchmark your company alongside industry peers to identify opportunities and threatsPerform competitor analysis and discover which markets are the most lucrative for your business.Identify the optimal pricing strategies for your business.Recognize which products or services are most profitable, and which need to be improved or discontinued. » Learn about the revenue vs product revenue discrepancy in GA4 Difficulties Associated With a Revenue Analysis Revenue analyses aren't without their difficulties, including the following: Accurate revenue analysis can be very time-dependent if conducted manually. Thankfully, an online tool like BeProfit will significantly cut time through automated functions and outputs.Revenue analyses are not always feasible if the company follows no standardization in the revenue recognition process and the basic accounting policies.For a revenue analysis to be accurate and effective, appropriate segregation of the revenue from different sources along with the different classifications of revenue are vital.Revenue analyses are complex if the revenue is derived from numerous sources, leading to variable results. Implementing Strategies From Your Analysis Revenue growth analysis is important for e-commerce businesses because it can help them predict future trends and plan ahead. By looking at past sales data, businesses can identify patterns and forecast future sales. This information can help businesses make decisions about inventory, pricing, and marketing, while a revenue trend analysis can also help them track their success and make changes to their business strategy as required. » If you're interested in learning how to calculate monthly revenue in Excel, check out our revenue calculation templates
Phone with Amazon logo on display
Profit optimizationUsing Amazon ROI to Maximize Profit MarginsReturn on investment (ROI) is a measure of the efficiency of an investment, usually expressed as a percentage of the investment's original cost. It compares the amount of money gained or lost on an investment relative to the amount of money invested. The higher the ROI, the more efficient the investment. Difference Between ROI and Profit Margin One of the most important distinctions in business is the difference between ROI and profit margin. They may sound similar, but these two concepts are actually quite different. ROI measures how much money you make on your investment, while profit margin measures how much you make on each dollar of sales. In other words, ROI tells you how efficient your investment is, while profit margin tells you how efficiently your company converts revenue into profits. COGS, or the costs of goods sold, is another important metric that Amazon merchants should keep their eyes on. Check out this guide to see how to calculate cogs for your Amazon business. » Find out 4 ways to increase your marketing ROI with dynamic pricing How to Calculate ROI and Profit Margin Calculating ROI and profit margin are essential for all businesses, regardless of their size or industry. The first step is to calculate your ROI, which is expressed as a percentage of the profit you earn on your investment. This is calculated by subtracting the initial value of an investment from the final value of an investment. For example, let's say your business invested $2,000 in advertising. One year later, the advertisement campaign generated $10,000 in profits. Therefore, the net profit was +$8,000. With these numbers, the ROI calculation would be: (8,000/2,000) x 100 = 400 This means that the initial investment in the advertisement campaign generated a 400% return on investment. Once you have your ROI, you can then calculate your profit margin, which is the percentage of each dollar earned that results in profit. This can be calculated by dividing net profit by net sales. For example, let's say a business generated a profit of $10,000 from $25,000 of net sales. The ROI calculation for this would be: (10,000/25,000) x 100 = 40 In other words, the business has generated a 40% profit from $25,000 in sales. Knowing these two numbers will give you a clear picture of how efficiently your business is running and where it could improve. It will also help you make more informed decisions about where to allocate your resources. If this looks too complicated, time-consuming, or both, there is an easier way to calculate profit for Amazon merchants. To do so, check out the best profit calculators for Amazon here. Healthy ROI for Amazon FBA Sellers For Amazon FBA sellers, a healthy ROI is essential for the success of their business. Sellers need to keep track of their expenses to minimize these as much as possible and boost sales through effective marketing to ensure that their profits exceed their costs. There are a number of considerations that factor into calculating a seller's ROI, including the cost of inventory, shipping costs, and Amazon fees. So what is a good ROI for Amazon FBA sellers? An ROI of around 100% is considered sustainable. Anything lower than this is working on profit margins that are too tight, putting a business at risk. For further reading, see how to track and calculate profit on Amazon here. Amazon ROI Strategies to Maximize Profit Sellers seeking a way to improve Amazon ROI should focus on keeping their costs as low as possible. Sourcing products from wholesalers or manufacturers can reduce inventory acquisition costs, and shipping costs can be reduced by using a fulfillment company like Fulfillment by Amazon (FBA). Amazon fees can also be minimized by using the right selling plan and taking advantage of promotional opportunities. If you'd like further insight into how to maximize e-commerce profits, see our guide on ways to improve profit here. Or, to kick-start your earning potential, check out the best products to sell online in 2022 here.
