Finance

Cutting the Cost of your E-commerce Business in 3 Easy Steps

e-commerceWhile the e-commerce business model may have first emerged in earnest at the turn of the century, it continues to grow in terms of popularity. This is reflected by numerous statistics, with Mashable reporting that online payment solution PayPal saw a total transactions of $4,423 per second during the third financial quarter of 2012. This is a huge amount, even accounting for the convenience of the service and reliability.

This considerable growth brings intensified levels of competition across all markets, however, which means that independent e-commerce business owners must be proactive when looking to manage costs, deliver a high quality of service and drive profitability. The former consideration is particularly important for firms that trade in the international market, as the cost of packaging goods and shipping them overseas can quickly accumulate if they are not managed carefully or with a clearly defined strategy.

Managing E-Commerce Costs: 3 Practical Steps for Business Owners

With this in mind, what practical steps can e-commerce business owners take to reduce these costs and subsequently boost their profitability? Consider the following ideas: –

1. Develop a Network of Carriers and Look to Rate Shop

As a general rule, e-commerce businesses network with multiple carriers simultaneously, as this enables them to rate shop according to the size of each individual shipment and its contents. While adopting this kind of flexible approach is key to maximising savings across each individual shipment, however, it is important that you prioritise different carriers over time and make a clear distinction between small and large packages. When dealing with some smaller parcels, for example, you may achieve the best rate simply by using a simple, first class delivery service through Royal Mail. In the case of larger shipments, however, you should maintain a small but focused network of delivery specialists and attempt to secure competitive pricing on a per-parcel basis.

2. Always Negotiate and Use Rate Prices as Leverage to Secure a better Deal

Like any other service provider, residential delivery firms operate according to the basic rule of supply and demand. They therefore tailor their services to suit the most lucrative market, and with the rise in online retail spending likely to continue indefinitely companies are increasingly keen to offer competitive pricing to merchants in order to secure their business. Depending on the size of your business and shipping volume, this provides you with an opportunity to negotiate strongly with suppliers and drive a more competitive rate. You will also need to enter negotiations armed with as much data as possible, however, including each service provider’s historical rate and a host of alternative prices that can be used as leverage to secure a more favourable deal.

3. Audit Invoices and Eradicate Recurring Billing Errors

While the first two tips will enable you to streamline the operational side of your e-commerce business, you may still fall victim to occasional overspends and billing errors. The amount lost through such mistakes can quickly accumulate, so the next step is to implement a stringent auditing process for invoices so that you can eradicate recurring errors and minimise costs over time. This is especially important when negotiating independent rates on a per-parcel basis, as the amount paid must reflect the agreed terms exactly. In addition to this, you should make a note of instances where money has been lost through weight discrepancies or the failure of carriers to reimburse in the case of late delivery, as these can easily be overlooked force you to pay more than is required for particular shipments and services. Once you have identified costly or recurring mistakes, you can put processes in place to prevent these and boost profitability over time.

This article was shared by TNT UK.

A post by Laura L Cole (33 Posts)

Laura L Cole is author at LeraBlog. The author's views are entirely his/her own and may not reflect the views and opinions of LeraBlog staff.
Laura is a blogger and researcher based in Northern England.

Do you have any questions? Please ask.