The eCommerce market is experiencing no shortage of growth. eCommerce revenue is expected to double over the next four years, and the average consumer on Shopify spends $92 online. This is great news for scaling stores, but not every eCommerce business enjoys a fairy tale ending.
If you fail to pay close attention to your numbers, selling fees will swallow a huge chunk of precious profits, leaving your business accounts noticeably lighter.
With platforms like Amazon and eBay raising seller fulfillment fees, now’s the time to optimize your logistics process and make your selling strategy as efficient as possible.
In this post, we’ll explain why you should focus on lowering your selling costs in the coming months. We’ll then share some strategic moves you can make to trim the fat from your spending.
Why it’s important to lower eCommerce selling costs
Although much advice recommends focusing on driving sales, you may wonder if it makes more sense to increase product prices or bundle items to increase average order value. While these are effective strategies, lowering your selling costs is a strategic yet underutilized way to bolster your business. Doing so helps you:
- Secure higher ROI: With leaner selling fees, you’ll have more cash on hand to scale, and your business will be more profitable.
- Increase customer happiness: Lower fees allow you to pass the savings on to your customers. This, in turn, will increase your brand’s perceived value, lower your return rate, and inspire more brand advocacy.
- Earn perks for current successes: Your high order volumes can secure lower fees and push your business forward for less.
How to reduce selling fees without stunting business growth
Now we’ll discuss how to slash seller fees like a Black Friday sale and set your store on the path to huge profits. Let’s break down each strategy.
1. Optimize your shipping and fulfillment costs
An underappreciated way to cut fees is to reduce shipping costs. One of the best methods to accomplish this is to work with a third-party logistics (3PL) provider and tap into their relationships with freight and transport networks. A reputable fulfillment partner can:
- Negotiate lower carrier rates and packaging prices thanks to economies of scale
- Place inventory as close as possible to demand to shorten delivery distances
- Strategically pool stock to save on warehouse space and costs
If you prefer to handle shipments bound for your warehouse or eCommerce platform’s fulfillment center but want to keep costs low, use a service that can help you find the best rates to ship items to your 3PL, warehouse, FBA, and more.
2. Partner with a dependable and cost-effective 3PL
Fragmented fulfillment is expensive, but it can also negatively impact your customer experience. So, instead of relying on multiple services like eBay Fulfillment, Walmart Fulfillment Services, and Amazon FBA, bring your logistics under one roof with a reliable 3PL.
Affordability is only one factor to consider though. You also need to look at other important elements like on-time shipment, error rates, experience, and territories served. Focus on areas such as:
- Cross-border capacity: Cross-border selling capabilities like sending stock, customs clearing, and receiving items is vital to business growth. Your 3PL should offer cross-border selling services through their strategic partnerships, such as shipping and warehouse networks. Working with a 3PL that has warehouses close to your manufacturers also keeps costs low.
- Prep services: If you work with a single manufacturer, you can ask them to handle your product branding and packaging. However, if you work with more than one, using a prep service from your 3PL is an efficient way to establish uniformity and reduce costs since you won’t have to print and send packaging materials and labels to multiple manufacturers and suppliers.
- Warehousing: If you sell cross-border in multiple regions, look for a 3PL with an expansive warehouse network. Work with your provider to optimize inventory locations and consider each SKU’s popularity and shipping costs. For example, MyFBAPrep has over 50 warehouses globally (and counting) and can handle even the most complicated product storing and packaging requirements.
- Transport: Maintain optimal fulfillment costs by working with carriers that offer bulk pricing for shipping to customers and can consolidate shipments from manufacturers. Shop for the best inbound and outbound shipping rates quarterly to ensure your fees stay in line with your store’s growth.
- Fulfillment fees: Avoid fulfillment providers with a reputation for springing nasty surprises on monthly invoices. Your expenses should be clearly laid out down to the penny, with a cost structure that’s easy to understand. Know how much your fulfillment-associated charges will be with the option to scale up or down. For example, MyFBAPrep has transparent pricing with flexible services.
