Omni Profit has a very strong focus on identifying and analyzing methods to increase profit margins. From understanding marketplace fee structures to hacks and software automation, our goal is to share strategies that can have a profound impact on your bottom line. This article identifies some of the easiest methods to increase profit margins. It outlines how to implement them yourself, for free, and how to automate them with affordable software.
As a brand owner, finding just the right price point can seem like a daunting task, especially with how many factors you can take into consideration; How do your competitors price their products? Should you beat them on price? Or should you brand your products as higher-quality with slightly higher pricing? Should you discount?
These considerations can take you down a never-ending spiral of contemplation and analysis paralysis. But setting the right price point can have dramatic increase on your profit margins. The key is to rigorously test how the market responds to different price levels to find the optimal price point.
Start by adjusting your pricing at set intervals; either hourly, daily, or weekly, while ensuring to remain consistent with your cadence. We recommend starting at a low price point and slowly increasing over time. Next, meticulously record your sales volume within each interval and start to look for trends. Identify the price point that generated the most profit, not revenue, and make this your more permanent price point.
Be forewarned, this manual implementation strategy can take a great deal of time and data analysis. The great news is there's a MUCH easier way to optimize your pricing, and that's with Splitly's Profit Peak tool, which automatically tests different price points until you achieve your peak profit. Splitly has generated nearly $200m in monthly revenue for it's customers. So what are you waiting for?
Finding the right price point as a reseller is much different than a brand owner. It's much harder to differentiate yourself from your competitors, so a large component of the consumers purchasing decision is around price -- which leads to a vicious race to win the Buy Box on marketplaces like Amazon.
Do you feel stuck when it comes to winning the Buy Box on Amazon? If so, you're not alone. Understanding how to price products, when to price products, and at what price to list products is no easy task - especially when you have a magnitude of competitors selling the exact same product. There are a few primary factors Amazon considers when determining what seller should be awarded the Buy Box:
1-3 are achieved with operational efficiency while price is achieved with careful competitive strategy. But all are not mutually exclusive. If you have the highest price, but your competitor has poor performance feedback, you will likely win the Buy Box. And you could likely increase your price even higher while still winning the Buy Box. If you have the lowest price but your fulfillment time frame is twice as long as your competitor, you very well might lose the Buy Box to a competitor with a higher price but faster fulfillment times.
There are many factors that are nearly impossible to detect and manage on your own, which is why you should leverage a completely automated and algorithmic repricing software which will intelligently adjust your pricing based on market conditions to ensure you're winning the Buy Box as much as possible. If you're selling competitive products and you don't use a repricer, you're very likely doing your business a tremendous disservice.
It's simple. Sign up for a repricer like Xsellco, import your products, and let it do it's thing. Xsellco Repricer customers see an average increase of 145% in Amazon sales in just 30 weeks.
Learn more about the top Amazon repricers here.
Perhaps one of the easiest methods to increase profit margins is to lower your shipping rates -- and as easy as it sounds, it just takes time. Here are a few ways to decrease your shipping costs:
As mentioned, it's easy but it takes time. For smaller sellers, simply check your rate on each carriers site before processing the shipping label and identify the cheapest carrier. Yes, this means logging into USPS, FedEx, etc., comparing the cost to fulfill an order, and choosing the cheapest. If you're a large enough seller, you might be able to negotiate cheaper rates directly with your carrier.
The easiest, most time-and-cost-saving solution is to use ShipStation. It offers pure shipping automate and it truly can't be beat. Pricing starts at $9/mo and it'll save you hundreds in shipping costs and even more in labor.
Another easy way to decrease your shipping costs is to use smaller and cheaper packaging supplies. We recommend going with small poly mailers that can be purchased on Amazon but feel free to browse Amazon for packaging supplies that better meet your needs.
Kitting and bundling products is one of the easiest ways to increase your Average Order Value (AOV) and profit margins. It's as simple as offering a product as a two or three pack, or offering two or more separate products bundled together.
For example, you can offer a single t-shirt for $20, or 2 for $35. Or, you could offer a single t-shirt for $20 and a single pair of socks for $15, or both bundled together for $30. Typically, you'll offer kits or bundles at a slightly discounted rate to incentivize the consumer to purchase the additional product(s).
