4 Tips to Increase Profit Margins for E-commerce Businesses


So, you’ve established the foundations of your business, started a killer Insta page, and you’ve sold some product. Now what?

At the end of the day, we want to sell what we love and do it in the most cost-effective (and profit-producing) way. Increasing profit margins without sacrificing sales numbers is the ultimate goal for any business, right? While this is no easy feat, we are here to give you some quick tips to help you get on your way!

So what should we do to increase profit margins and eventually grow as an entity?

Here are the main takeaways:

  • Know your Business
  • Test Different Pricing Strategies
  • Maintain Customer Satisfaction
  • Survey your Competition

Below, we break down all of these steps one by one!



1. Know your Business

Firstly, knowing the margins of each of your products and their costs is one of the valuable things to do. This is the base of your financial performance. Once you’ve taken the time to note that, it is time to figure out which products generate larger and smaller profit margins due to their nature and market demand. This will help you understand the true margin potentials of your business. It also helps you decide which products to invest your time and money in!

Start by asking yourself these questions (and take some time answering them):

  • What is your vision of what your business will be in the future?
  • What is your budget for running your store?
  • Do you know who your ideal customers are?
  • Do you know your business metrics?
  • Do you know your competitors?
  • How much power do your suppliers have?
  • Are you working with the right people?

Remember to look back into your answers in the following months and see if they are changing. If they haven’t, don’t panic! Sometimes the responses to these questions will remain stagnant, and other times they will grow and change; neither of these is “correct”- it’s all about what works for you.

Maybe you have a strong vision for your e-commerce pages, but you’re not sure how to create an effective storefront to help you get there. Having considered these things will allow you to move forward with the information you need to successfully amend your roadblocks and get you on the track for success!

girl use the tablet


2. Test New Strategies

Every business works best using a different model, so make sure you are trying out a variety of options that fit the needs of your company.

A general rule that is often adhered to in the e-commerce world is to set your sale price using dynamic pricing. Due to a vast amount of price comparison engines, consumer bargain hunting expertise, and advanced tools out there, finding the best price isn't as difficult as it was before. Setting fixed or rarely changing prices may limit you. By adopting a dynamic pricing strategy with a pricing software, online stores have great flexibility to decrease or increase prices and attract traffic towards its stores in the market. Pricing will also impact your ability to win the Amazon Buy Box, if you are a seller on that platform.

Changing your strategies gives you opportunities to see growth where you did not before. If you’re still unsure of what experiment to do, start small. From there, you can increase the number of your experiments and you'll get used to analyzing the results.


3. Maintain Customer Satisfaction

Customer service is an essential part of any successful platform, e-commerce or not! According to a recent study, 86% of customers are willing to pay more to get a better customer experience.

While providing high quality may also be an additional cost, it is something worth investing in. Happy customers generate natural promotions through word of mouth and social media engagement, which can increase sales. Additionally, someone who has purchased from you before can be reached through inbound marketing strategies to encourage repeat customers (which in turn generates higher profits). A small investment can produce a big return!

The role of any business today is as much about delighting existing customers as it is attracting new ones. Make yourself available and present to your customers. Email, social media, and websites are the top 3 marketing tools for small businesses, so taking time to curate a presence. This can help you go a long way!

"We [all] want to sell what we love and it in the most cost-effective (and  profit-producing) way...without sacrificing sales numbers ...we are here to  give you some quick tips to help you get on your way!"  -Click to Tweet-


4. Survey your Competition

While large retail platforms that offer marketplaces to individual sellers may seem like the obvious place to sell, there are plenty of other options that may benefit your company’s needs. It is important to consider where your competitors are (and are not) to get an advantageous edge.

40,000 Google searches are made every second. In a day and age where information and products (sourced by both you and competitor brands) are so readily available, it is important to reflect on how others in your field are approaching the same topic. By finding and analyzing your true competitors, your business can position itself in a very profitable place with the right amount of time given to research.

One important use of competition levels is to set a good, reasonable goal for your business efforts. If competition is excessive, it’s nice to manage your own expectations. Make sure your investments and returns are lining up.

If you are pouring your time and money into something and seeing little return, it may be time to adjust against the competition by making your product more desirable. If you are selling a comparable product at $10 dollars more than the competition, can you adjust your price? Can you offer something with added value to your customers? There are plenty of ways you can succeed and increase sales without compromising your boundaries and expectations for your products!

people in headphones


Final Thoughts

While we have given you a lot of information on ways to increase profit margin, we have barely scratched the surface. Maximizing opportunity within your business is one of the most exciting challenges you can take on. As you venture into this, we wish the best of success!

Have you done something remarkable surrounding the increase in your profit margins? Share it with us!

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