Focus on the Bottom Line: Making Your E-Commerce Business Profitable


There is no doubt that COVID-19 has boosted the e-commerce industry, both in UAE and worldwide. According to research by IBM’s U.S. Retail Index, the pandemic has accelerated the shift to digital shopping by roughly five years.

This means that existing e-commerce stores witnessed an unprecedented increase in sales, and many new players have entered this exponentially growing industry.

High revenue does not always equal profit. Nowadays the biggest headache for e-commerce store owners or entrepreneurs is how to run their operations profitably.  

So what are the essential costs to account for when considering launching an e-commerce platform?

1. Evaluate your supply chain

This is the most important and sadly most difficult factor to optimize.  

One should start by evaluating all of their supply chain costs, such as cost of packaging, cost of storage, picking up and delivering the product (within and outside the city), cost of maintaining the stock etc.

Out of all the above things that fall under the supply chain umbrella, maintaining stock level needs the most attention. 

You need to spend considerable time planning your inventory by keeping in view the demand for your products on different days of the week.

For example, your product might have a greater demand during the weekend as compared to weekdays or higher demand during special shopping seasons and national holidays. Upfront planning helps in these types of situations.

Planning is key – having excess stock, results in higher storage costs and lower profit margin. Poorly managed stock frequently leads to companies expanding their storage, when they actually do not need to do so.  

On the other hand, fewer items than the demand will result in lost sales. Therefore, the right approach is to maintain balanced stock levels which is only possible with careful planning. 

Pro tip: Ensure you are collecting the necessary data and invest the time to analyze it. From there on you can make data-driven stock planning changes and use the insights for contract renegotiations.  

2. Adopt the latest technology

In today’s world, no business can survive without incorporating technology in their day to day operations. And since we are talking about e-commerce, the importance of technology multiplies. 

Though, merely having the latest technological tools is not enough. You also need to have the resources to successfully implement and make the best use of the technology. 

As an illustration, imagine buying a brand new Ferrari with a shiny and beautiful aesthetic. However, it comes without an engine or the driver does not even have a driving license. 

The people in your company are the engine/drivers of the technology. Unless you train them or hire someone already familiar with the tools and the e-commerce industry, the technology is useless, no matter how advanced it is. 

Another important thing to consider while brainstorming on what technology is best is to look at the size of your business. 

If you are a small e-commerce brand or have just started, investing in enterprise-level e-commerce platforms would be a waste of time and valuable resources. Instead, you should look into more affordable e-commerce platforms such as Shopify, Magento Community Edition, Woocommerce, or any other open-source tool.

On the contrary, if you are a fast-growing company with an established brand, you can’t expect to drive high revenue by just using a Shopify store. 

Instead, you should utilize enterprise-level e-commerce platforms, such as Salesforce, Magento, SAP, Oracle, etc. Such platforms will allow you to streamline and automate your day to day operations, something which is not possible with an excel sheet record.

Additionally, enterprise-level solutions are a lot easier to integrate with your existing IT infrastructure. As a retailer or a B2B company you must integrate your e-commerce platform with the existing ERP, CRM, WMS, OMS applications to ensure that you have accurate stock and price information as well as a single view of the customer data.  

Otherwise, most of your time will be spent on doing all these things manually and you will not have any time to think of competitive business strategies. 

Pro Tip: If you choose an enterprise-level e-commerce platform, make sure you have the right team to implement and use the chosen platform. Also, you should make enough sales to cover e-commerce license costs, yearly e-commerce solution maintenance fees, etc.

3. Invest in digital marketing

To ensure that investment in digital marketing results in desired sales, the first step is to identify the most appropriate marketing channels, clearly define the digital marketing budget per channel, and targets for each campaign, just like a sales team in a company has sales targets. 

For example, how much do we want to generate from influencers, how much from paid Google or Facebook campaigns, how much sales we should get organically, etc. 

Only when the budget and targets are clearly defined, e-commerce managers should invest in marketing. Otherwise, we will be spending money on digital marketing without getting enough sales. Hence this will affect our bottom line negatively.

In order to ensure that your digital marketing efforts for your e-commerce store are going in the right direction, our recommendation is to work with a digital marketing agency for at least the first 6 months. 

This is to have the correct digital marketing set up from the analytics standpoint, performance marketing, and SEO.

If an external agency is not an option we recommend hiring a digital marketing executive who thoroughly understands the different digital marketing channels.

4. Make use of product and data analytics

Data is the new oil today.  If you will make good use of data for your e-commerce business you can leap ahead of many businesses even with a limited budget. 

For instance, as an e-commerce brand owner, you should always be thinking of ways to increase the Average Order Value (AOE). In simple words, this is the amount a particular customer spends on your e-store.

Make use of data to find out the customer patterns in terms of what they are ordering, the content of each order, and the overall behavior of the customer towards promotions. 

Try different tactics to increase sales, use data to find out the customer’s reaction towards different strategies you have used (A/B Testing), and then optimize it to achieve maximum results. 

For example, do customers react differently if product bundles are created or special discounts are given, etc?

In short, use data to find out what works and what does not, instead of using your intuition to make decisions. 

5. Keep a record of all the expenses

Having a record of your expenses is important for both online and offline businesses. 

Make sure to document all of your e-commerce expenses. This includes the obvious ones like the cost of purchasing inventory and marketing expenditure as well as less obvious ones like payment processing fee and cost of website maintenance, hosting, and domain. 

The practice of record-keeping will serve dual purposes. First and foremost, it will allow you to divert your valuable resources from the least productive to the most important tasks. Secondly, it will help in cost-cutting. 

6. Never stop growing

One of the most important things for bottom-line growth is to constantly look for new opportunities. The world we live in today is characterized by rapid transformation and disruption. As such, if you don’t evolve, you would be left far behind. 

Growing covers a lot of aspects. For example, adding new products/services to your offering, expanding into new markets, incorporating new technologies, or even increasing the number of suppliers. 

In short, growth entails seeking new opportunities and discovering new horizons. 

If you need help in growing your e-commerce brand, consider taking regular feedback from your customers. This is the single best way of discovering new avenues for growth.

Focusing on the Bottom Line is the Only Way Forward

Many people consider e-commerce to be a shortcut to success. They think that by having an online presence, they can earn millions and become Jeff Bezos in no time. 

 This is not to say that your e-commerce brand cannot be a success. By creating a strong value proposition, attention to detail, and with the right mix of strategies, you can outclass your competitors and be a well-known e-commerce brand.

If you need help with making your online business profitable, please get in touch with Emerce Consulting today. We bring over 14 years of experience in e-commerce, supply chain, fulfillment, and other retail platforms including, merchandising, order management, point of sale, and warehousing systems.  

We have deep expertise in helping leading retailers and e-commerce brands across the GCC region in implementing winning strategies that help them provide memorable brand experiences to the customers.   

Get in touch now to find out how we can do the same for you.