Boost Ecommerce Profits: 10 Ways to Do It

In ecommerce, every dollar counts. It sounds scary, but understanding profitability to boost ecommerce profits doesn’t have to be complicated. There are 10 ways retailers and brands can make clear-eyed decisions about where to make small changes that can have significant effects.

10 ways to boost ecommerce profits:

Find your most profitable products
Track relevant keywords
Focus your marketing efforts on the right channels
Compare marketplace fees
Avoid stockouts and overstocking
Add another store or sales channel
Decrease return rates
Explore fulfillment services
Start a customer loyalty program
Update your packaging

1. Find your most profitable products

If you want to focus your business efforts and boost ecommerce profits, follow the data, says Webgility CEO and founder Parag Mamnani in a recent interview about the future of online sales.

“I don't know how many merchants I've talked to who, when you talk to them about profits, always go back to their business P&L, like, ‘This is how much money I made,’” he explained.

“But when you dive in and try to understand which of your products made you money, most of them stutter. And that's where you find your edge. … If you can get down to product- and order-level profits, you’ll get to the heart of the unit that's making you money.”

But determining which products can help you boost ecommerce profits isn’t always cut and dry. Every item you sell comes with a whole host of costs. And it’s easy for a few to slip through the cracks.

Fortunately, solutions with multichannel inventory sync and accounting automation capabilities can help ecommerce businesses understand the breakdown of expenses, from sourcing materials to getting products to the end customer.

2. Track relevant keywords

Keyword research can ensure that you're selling the right products and help customers find your products when they're looking for them. Are you building out your product descriptions with the right keywords?

With tools like Google’s Keyword Planner, you can see how often people are searching for keywords that align with your business. If you find frequently searched phrases related to your products, add them to your online store or product titles and descriptions.

Look out for seasonal changes too. Add terms like “Mother’s Day gift” to your product listing if you think it’d be a good fit for those shoppers. This research is essential for sellers on Amazon, for example. Using the right keywords can significantly increase your Amazon best-seller ranking (BSR), which, in turn, boosts ecommerce profits.

Keyword research can also tell you what to add or change about your catalog. For example, if you sell wristlets but find the search volume for “monogrammed wristlet” is high, consider adding customizable options to your products.

3. Focus your marketing on the right channels

Determining which stores or sales channels are your strong suit is key to scaling your business and boosting ecommerce profits. Channel-specific revenue insights inform more data-driven decisions about where to sell certain products and focus your time.

“Identifying where your customers come from before they make a purchase on one of your channels is crucial,” says Sean Buckley, retail partnerships lead at Shopify, in a conversation about omnichannel marketing secrets.

“You want to identify the conversion paths that produce the most valuable customers and focus on the profitable paths to increase the quality of your customer base.”

If you can identify your most profitable channels, you’ll know where to put your time and resources, marketing that channel and improving the customer experience to nurture those existing customers.

4. Compare marketplace fees

Marketplace fees present a significant challenge when determining item or sales channel profits. With complicated fees ranging from membership and subscription fees to listing and storage fees, it’s no wonder why retailers need help keeping up.

“When you start to sell on marketplaces, your fees add up,” Mamnani explained. “In some cases, you're looking at up to 30% of your sales revenue going to fees. It's important to understand that, so you can continue to fine-tune. For a lot of merchants, that's the difference between making money and losing money.”

Lucky for you, we’ve compiled a breakdown of marketplace fees from Amazon, eBay, Etsy, and Walmart, so you can see how each one measures up. Do the math to see if paying more for membership will increase your net profit, or switch marketplaces if you’re spending more on fees than you should be.

5. Avoid stockouts and overstocking

Retailers know that running out of an item is a curse. It stops a sale in its tracks and negatively impacts the customer experience. Unfortunately, in 2022 alone, sellers lost almost $2 trillion to inventory distortion from out-of-stocks and overstocks.

Meanwhile, 37% of online sellers who manage inventory in-house say their biggest inventory-related challenges are stock issues like overselling and overstocking, according to new inventory management statistics from Webgility.

The key to boosting ecommerce profits through inventory is balance, adopting new strategies, and understanding that the future of inventory may be in a hybrid model, Mamnani says.

“Ultimately, I don't know if there's a technique that’s well-suited for any one seller,” he said. “It depends on your catalog, business model, and fulfillment promises. And if your goods require customization, you might have a different technique for that catalog.

If anything, sellers today need to understand the different techniques and get smarter about inventory management strategies. Fortunately, lots of great inventory management solutions can give you some guidance. But this is where analytics becomes critical.”

6. Add another sales channel

When scaling your ecommerce operation, adding more stores or sales channels is a surefire way to expand your reach and get your products in front of new shoppers. You might open an online store on Shopify or Wix in addition to selling on Amazon. Or you might diversify your marketplace presence by adding another one (or two) to your business.

Regardless of your path, adding another sales channel will likely help you, not hurt you. And, as Mamnani explains, "it's not a big task" to move a handful of products to another channel.

“I think experimenting on multiple channels is a must for every merchant,” he said. “You have to try a lot of different channels until you can find that sweet spot of what works. Single-channel selling has a lot of risks, especially in rough times.”

Thankfully, ecommerce automation software syncs prices, counts, orders, and expense data from your stores to your accounting solutions, making multichannel adoption much easier. Use it to add products to new stores quickly and access essential COGs data from all stores in one place.

