2020 was an astounding year for e-commerce due to COVID-19, with global e-commerce sales reaching over £3.9tn. This trend is expected to continue over the coming years, with 2024 e-commerce sales expected to hit the £7tn mark and £10tn in 2027.
Despite the dramatic rise in online sales, maintaining profitability within e-commerce can still be a concern for business owners, particularly given the uncertainty surrounding post-Brexit trading rules and customers seeking value for money amid the pandemic.
It’s also considerably costlier to deliver a product directly to consumers than buyers purchasing and collecting goods from a brick and mortar store. In Kantar and Profitero’s 2020 Ecommerce Organisational Benchmark Report, the study found that profitability was the biggest concern for online business owners in 2022.
To ease profitability pressure, 2020 saw many e-commerce businesses raise their prices. The study, which looks at over 200 brands, found that prices were 1.6% up by the end of the year. According to the statistics, beauty, home furniture and household supply businesses saw the most significant price increases, whilst toys and videos games companies saw the largest price drops.
Which areas of business to focus on in 2022
During periods of economic uncertainty, there are five areas that e-commerce business owners should monitor to help maximise profitability in the coming year:
E-commerce businesses need to be mindful of who they distribute their products to, who is likely to cause their average selling price to fluctuate and who will happily keep prices at a premium. Past performance shows that Amazon is the marketplace most likely to price match and lower costs. Kantar and Profitero’s e-commerce price index revealed that Amazon predominantly slashed prices on beauty products and vitamin supplements last year, whilst Target increased prices by 16% and 12% respectively.
Controlling product distribution
E-commerce businesses must maintain control when it comes to product distribution to avoid falling victim to marketplace dynamics. Limiting your number of third-party sellers can ensure that your product value is not diminished across the market. Establishing a minimum advertised price (MAP) means business owners can create boundaries for third-party sellers and ensure that the product value remains reasonable.
Cost-efficient shipping and packaging
E-commerce brands must look at ways to reduce costs where possible, with packaging and shipping being a substantial cost for many companies. A prime example is the Tide brand by P&G, who recently reassessed its packaging strategy. Their new packaging now uses 60% less plastic and 30% less water, meaning shipments are much lighter and cost-efficient. Many online brands now choose to outsource their order fulfilment to a third-party logistics (3PL) provider who can create bespoke packaging solutions to best suit their business needs, helping them to save time and money.
Limiting promotional strategies
Whilst promotional strategies can help increase product sales; they can also lead to dramatic reductions in your average selling price. There have been instances where Amazon have offered price-matching against significant competitors, triggering other retailers to follow suit. Limiting omnichannel promotions can help businesses regain control over their average selling price, encouraging substantial sales growth.
Offer greater value for money
With so many retailers engaging in price wars, e-commerce businesses must offer value to their customers beyond item pricing. Think of the many ways in which you can create additional value to your customers to set yourself apart from competing brands. Perhaps offer a loyalty program where they can receive items at a discount or product bundling where they can earn additional savings.
With the e-commerce boom set to continue for the foreseeable future, e-commerce businesses must remain sensitive to pricing by offering value to their customers without sacrificing their profitability.
If you think that outsourcing your order fulfilment could help your e-commerce business save time and money in 2022, it could be time to give Pointbid a call. At Pointbid, we take the time to get to know your business to ensure that we choose the right fulfilment strategy for you. From goods in, picking and packing, to timely shipping, we take care of the order fulfilment process from start to finish. If you’d like to know more, please do not hesitate to give us a call on 0121 326 7368.
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