Many ecommerce businesses are struggling. Profit margins are thin; cash is low.
As the host of “Ecommerce Conversations,” I typically interview entrepreneurs and executives. But I’ll depart for this episode, sharing lessons from running Beardbrand, my company, for over a decade.
What follows are my tips for adding margins to an ecommerce business. My entire audio narrative is embedded below. The transcript is condensed and edited for clarity.
Clarify Goals
I believe in bootstrapped businesses, prioritizing freedom over money. My decisions differ from those of Sean Frank at wallet-maker Ridge, who aims to build a billion-dollar company. My goal is to create a lifestyle that allows me to do what I want.
Having a clear goal facilitates focus. Chasing a billion-dollar business means thinking about a broad market, but focusing on a niche can result in a high-margin, low-stress company that’s lean and manageable, even at just one or two million of annual revenue.
Think about your products and how you communicate with customers and prospects. Are you speaking to a specific value proposition or in broad generalities? A 90% gross margin — revenue less cost of goods — allows flexibility to offer discounts or bundles. Creativity comes from starting with high margins versus struggling with products that cost too much.
Improve Operations
Shipping costs are significant. If you’re not comparing rates annually from FedEx, UPS, and DHL, you’re leaving money on the table. If you use a third-party fulfillment provider, ask what they’re doing to lower shipping costs. As a steward of your business, your job isn’t to serve vendors. It’s to ensure the best prices and value for your customers.
Think about what’s unnecessary in your business. For example, at Beardbrand, we sell directly to consumers (not in physical stores), which means we can use minimal packaging to lower costs.
Shrinkflation — reducing the size or quality of an item — is another option. There’s a reason brands have used it for decades. For instance, Montana Knife Company can fit two more knives per sheet of steel by slightly reducing blade length — adding inventory without increasing costs.
Consider manufacturing improvements. Dealing directly with the manufacturer can offer savings, as can manufacturing in-house. Josh Paulson of Quality Cage builds chinchilla cages in-house, giving him a competitive advantage and keeping costs low since he produces on demand.
In-house manufacturing can reveal optimizations vendors might overlook.
Upgrade Marketing
Many businesses create a website, run some ads, and call it a day. But there’s so much more you can do. At Beardbrand, we help men love the person in the mirror. To support that, we’ve done style consulting, where customers send photos, and we advise on hairstyles and products. Offering more expertise can build loyalty and word-of-mouth referrals.
Adding small notes of gratitude or sending birthday cards encourages repeat sales. We use PostPilot to send birthday cards to our top 1,000 customers, often including Yeti mugs with our logo. A $20 gift for someone who’s spent thousands goes a long way in maintaining relationships.
Limited edition drops for top customers can create loyalty. Hosting exclusive events promotes community and excitement around your brand. Instead of spending $5,000 on ads, put on a memorable event and get far more value from the connections and energy.
Elevate the Brand
The design and appearance of an ecommerce site impact conversions. Elevate your brand by upgrading photography, layout, colors, and fonts. These details matter. Consider if warm or bright lighting works best for your product, and ensure everything — from look-and-feel to human models — aligns with your brand and target audience.
Premium brands sometimes avoid publishing reviews, focusing instead on their products and services. It’s a bold move, but it elevates their image.
Superior materials can also help, especially in niches where customers will pay for the best.
Enhance the Checkout
Offer a premium return experience. For instance, you can add a “white glove” option at checkout, similar to premium shipping choices. ReturnLogic, for example, automates the return process, helping customers and brands. Other options include offering a $1 or $2 upsell for no-questions returns or priority support.
Additionally, consider offering high-margin accessories at checkout. At Beardbrand, we add quality tweezers for $10 that cost us $1. This strategy mimics grocery stores that place small, high-margin items near the point-of-sale station.