3. Choose sales channels strategically
It’s critical you identify which sales channels your products perform best on to sow long-term financial efficiency for your store. Look at your competitors’ sales history across various channels and ask your customers where they prefer to shop online. While there are no guarantees, you’ll be able to gauge with confidence which channel(s) are the right fit.
Also, assess both the products you sell currently and those you intend to launch. Note every charge you could incur and estimate each item’s long-term viability in different markets like a recession, increased competition, or off seasons. This tactic will help you determine how long you can pay the fees and which sales channels will be more profitable in the long run.
Don’t hesitate to drop slow-moving products, test other eCommerce platforms, let the numbers guide which ones you pick, and jump ship if you find a better option.
Tip: Consider selling low-profit items on your own website and fulfill through a 3PL to increase profits.
4. Check marketplace referral fees for your category
Marketplace fees have become a giant web of branching costs depending on what you sell, where, and when. For instance, say you sell electronics; you may have to pay 10% on one marketplace but only 8% on another, making it difficult to keep track of how much you pay to sell your items.
So, before you sign on the dotted line, research referral fees for your product categories in each season and note any charge adjustments the marketplace will enforce as your order volumes increase and decrease.
If you purchase a marketplace subscription, learn what’s included, the time spans (monthly, quarterly, or annual), and any extra services you can buy. For example, if you want to sell on eBay, their starter package costs $4.95 per month for 250 fixed and auction listings when renewed annually and $0.30 for every listing after that.
Meanwhile, their enterprise subscription costs $2,995 for the same time period and gives you 25,000 auction listings in specific categories (with additional listings costing $0.10) and 100,000 fixed listings in all categories.
So, decide whether you’ll use what’s on offer in a package and change your subscription if your current one no longer fits your business needs.
5. Monitor your payment platform costs
Costly payments for selling and buying can hurt your business if you fail to keep a close eye on them. Use a reliable digital wallet to manage your store’s funds so you can pay suppliers and expenses in the required currency and convert disbursements affordably and quickly.
Watch out for different charges for selling domestically and internationally, as these are incurred after an order is placed and has settled on your account (which, by then, is too late to change). For instance, PayPal varies payments between 2.9% and 3.4% plus a fixed fee depending on the country. Shopify payments base fees on your store’s subscription plan, such as:
- Basic Shopify – 2.9% + $0.30 for online transactions
- Shopify Plan – 2.6% + $0.30 for online transactions
- Advanced Shopify – 2.4% + $0.30 for online transactions
6. Reevaluate pay-per-click costs by product
Pay-per-click (PPC) has become one of the most widely implemented tactics eCommerce brands use to launch and gain traction for their offers. However, although not as high as during the COVID-19 pandemic, PPC ad costs are on the rise, increasing by 13% in Q4 2021.
Even products once seen as an easy entry into low-competition niches are racking up high campaign costs. Before you launch a PPC campaign, pull up search figures and cost-per-click numbers to estimate how much marketing will cost at the SKU level. Then, assign a budget for each product based on your findings, along with a healthy buffer.
7. Focus on your most profitable sales channels
Depending on the platform where you set up shop, selling can become cheaper as your order volume increases. In most eBay categories, for example, you’ll incur a 12.9% final value fee on items up to $7,500 and a 2.35% sale percentage afterward. To enjoy lower selling fees, push sales on the platforms that reward your higher volume and sell higher-priced items.
Also, bolster your PPC efforts with organic marketing, which can be more profitable in the long term, such as:
- Influencer marketing
- Affiliate marketing
- Community building
The secret to larger online profits
With rising ad costs and continued global supply chain chaos, finding ways to reduce your operating expenses is essential for success in the next eCommerce frontier. Partnering with a 3PL, negotiating service costs, reevaluating your tech needs, and optimizing your ad strategy are a few ways you can reign in your spending for bigger profits.
So, take action now. Pick an area to focus on this month, assess your results, then rinse and repeat with other business operations. Before long, you’ll see serious monetary gains and avoid selling expenses that pinch your pockets.