When you open different social media apps, it’s quite common to see different e-commerce guru ads. Headlines like “$0-$10000 profits with Facebook ads” or messages like “create a 6 figure dropshipping store with Amazon” paint an overly simplistic image of how things work. These videos often leave out the nitty gritty of how a profitable AND successful dropshipping store is built.
If investing a certain amount of money will guarantee success, there won’t be any failed businesses! That’s not how the world works! Whether you are new to dropshipping or are looking to expand your e-commerce business, understanding the mechanics behind HOW to increase profits is necessary. Not only will it bring in more income for you, it also helps you to sustain your income flow in the long-term!
Understand how profits generation work
Focusing mainly on the numbers is one of the biggest pitfalls a dropshipper can make. Worrying on your profits is valid. However, focusing only on the figures will cause you to be blindsided.
As business owners, we all know that the equation for profits is as such:
Profits = Revenue – Costs
In reality, this equation is more dynamic than it appears to be. For example, increasing the amount you spend on logistics may incur you more costs. However, customers are happier and trust your services more due to the consistent shipping times. As such, they are more likely to refer new clients or buy from you. The increased stickiness to your business brings you more revenue which offsets the additional costs and grow your profits!
Most e-commerce gurus don’t breakdown the sources of costs and revenue for you. That’s why we classified the different sources of costs and revenue here. You may use this as a guideline to evaluate and improve your business processes.
The front-end costs for your business are essentially narrowed to 2 main sources – the cost spent to increase visibility of your business and the cost of improving customer service.
1. Marketing campaigns
If you want to increase traffic to your business, it is a no-brainer that you will have to invest some amounts on ads or engaging influencers to promote your brand. Assess the feasibility of your marketing campaigns every months and do the necessary A/B tests. An effective marketing campaign will provide you sales conversions. Otherwise, you are merely squandering on beautiful aesthetics.
2. Improving customer service processes
When you only received 10 orders a day, it was manageable to answer to your customers. However, if you’re looking at achieving 100 orders and more, it will be unfeasible for one person to answer your customer queries. Shops with faster response rates have better chances of converting sales. This is why if your budget allows, invest in better technology on top of having a standardised customer service system to improve your customer experience with you. Understand that the dropshipping industry is highly saturated and the chances of you selling same/similar products as your competitor are high. This is why investing in infrastructure to provide your customers a good experience is important as it helps YOUR dropshipping business stand out from the rest!
Back-end costs boil down to what makes your customers ask for refunds
What makes your customers ask for refunds? In some rare cases, they make the wrong purchases. Usually when your customers ask for refund, it’s because of 2 things. Your products either do not meet their expectations or they took too long to reach them. As a business owner, refunds are the costs you want to minimise these by investing in quality fulfilment services. When you work with a quality dropshipping agent like Xianchao logistics, quality product curation and reliable delivery services help to keep these refunds to the minimum.
Now that you have settled the sources of problems which will cause your costs to rise, let’s talk about how you can increase revenue for your dropshipping business!
Sources of revenue can be categorized accordingly:
1. Customer’s perceived value of your products
One way to create value is creation of cost-savings for your customers. To do this, you may consider running promotions or providing returning customers with referral codes. This is one of the more effective ways in which e-commerce stores clear unwanted old stocks.
Another way to create value is through increasing the unique quality of the brand. Customising products for your brand. Both a brandless bag and a branded bag are bags. Yet what makes a customer purchase the branded bag? It is the perceived value of the branded bag that makes them buy it. At Xianchao logistics, we provide different levels of customisation for your dropshipping store. Let us know how we can help you customise your products today!
2. Order volume
Your order volume depends on repeat customers or referrals from your customers. To increase your order volume, you really would need to have good quality products and customer service. Ensure the quality of goods by having a strict curation process. Usually, working with a credible dropshipping agent to do so will help! You’ll be able to communicate what you need effectively with your suppliers and couriers. Not only will having good products help to boost your sales volume, it will also reduce the incidents of refunds.
Of course, methods to maximise profits are not limited to these methods. As there are a variety of dropshipping products, you would also need to tweak your strategies accordingly. Nonetheless, these tips are basics which you should see fulfilled if you want your e-commerce store to continue growing!
With over 30 years of logistics experience, Xianchao Logistics began to branch out to serve the dropshipping industry in 2015. With our experience in logistics fulfilment and close relationships with suppliers, our company has risen to help different dropshippers grow their businesses over these years. We believe that our company’s success and growth will only come with helping our clients grow. Do you have a dropshipping business to grow? Discuss with us and let’s get started ASAP!
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