7. Decrease return rates

It’s no secret that returns are the bane of ecommerce businesses. Online return rates dropped from 20.8% in 2021 to 16.5% in 2022, according to the National Retail Federation.

But returns are still responsible for around 16% of revenue losses. So if you make $20,000 a month in sales, you lose $3,200 to returns, some of which may be fraudulent.

How can you balance creating positive customer experiences and maintaining profit margins? Help prevent shoppers from needing to make returns. Returns will happen, but try these techniques and see if you notice a difference.

Write detailed product descriptions: Include as much information as possible in your product listings — measurements, photos, material details, color, size, everything. The more information you provide, the better you can set customer expectations.

Overall, 46% of US shoppers said they won’t make a purchase if product information isn’t detailed enough. And 30% won’t complete a purchase if images are missing or low quality. More information upfront means you’ll have more evidence if a customer initiates a chargeback due to products not meeting expectations.
Engage with — and encourage — reviews: Earning positive reviews and satisfying customer issues in negative reviews is another way to boost ecommerce profits and increase ecommerce sales and rankings.

Include a call to action for a review in your receipts to encourage buyers to leave feedback if they’re happy with their purchase. And make every effort to solve problems publicly and privately when buyers experience issues.
Adopt a flexible return or exchange policy: It might sound counter-intuitive, but the longer a customer has to return an item, the more likely they are to keep it.
Improve packaging to avoid damage in transit: It's common for customers to dispute purchases or seek returns for items that arrive broken or damaged.

Damaged goods may not be your fault in many cases. But investing in extra padding can ensure a safer journey for all your items.

8. Explore fulfillment services

Businesses with large order volumes can quickly become bogged down with the labor and time involved with personally shipping products: packaging, generating and printing shipping labels, and mailing. In many cases, paying extra upfront to simplify the shipping process by using a fulfillment service is more financially efficient.

Sellers who use a fulfillment service ship their inventory to a fulfillment center for warehousing. The fulfillment center organizes, maintains, and manages the seller’s inventory. When customers make a purchase, workers at the fulfillment center pull the products, package them, and ship them to the customer.

“Effectively, ecommerce has gone from being this inventory-heavy, ‘let me store the packages, put them in a box, put a label on them, and send them to customers’ to ‘let me watch the numbers move around on a screen,’” Mamnani says. “It's just mind-boggling how that's all evolved.”

Amazon and Walmart offer fulfillment services through their Fulfillment by Amazon (FBA) and Walmart Fulfillment Services (WFS programs). This type of fulfillment service is ideal for sellers who do a significant portion of their business on these marketplaces.

On the other hand, 3PL shipping and fulfillment companies, aren’t tied to a marketplace, so you can use them for any of your stores or sales channels. 3PL companies are also more likely to provide better customer service and build a partnership with your business.

9. Start a customer loyalty program

If you want customers to return and share their experiences with others, start a customer loyalty program and keep them engaged with rewards and incentives.

Customers who feel connected to your brand are more likely to interact with your business on social media, recommend your products to a friend, shop on your online store or marketplace, and visit your brick-and-mortar locations.

“The brands that make it easy and fun for customers to shop with them across those channels and really help their customers feel seen and valued end up having the most loyal customers,” explained Koshika Samarasinghe, retail product partnership manager at Shopify.

Turning a first-time buyer, she says, isn’t just gaining a repeat customer but a brand ambassador who may be more inclined to promote the brand on social media, try new products, and leave reviews. All of those are profit-boosting activities.

10. Update your packaging

Like returns, product packaging is another area where you must weigh customer experiences versus costs. Unique packaging may delight customers and promote repeat business.

But if you’re spending too much money on packaging that customers throw away, take the opportunity to cut costs. For example, a fun compromise might be to use generic packaging but customize it with branded stickers or tissue paper.

If you’re investigating more cost-efficient materials, consider switching box sizes, filling materials, and even the tape you use. If you suspect items are damaged in transit or upon return, more durable packaging can save you money in the long run.

More than half of consumers in a recent survey said they’d be willing to pay more for eco-friendly packaging. So eco-conscious brands might look for shipping options that use less packaging or packaging that environment-minded customers can recycle, something 65% of consumers said would impact satisfaction.

Analytics solutions use data to boost ecommerce profits

The more data you have about your ecommerce operation, the better decisions you can make about how to boost ecommerce profits. Business analytics solutions play a crucial role in helping you acquire that data. The right solution can show sales, profit, and payout reports for your ecommerce business in one place.

Sales reports show orders and sales by channel and product in addition to comparison and forecast reports across connected stores or sales channels. Filter specific date ranges or drill down on particular sales channels for deeper analysis.

Profitability reports show profits for your entire operation by channel and product across connected stores or sales channels. Use your QuickBooks integration to sync revenue and fee data from each connected sales channel and COGs data from your accounting platform.

Finally, payout reports show settlements for customers with Amazon stores. The right solution syncs historic settlements and provides a detailed breakdown of fee types and net proceeds. All of this information can show you which products are making the most so that you can branch out and explore new channels and which may need more or less marketing attention.

“To be a successful multichannel merchant and continue to accelerate and grow in the future, you've got to employ technology,” Mamnani concluded. “And not just technology for selling online. You need all the right automation tools and analytics solutions to get a good sense of how your business is doing and stay in control.”