Boost revenue and profits with personalized discounts.
Profit optimizationSuccessfully Increase E-commerce Store Revenue With Customer DiscountsDid you know that 92% of US shoppers search for promotions or coupons before shopping online? It can be a powerful way to improve retention. Businesses can leverage this in numerous ways, such as product-specific discounts, free shipping, or rewards. With the right strategies, you can boost customer satisfaction and improve revenue and profits. How Can Discounts Improve Revenue? Discounts can help increase sales by reassuring customers that they are saving and products are within their budget. Abandoned Cart Discounts Baymard research shows that 48% of customers abandon their carts because of high additional costs, like shipping and taxes. Offering a free shipping discount can help recover abandoned carts and improve your revenue and profit by increasing conversion rates and average order value (AOV). For example, a business that offers free shipping on orders over $50 can encourage customers to add items to their cart to meet the free shipping threshold, as well as complete their purchases. Seasonal Discounts These are offered at certain times of the year, such as holidays. Seasonal discounts can be powerful tools to help businesses increase profit margins and sales by attracting new customers, boosting sales, and clearing out seasonal inventory. For example, a clothing retailer offering 40% off all winter jackets in February boosts sales and clears inventory by the end of the season, while also attracting customers looking for winter clothing sales. Businesses can leverage their customers' shopping habits and seasonal festivities for higher AOVs and profits. » Stuck on marketing? Learn how to increase your marketing ROI with dynamic pricing Referral or Subscription Discounts This strategy encourages customers to make repeat purchases or refer new customers to your business, which can lead to increased sales and profits. With 48% of customers saying that exclusive offers would make them purchase items sooner, businesses can utilize personalized and targeted discounts to help convert them. For example, a meal delivery service that offers discounts based on past purchases to customers who refer a friend can help drive repeat purchases from existing customers while also gaining new customers. Minimum Spend Discounts This discount is awarded when a customer meets a certain minimum spend threshold. This type of discount encourages customers to add items to their cart and increase their AOV to receive discounts. For example, a cosmetics retailer that offers a $10 discount on orders over $50 can encourage customers to purchase more products to meet the minimum spend threshold. This strategy helps businesses increase sales and profits by increasing AOV. Similarly, discounts for higher quantities are also an option, where customers can enjoy price cuts if they buy in bulk. Returning Customer Discounts These discounts can form part of loyalty programs and usually offer percentages or flat rate discounts. The purpose of these is to encourage repeat purchases, increase customer loyalty, and ultimately boost sales and profits. For example, an online bookstore that offers a 10% discount to customers who have already made a purchase may encourage those customers to come back and buy more, which can increase retention and lower acquisition costs. Related Product Discounts This can be done by suggesting similar products of interest or cross-selling products. Highlighting a discount this way can help encourage large purchases since customers can feel you understand their interests and that they're getting higher value for money. For example, a technology retailer offering discounts on related items bought together, like a laptop, mouse, and laptop bag, can encourage customers to make multiple purchases at once, increasing total order value and revenue. Take Action With Real-Time Insights BeProfit offers an intuitive platform to help you monitor your sales data, profits, and revenue metrics. Uses auto-matching and manual tagging to track revenue metrics and cost per order.Provides an aggregated view of business performance by connecting all shops.Accessible on mobile and desktop devices for easy collaboration with teammates. Some Tips For An Effective Discount Strategy Research shows how effective discount strategies can also improve retention and loyalty, stating that 39% of customers are more likely to return for repeat purchases after using discounts. However, ineffective discounting can imply poor value and lead to lower profits and higher cart abandonment rates. Some tips include: Ensure profitability - Too many or too frequent discounts can reduce profit margins and revenue, so limiting promotional discounts to certain periods or items is suggested.Monitor the market - This can ensure that businesses' rebate strategies remain competitive and relevant. For example, a retailer offering 20% discount during a big sales event when a direct competitor is offering 30% may not be effective.Make sure discounts aren't too frequent - If discounts are frequent, customers will expect them all the time, which can lead to lower perceived value and even cause customer loss when discounts aren't available. Ultimately, this can hamper revenue and profits.Choose discount types strategically - Discount types should match businesses' overall goals and customer preferences. For example, if a business wants to increase AOV, minimum order discounts may be a good option. Discounts for repeat customers can be useful if a business wants to optimize retention. » Find out how to track revenue like the e-commerce giants with trade secrets Boost Revenue With Strategic Discounts By choosing discount types carefully, businesses can encourage customers to purchase more and encourage repeat purchases. This can not only help lower customer acquisition costs but also improve revenues and profitability. And choosing these strategies comes down to efficient performance monitoring. Tools like BeProfit help businesses with an all-in-one dashboard to track profits and monitor real-time sales data. This way, your discount strategies can be data-driven for improved results.
