6 Most Common E-Commerce Expenses (+ How to Reduce Them)
Published January 28, 2023.
The old adage goes: it costs money to make money. And if you run an e-commerce store you know how true that is.
Keeping expenses down is important for any business, but in e-commerce especially, expenses can quickly grow out of control due to all the demanding aspects of your business, including processing returns, packaging products, and marketing your business.
Keeping track of your e-commerce expenses means more profit for you at the end of the day. For example, in my own business, changing the type of packaging used to ship my goods allowed me to save up to $1 per order. Added up over time, that's a huge saving.
Below I discuss the 6 most common e-commerce expenses I've come across plus tips to reduce them.
1. Number of Returns
A high number of returns can quickly add up. Each return costs you money whether you have to pay for the return shipment or, even worse, the product is damaged and can't be resold. Plus, you have to invest time and resources to contact the customer to sort out the return.
Also consider that regardless of the reason for the return, your customer had a bad experience. So, it's unlikely that this customer will buy from you again, which means the money you spent to acquire them is now down the drain.
My tips:
Reducing the cost of processing returns starts with reducing the number of returns.
- Make clear product descriptions: Add dimensions, color notes, and multiple, clear photos so the customer knows exactly what to expect.
- Extend the window for returns: Give customers more time to get to know and potentially keep your products.
» Try these strategies to reduce your return rates
2. Product Packaging
Packaging is an important part of the customer experience but it's easy to get carried away and spend more than necessary. It's wasteful because the packaging is tossed away at the end of the day. For example, if you include premium tissue paper with every order, that expense is multiplied over every order.
My tips:
- Examine your packaging process: Are there parts that can be removed or changed to a cheaper material?
- Consider the added benefits: Lighter packaging will reduce your shipping costs and be more environmentally friendly.
3. Holding Extra Inventory
It makes sense to hold extra inventory so you never have to worry about a customer trying to order something that's out of stock. But holding too much is like leaving money sitting on the shelf. I once ordered a large amount of a new product because there was a discount—I still have unsold stock that's not moving.
My tips:
Get an inventory management system to keep expenses in check by
- Tracking your inventory: Only order new stock when you actually need it.
- Analyzing your sales: Always keep enough of your bestsellers on hand but be more conservative with other products.
» Selling your products on Wix? These are the best Wix inventory management apps
4. Marketing
Marketing is a vital part of growing your e-commerce business, but it's also very costly. Without a solid marketing strategy, you'll simply be throwing money away with little to no return.
The most expensive type of marketing is pay per click (PPC), a type of traditional ad placement. While it can be very effective, there are cheaper ways to market your store.
My tips:
- Use social media posts to increase organic traffic and build your brand.
- Write or commission SEO-driven blog posts to capture traffic from search results.
- Work with influencers to promote your brand in exchange for products.
- Create a referral program that rewards customers for sharing your store with friends and family.
» Still prefer using e-commerce ads? Follow this ultimate guide
5. Shipping
Shipping is a very costly part of e-commerce businesses, especially if your products are large, heavy, or delicate. Your customers have also learned to expect low or even free shipping costs, so you might feel like you have to absorb shipping costs to keep up appearances. But there are ways you can pass the full cost of shipping on to customers without calls of foul play.
My tips:
Be transparent with your customers about your shipping options:
- Offer a choice: Allow your customers to choose between fast but expensive or slow but cheaper shipping options.
- Push minimum order values: Incentivize your customers to get free shipping by ordering a minimum amount.
» Thinking of using flat-rate shipping instead? Here's the best time to use it
6. Negotiate With Your Suppliers
As you build your relationship with suppliers, you create opportunities to negotiate better deals, thereby saving money. But remember this is a two-way street. If you prove to be a reliable customer who pays on time and orders consistently, you can get the best deals.
My tips:
- Early bird or prepayment deals: If you pay sooner, the supplier provides a small discount as a thank you.
- Bulk discounts: Suppliers can provide lower prices if you order larger quantities.
Extra Benefits of Reducing Your E-Commerce Costs
Reducing the expenses for your e-commerce store has benefits beyond saving a few bucks.
- Your revenue will be higher.
- More efficient business practices mean more satisfied customers.
- You can put that saved money toward growing your brand.
Monitor Your E-Commerce Expenses With BeProfit
All these extra expenses can add up to huge spending if not kept in check. I've learned from experience that a little trimming here and there adds up to major savings.
Keeping an eye on your spending is crucial, and you can do just that with BeProfit, an all-in-one expense-tracking solution for e-commerce businesses.
» Book a demo to explore BeProfit's features