As a result, your AOV should increase. Additionally, you'll save money on shipping because your shipping cost per unit will decrease: you're paying one low shipping fee to ship two or more items instead of one shipping fee per item (if they're sold separately).
Kitting and bundling manually is a bit of a pain and is not recommended because it can result in an inventory management nightmare. You have two options:
Manually managing kits/bundles is the easiest way to waste time and oversell products, resulting in a stressful you and unhappy customers. Instead, we recommend automating the process via Bold Commerce's "bundler". It allows you to create virtual kits/bundles and automate inventory synchronization. It's compatible with Shopify and you can use Shopify to push products to marketplaces like Amazon and eBay.
If you're not an operational or logistical wizard, you may want to consider outsourcing your warehousing needs to a 3rd Party Logistics (3PL) company. Learning how to structure and manage a warehouse for maximum efficiency is no easy task and should be saved for the professionals.
3PLs house your inventory and handle order fulfillment so that you don't have to. It's that easy. If your strong suit is in marketing, branding, or really anything other than operations or logistics, why should you worry about managing a warehouse?
Here are a few other reasons you should consider a 3PL:
Partnering with a 3PL isn't nearly as difficult as it may seem. All you have to do is pick one, send in your products, connect your channels, and get back to doing what you do best: selling!
We recommend parting with ShipMonk as your 3PL.
If you've found yourself conducting the same task over and over again, it might be time to outsource it. It's a simple concept: you, the business owner, have better things to be doing such as sourcing new products, running advertising campaigns, and a whole lot more. So why spend time doing tedious and mundane tasks that someone else can be doing for a lot cheaper.
Welcome to the world of virtual assistants: a network of remote workers who are willing to offload pretty much any task for you. Whether that be data entry, customer support, product analysis, etc. And the best part? They only cost a few dollars per hour without sacrificing quality of work. It's a no-brainer.
To find a virtual assistant yourself, you can Google your task + "virtual assistant". For example, if you're looking for help with customer service, you could Google "customer service virtual assistant" and you'll find a variety of individual VAs and VA service providers.
You'll then have to vet the VAs to ensure they're qualified for the job at hand and put together an agreement with them. You'll also want to put together an operations manual or playbook for them to follow to ensure they're following your exact protocol.
While we wouldn't consider this complete "automation", services like FreeeUp handle all the vetting for you to ensure you're only picking from a network of completely qualified VAs. These VAs typically have experience in their field and skill set which can save you time having to train them.
To learn more about outsourcing, we recommend giving The Four Hour Workweek by Tim Ferriss a read. Tim Ferriss is a lifestyle automation junkie and found a way to outsource and automate his multi-million dollar ecommerce business.
Finding suppliers that can offer you the same product at a lower cost is a surefire way to increase your profit margins -- just be sure you're not compromising the quality of your goods and that recent tariffs don't eliminate your cost savings.
Similar to finding VAs, finding suppliers is as simple as conducting a Google search for your product + "manufacturer" or "supplier". For example, if you're looking to have dress socks made, simply Google "dress socks manufacturer" or "dress socks supplier".
You'll then want to contact each supplier and vet them by having them provide any certifications they possess, number of years they've been in business, references, etc. It's a time-consuming process but you can find some quality suppliers in the depths of the internet.
While this isn't complete automation, Alibaba offers the largest directory of vetted B2B suppliers in the world and they offer a variety of different services to go the extra mile in confirming the quality of goods offered by suppliers. If you need a supplier for any type of good, there's a good chance you can find one on Alibaba.
We've discussed 7 different methods and tools to increase profit margins in your ecommerce business. The moral of the story is to leverage 3rd parties with a specialty in their field to help you advance your business. No one can do everything, and no one should. If you found this article to be helpful, please don't hesitate to share it with your network and please let us know how you're going about automating your business and increasing profit margins - we'd love to know!
*we may receive affiliate commission from solutions mentioned in this article but would never promote a method or solution we haven't tried or wouldn't use in our own business