Best Products to Sell Online in 2022 for Big Profit Margins
Profit optimizationBest Products to Sell Online in 2022 for Big Profit MarginsIn 2020, more than two billion people bought something online. So, there’s a massive market of potential customers. Though, what products are most profitable to sell? Your product choices will depend primarily on whether you plan to sell locally or internationally, among other things. If your target audience is local, the top product to sell online will possibly not be the same as what’s trending globally. If you’re wondering what to sell online, here are some niche products for 2022 and other items to sell for profit. Is Selling Online Profitable? There are many high markup products to sell online. So, finding items with a high profit margin for businesses to sell is not necessarily the challenge. The trick is to see which products your target audience will like in order to personalize the customer experience. If you crack this code, you can definitely make money online. How much money? Well, that depends on several factors, including the type of product you sell, how good you are at marketing it, and how dedicated you are to making sales. To gain greater insight into how much an online store is likely to make, see our performing product profit analysis for an online store guide to learn more. Which Products Have the Highest Profit Margins? According to Shopify, a good margin for selling online products is around 45%, and according to Insider Monkey, the software industry was the most profitable in 2021. Alongside software, these winning products are also highly profitable: Jewelry Beauty products Kids' toysWomen’s and men’s apparelDesigner sunglassesEco-friendly products What Are the Low-Cost High-Profit Products? On the other hand, products with low margins can also be lucrative products to sell. While hygiene products are inexpensive to produce, there’s almost a daily recurring demand for them, which makes them some of the best consumable products to sell. On the one hand, offering lower-priced items can attract more buyers, help you stand out from your competition, and make your products available to a wider audience. However, there are also some disadvantages to selling low-cost items. For one, product margins are significantly less. Consequently, you’ll need to sell more products in order to make the same amount of money. It’s not all bad, though. To help attain the highest profit margins possible from low-cost items, tracking business expenses is a must. See our guide to optimizing online profit by tracking product expenses to learn more. It's also essential to understand the difference between gross profit and gross margin. What E-Commerce Products Are Trending in 2022? In 2021, some of the best things to sell online for profit include activewear, hair accessories, phone cases, and phone tripods. Some of the best consumable products to sell include pet food, quality tea, and craft drinks. With more people focusing on their health and the environment, you can expect that reusable water bottles will be in demand in 2022. According to Grand View Research, the global reusable water bottle market size is expected to grow at a CAGR (compound annual growth rate) of 4% until 2028. It’s also one of the best products to sell on Shopify. Grinders, drills, and other power tools commonly needed for home improvement projects are also good products to sell online in 2022. In fact, according to Global Market Insights, it’s expected to generate $1 trillion in sales by 2027. Which Products Are in High Demand Right Now? So what products are currently flying off the shelves? Taking a look at the most recent product trends, the following items are being purchased at a high rate: Pet accessories: Pet carriesCBD productsDog toothpasteCat treatsPet beds Lifestyle products: Decorative drink bottlesBags and totesGardening supplies Health products: SupplementsGym equipment and accessoriesTrainers and sports-specific shoes What Online Services Are in High Demand? If you’re not searching for just items to sell for profit, you can offer a wide range of online services. Print-on-demand, graphic design, website development, social media management, and app development are just a few of the other things to sell with a high profit margin. How to Increase Your Profit Margin There are many things that you can do in order to increase your profit margin while selling online. One of the simplest and most effective ways to do this is by improving your product selection. When you offer a wide variety of quality products, you make it easier for customers to find what they're looking for, and this increases the likelihood that they will make a purchase from your store. You can also improve your profit margin by increasing your prices. While this may seem like an unpopular suggestion, it's important to remember that customers are often willing to pay more for quality products. By increasing your prices, you can ensure that you're making a healthy profit on each sale. Finally, check out our guide on how to increase profit margins in e-commerce, where we break down how this can be achieved in more detail.
