It’s not uncommon for e-commerce businesses and online retailers to run into this sort of problem — while their top line may be doing well, company spending has started to eat into the gains their business makes in revenue.
Fortunately, it’s possible to reorient your company’s direction so you’re maximizing your bottom line, and not just your revenue, so long as you have the right strategies and technology in place.
Here are six strategies for improving your bottom line in 2020.
1. Advertise for Conversions, Not Traffic
When building and testing advertising campaigns, it can be tempting to follow the strategies that drive the most traffic. However, eyes on your storefront will only get you so far.
E-commerce research shows that, in the U.S., just 8% of repeat customers make up more than 40% of retail purchases.
Optimize your ad spend so you’re focused on finding ways to drive that 8% of customers to your storefront. Worrying about conversions, rather than traffic, can help boost revenue and ensure your ad spend is truly delivering results.
2. Target Top Customers
Similarly, you can significantly improve your bottom line by focusing on the fraction of customers who spend the most money. Once you’ve identified that 8% of customers, focus on retaining them and encouraging them to return to your storefront with the right incentives and programs. Rewards programs, coupons, targeted promotions and sales can all be effective in further locking down top customers.
3. Embrace Advanced Technology
One of the most disruptive trends in business right now is the rapid growth of advanced business tech — especially analytics software. Tools that automate repetitive and tedious processes or provide aid in areas where staff may be stretched thin are also trending. These are things like AI-powered customer service chatbots that can field client questions when your entire support team is occupied.
These solutions, when applied correctly, can save your team time and money on repetitive tasks and processes. They are then free to focus on work that requires a human touch, or to innovate and pursue new strategies.
These solutions will be an upfront cost, but they have the potential to save money over time.
4. Restructure Your Indirect Spending
It’s easy for indirect spending to bloat when left unmanaged, leading to a reduced bottom line. When possible, ensure that your indirect expenditures — money that’s spent on essentials that don’t directly make money — is as efficient as possible.
For example, your company may be relying on a wide variety of suppliers to fulfill indirect purchases, which can drive up your indirect spend. It’s a problem that leading motorcycle manufacturer Harley-Davidson ran into in 2009 — and one that the company saved nearly $4 million by solving.
5. Reduce Cybersecurity Vulnerability
Data breaches can be a nightmare scenario for e-commerce businesses and online retailers for many reasons — especially how much they can cost in fines, security upgrades and customer trust. It’s not uncommon for these hacks to be significant expenses for companies. On average, the cost of a breach was higher than $200,000 in 2019 — enough to put many out of business.
Even if you don’t think your company is threatened by data breaches — whether because it’s a small business or you think it isn’t handling too much information — you shouldn’t skimp on cybersecurity. About 43 percent of cyber attacks target small businesses. If you’re holding on to valuable data, you’re a target for cybercriminals.
Cybersecurity is a preventive measure that can save your business significant costs in the long run. While it may seem like an unnecessary expense, the evidence shows that not spending on cybersecurity can negatively impact your bottom line.
6. Optimize Data Spending
Data is more valuable than ever when it comes to building advertising campaigns and driving business decisions. As a result, your company may be holding on to more customer data than it knows what to do with.
Storing data costs money, and maintaining information your business doesn’t need can be bad for your bottom line. Your company can save on storage costs by identifying and holding on to only the most valuable customer info that you know can be used to drive conversions.
Data management is also increasingly important in the wake of new legislation like the CCPA and GDPR, which require businesses to provide customers with more control over their stored data. This means companies will need to have a stronger grasp on how they store and categorize customer information. Reconfiguring how your business does this also provides a great opportunity to ensure compliance with these new privacy laws, while also saving money on data spending.
Boosting Your Company’s Bottom Line
Even if your top line is doing well, inefficient spending can have serious impacts on how much money your business actually makes. Fortunately, you can boost your profits with the right strategies.
Optimizing ad and indirect spending, improving cybersecurity and embracing advanced tools are all possible ways to decrease expenditure and, ideally, improve your bottom line.