During the epidemic, online retailers saw their top-line results skyrocket as shopping volumes through digital channels increased due to lockdown policies. Increased sales, however, doesn't always translate into higher profitability for store owners since several factors might impact a company's bottom line as it decides to scale up.
This is why business owners often get accountants to help them improve business profitability.
This article's for you if you are currently failing to raise your store's revenues despite a boom in sales. Check out our pointers on how to boost your online store's profitability.
1. Utilise Business Intelligence Software
An effective way to generate critical insights is to invest in business intelligence software. Business intelligence refers to the ability of the business to collect, analyse, and interpret data to make better business decisions.
Business intelligence software can determine the reasons for a drop in profitability by comparing the top-line sales performance to the bottom-line profitability. It's also used to identify suitable business strategies that positively impact the bottom line.
2. Keep an Eye on Your Overhead Costs
One of the reasons your bottom-line results have been on the decline is your overhead costs. Overhead costs are expenses acquired by a business for running costs such as the cost of facilities and equipment, office rent and utility bills.
Overhead costs are unlikely to change, and if your costs increase, there will be a simultaneous decline in your profitability. As such, we would advise you to monitor your overhead costs and ensure that they do not exceed the projected sales revenues.
3. Avoid Expensive Debt
Debt service refers to the interest incurred on debts such as loans. It is recommended that you avoid building a large amount of debt as the interest incurred on debt is often more than the profits earned from your business. In addition, a debt incurred is a debt owed. If you default on debt repayment, you risk your business’s longevity and financial stability.
4. Work on Your Customer Retention Strategy
To maximise your store's profits, you should consider implementing a customer retention strategy. This strategy involves retaining existing customers and encouraging the purchases of first-time customers.
A customer retention strategy is often cheaper than attracting new customers. By implementing a customer retention strategy, you will increase your profitability without increasing your sales. To further improve your bottom line results, you should also consider implementing a customer loyalty program.
5. Pay Attetnion to High-Value Sales Strategies
It is essential to use sophisticated sales techniques and strategies to drive high-value sales. High-value sales refer to the sales of products that have a higher profit margin. By increasing your profitability, you will be able to improve the performance of your business overall. There are many sales techniques that you can use to drive high-value sales.
The use of a sales funnel, for example, can be used to drive high-value sales. This is because the funnel will direct your customers to high-value products, which will improve your business's overall profitability.
Conclusion
Online stores can see their profitability skyrocket during this pandemic, like the swine flu pandemic. However, just because there's an increase in profitability does not necessarily mean that profitability will improve. Several factors may weigh on your store's profitability.
Investing in business intelligence software, having a well-balanced product mix, controlling your overheads, avoiding expensive debt, and implementing a customer retention and loyalty program can help you boost your store's profitability.
At The ECommerce Accountant, we help eCommerce business owners increase their profits while minimising tax. We take your business and meet its needs holistically through different eCommerce solutions to boost your ROI. We have top-notch accountants for online businesses who are well-trained in the Australian ECommerce Industry. Call us now!