Man working on profit analysis with his cellphone and laptop on desk
Profit optimizationCustomer Profitability Analysis: Benefits, Formula, and Step-By-Step GuideCustomer profitability is the difference between the gross profit margin earned on a customer and the cost incurred to acquire them. Most businesses determine customer profitability with the help of a cost and profitability analysis. This analysis helps prioritize clients, services, and marketing campaigns in order to increase profitability. It considers the costs of servicing each customer and the profits made by maintaining that client. The analysis measures the profitability of new customers versus existing and retained customers. Step-By-Step Guide to Customer Profitability Analysis 1. Determine Cost of Servicing Customers A good place to start a customer profitability analysis is by determining the expenses incurred by obtaining and retaining your customers. These costs include: MarketingCustomer supportStaff wagesTransit and shippingWarehousingTaxes Once you’ve determined what each customer is costing you, it’s time to designate them into separate groups. 2. Segment Your Customers Segmenting customers based on their profitability to a business is important to a customer profitability analysis because it allows for the identification of high-profit customers. This information can be used to ascertain what customer segments are worth targeting, how much they are worth, and what they are most likely to buy from you. There is no definitive way to do this, but you could determine the groups by profit ranges that you define as "worth it" and "not worth it." 3. Track Your Data Now onto the most important part of any analysis, data tracking. Data tracking is the only way to accurately and consistently quantify outcomes, such as those represented by metrics like ROI (return on investment) and TCO (total cost of ownership). Customer profitability analyses also help to forecast what will happen in the future. Data can be used to see how customers are behaving now and predict what they will do in the future, which can help a business determine which products they need to focus on and where they need to provide better service. » Discover how you can increase your profit margin in e-commerce Advantages of Customer Profitability Analysis A customer profitability analysis offers businesses substantial advantages. This type of analysis helps: Optimize customer acquisition strategiesFind new customers with the maximum potential profitIdentify customers that are not profitableReduce customer churn and increase customer retentionCreate segmented customer lists How to Calculate Customer Profitability The product profitability calculation looks like this: Total profit per customer = (total generated revenue) - (total incurred costs) In a real-life profitability analysis example, the formula looks like this: Customer A places an order totaling $450, but the cost incurred to the business to entice them to make these purchases was $300. Therefore, the total profit generated from customer A stands at $150. Customer B places an order totaling $300, but the cost of enticing the purchases they made was only $50. That makes the total profit for customer B $250 Even though the revenue attained from customer A was $450, which was $150 more than customer B, they were not the more profitable customer. The cheaper cost of acquiring customer B made them $100 more profitable than customer A, even though the total order amount was less. We suggest that you read more about the mistakes to avoid when calculating profitability to ensure that your figure is accurate. How to Benefit From a Customer Profit Analysis The data generated by a customer profitability analysis can be used to optimize marketing and sales activities by determining which customers are profitable and which should be prioritized. Once customer profitability has been assessed, it's possible to determine if one customer segment is more profitable than another, or if a certain group of customers has a higher profit margin than expected. The insights gained from this type of analysis are also perfect for creating marketing strategies that will boost a business’s overall profitability. This may include the following methods: Customer segmentation strategies Implementing a customer segmentation strategy to identify consumer groups with maximum profit potential and create a targeted marketing campaign for these segments. Building brand loyalty Increasing the number of customers who buy goods at full price by building brand loyalty among shoppers will entice them to become regular shoppers and spenders, increasing the total long-term revenue without spending more on acquiring new customers. Using discounts sparingly Discounts can be a great way to acquire new customers or hold on to existing ones but can undermine profits if used too frequently. If you’re serious about determining the profitability of your customers, use the BeProfit app to easily conduct various profit analyses.
