Launching a business is an exciting opportunity for entrepreneurs, but in the early stages, money matters — a lot. Delivery, customer acquisition and inventory management expenses eat into eCommerce margins, so small businesses need to be savvy and make every cent count.
That’s why it’s vital to identify money-saving strategies for your small business, whether you’re just getting started or expanding further. Read on as we cover topics such as:
- Lowering your shipping costs
- Discovering seasonal opportunities
- Automating tasks within your business
- Using customer data effectively
- Financing your growth resourcefully
- Saving on international transfers to your suppliers
Lowering your shipping costs
One of the easiest and fastest ways you can start saving money is by taking steps to lower your delivery costs – namely, by reducing the excess packaging you use when preparing orders for shipment.
While there are other factors, pricing frameworks for shipping costs largely depend on the total weight of goods. So, by eliminating additional sources of weight, you can reduce your costs. Best of all, these savings can be passed onto your customers too, making your goods a more attractive offer against your competition.
Of course, there is a balancing act to this, as many small eCommerce businesses struggle to find standardised packaging solutions (opting for ill-fitting envelopes or boxes instead) or need to provide additional wrappings to protect goods while they’re in transit.
Nevertheless, throughout your business’s growth, lowering shipping costs should be a constant goal as packaging materials will remain a consistent source of wasteful expenditure if left unchecked. If your business can’t introduce a more efficient packaging solution, try to find a cheaper shipping supplier instead.
Discovering seasonal opportunities
When starting your business, you’ll likely have a single hero product or core set of goods to focus on. However, you may find that customer interest peaks at different times during the year, resulting in a quieter sales period and disrupted cash flow.
Utilising seasonal trends as a business opportunity can bridge these points and help reserve or even grow your working capital at the same time. Being proactive to protect your business’s cash flow more broadly is essential as failing to do so is the leading reason many start-ups fail.
Automating tasks within your business
Despite not always feeling like it, your time is valuable and finding software solutions to automate tasks can offer crucial time-saving (and money-making) opportunities for other areas of your business.
Luckily, there’s never been a better time for new entrepreneurs to find workflow solutions that best fit their needs. In particular, new eCommerce businesses can benefit from integrated solutions across nearly every aspect of their enterprise.
Tackling accounting and bookkeeping can seem daunting for small business owners. Between building the habit and knowledge-base to organise your accounting records effectively, it can quickly become a draining chore.
Emerging accounting software providers like MYOB, Xero and QuickBooks offer efficient accounting systems that let you save time and effort managing your financial records and make your finances easier to understand. Even if you’re a more seasoned business owner, the time-saving benefit can’t be overstated, so consider whether an accounting software solution is right for your business.
Unlike traditional retail businesses that often rely on employee labour to fill shop floors and re-mark product prices, eCommerce businesses can benefit from computerised management systems that help listings and prices appear automatically.
API software that interfaces with platforms like Alibaba, eBay or Amazon can help you manage product descriptions, prices and inventory counts more easily and quickly. If you sell via your own eCommerce website, similar systems are available for platforms like Shopify and WordPress.
Together, these time savings can be redirected to more lucrative areas of your business that need attention, like marketing and product development.
Using customer data effectively
In a similar vein, eCommerce businesses enjoy unparalleled insights into customer spending habits when compared to traditional retail. Small businesses can harness this valuable information to target customers more effectively and boost sales.
With just a few additions to your website’s sign-up requirements (or by using demographics report on platforms like Amazon), you can easily track the behavioural patterns of consumers for analysis. Below are two key examples of how you can start using this information to save money.
1. Focus your advertising
Using customer data, you can focus your advertising on consumers who are more receptive to your business’s offers. For instance, you can target specific ages, genders or hobby communities where your product or business is relevant.
As a money-saving exercise, targeting your advertising has three main benefits. Primarily, it helps to lower your customer acquisition costs as you’re no longer having to market to consumers who first need to learn about your product before buying it. Instead, you can target people who are more familiar with your offers, leading to quicker (and easier) sales. Similarly, directing advertisements at specific groups helps to lower your return rate as customers have an established interest in your brand and may already know what to expect when purchasing goods from your business. Finally, you’ll enjoy more available working capital with less money draining into stagnant inventory.
2. Find your par level
eCommerce businesses can hone in on their minimum inventory requirement further by finding their par level. Par level is the optimum level of inventory businesses should have on hand at all times.
Limiting your spending on inventory you may struggle to sell quickly enough (or even at all) can help you save money for other business needs. Although your business’s par level is difficult to identify in the early stages, the quicker you establish this metric, the easier it is to avoid overspending. Find an inventory management system that works best for your needs and begin determining your par level.
3. Work with fulfilment centres
Inventory levels can be further improved by working with fulfilment centres. These are B2B organisations that hold stock for other eCommerce businesses and help handle dispatch and shipping needs.
Small eCommerce businesses can better utilise batch order pricing from manufacturers when stocking fulfilment centres and limit their customs fees if centres are found closer to customers. As before, using your customers’ demographic data is a vital element to make this targeted strategy effective.
Financing your growth resourcefully
With eCommerce having enjoyed unprecedented growth during 2020-21, many investors and lenders will be eager to build upon this success in 2022-23. Fortunately, this means your eCommerce business won’t be short on offers, but you need to think strategically and find the right one for you.
Businesses have two main options to fuel their expansion – debt or equity financing – utilising bank loans and lines of credit to fund growth or win investors’ favour to source necessary capital. This is known as the ‘cost of capital’ and the exact balance of debt to equity ratio is an ongoing challenge for businesses.
In general, you should aim to use the lowest interest rate possible for any loans or credit arrangements you undertake in order to limit your costs. Unfortunately, this often comes with the trade-off of extending the term length which can impact your cash flow for a longer time.
In contrast, equity financing helps you avoid long-term debt obligations but can come with the potential to limit your future profits as dividends are paid to your fellow shareholders instead of being reinvested in your business.
And so, eCommerce business owners will need to carefully balance their growth strategy in the coming years in order to save money on costs and invest in growth opportunities as much as possible. To gain a clearer picture of your investment needs, begin by speaking with your accountant.
Saving on international transfers to your suppliers
As an eCommerce business, you likely need to make regular international payments to suppliers for your landed goods or raw materials. Unfortunately, too often this means small businesses are left paying hefty transfer fees.
WorldFirst offers small businesses a straightforward flat rate on their money transfers and can handle multiple international currencies. Your transfer fee even scales with your growth, helping your business cut costs and use a simplified budget framework.
Your easy alternative to a bank account abroad
With an account from WorldFirst, you can pay suppliers in their local currency and choose the best time to move your money. Open up to 10 local currency accounts for free and start collecting funds when it suits you.