Man holding a wooden block with an image of an increasing profit graph
Profit optimizationWays to Increase Your Profit Margin in E-CommerceProfit margin is a measure of financial performance that shows how much profit a business makes for each dollar of revenue, calculated by dividing net income by revenue. In the e-commerce space, due to the low margins typically associated with this type of business, a high profit margin is essential for profitability. An online company must be able to sell its products and services at a price that covers costs and generates a healthy profit. Ultimately, if an online entity isn't profitable, it will eventually go out of business. To help you avoid this, this article will explain why it’s important to improve profit margins and discuss strategies for doing so. 3 Types of Profit Margins There are 3 types of profit margins: Net profit margin The percentage of revenue remaining after all expenses have been paid, including interest and income tax.Gross profit margin The percentage of revenue remaining after deducting the cost of goods sold from total revenue. Operating profit margin The percentage of revenue remaining after deducting all other operating expenses from total revenue. An effective method of determining whether your profit margins are sustainable is to use a customer profitability analysis. 3 Strategies for Increasing Profit Margins 1. How to Improve Net Profit Margin (NPM) To improve your net profit margin, you'll need to focus on 3 key factors: Review your expenses and reduce them Can you negotiate a lower rate with your suppliers? Can you cut back on some of your advertising or marketing expenses? Are there any unnecessary or duplicate services you can cancel?Increase your revenue by finding new customers This can also be achieved by selling more products and services to your current customers. Can you increase your prices without causing too much backlash? Can you cross-sell additional products or services to existing customers?Track your net profit margin regularly and make adjustments as needed Change your business strategy in order to improve profitability. Don't be afraid to make tough decisions in order to protect your bottom line. A high net profit margin is a good thing—it means the company is doing well financially. » Learn how to calculate net profit margin 2. How to Improve Gross Profit Margin (GPM) There are a few key ways to improve your company's gross profit margin: Increase the price of the products or services that you sell This can be done by conducting a market analysis to ensure that your prices align with those of your competitors. You may also want to consider raising your prices if you have not done so recently.Reduce the cost of goods sold (COGS) This can be done by producing or purchasing products and services more efficiently. You may also want to explore alternate suppliers who can offer lower prices for the same quality product.Keep track of business expenses Keeping track of business expenses can help you ensure they are in line with your overall business strategy. Reviewing your overhead costs regularly can help you reduce them without sacrificing quality or service. A high gross profit margin means that a company sells its products or services at a higher price than it costs to produce them. » Learn how to calculate gross profit margin 3. How to Improve Operating Profit Margin (OPM) Operating profit margin is a key metric for any business. By understanding how to improve your company's operating profit margin, you can ensure that your business runs efficiently and makes the most money possible. There are several ways to improve your operating profit margin: Look for ways to reduce spending This applies to all areas of your business, which may include renegotiating contracts with suppliers, streamlining processes, and reducing headcount.Raise prices If demand for your products or services is high, consider raising prices to increase revenue. However, be sure to do so in a way that does not alienate customers or hurt sales. Optimize processes Make sure your business is running as smoothly as possible by optimizing processes and eliminating waste. A high OPM means a company is making money on its core operations. What Is Considered a Good Profit Margin? When running an online business, there is no magic number for what is considered a good profit margin. The amount of profit that a company makes on each sale can vary depending on the industry, the products or services being offered, and the company's overhead costs. However, most businesses would like to see a profit margin of at least 10-15%.