Which factors influence an online shop's profits?
BLOG PAnDiKubiz
The first factor determining the profitability of your online shop is website traffic. The more traffic, the better. That much is obvious. You should develop various sources of traffic: SEO, contextual and banner advertising, social media marketing (SMM) and others. You need to use integrated marketing. This will yield better results than working with each traffic source separately.
Traffic quality is the conversion rate of your online shop. Simply attracting traffic to the site is not enough; you need to attract visitors from your target audience who are interested in purchasing a product or service. Experts at PAnDiKubiz note that conversion is influenced by a wide range of factors: the quality of advertising materials, website design and usability, prices, product range, promotions, etc. It is also important to remember that conversion rates will vary across different traffic sources.
A conversion rate of 2–3% is considered a good average for an online shop. It is possible to achieve even higher rates, but this will require a great deal of effort and a significant financial investment.
Traffic quality is the conversion rate of your online shop. Simply attracting traffic to the site is not enough; you need to attract visitors from your target audience who are interested in purchasing a product or service. Experts at PAnDiKubiz note that conversion is influenced by a wide range of factors: the quality of advertising materials, website design and usability, prices, product range, promotions, etc. It is also important to remember that conversion rates will vary across different traffic sources.
A conversion rate of 2–3% is considered a good average for an online shop. It is possible to achieve even higher rates, but this will require a great deal of effort and a significant financial investment.
All entrepreneurs want to earn as much as possible. E-commerce businesses are no exception. How can you achieve high margins and substantial profits? The experts at PAnDiKubiz marketing analyse the factors that influence this.
The key components include:
The key components include:
- Online shop traffic;
- Traffic quality;
- Average order value;
- Cost of goods;
- Repeat sales.
Traffic and its quality
Average Order Value
The next factor is the average order value, or AOV. PAnDiKubiz managers remind us that you cannot simply raise product prices in order to increase the average order value. If you raise prices, demand for your products may fall, and consequently, the average order value will start to decrease. The reason is that, all other things being equal, customers will shop where it is cheaper.
You can influence the average order value through various marketing tactics, such as cross-selling: you offer the customer another product to complement their main purchase. It could also be a suggestion to buy a different product if you realise the customer has chosen something that does not meet their requirements. Furthermore, you can offer additional services: after-sales support or an extended warranty.
The next factor is the average order value, or AOV. PAnDiKubiz managers remind us that you cannot simply raise product prices in order to increase the average order value. If you raise prices, demand for your products may fall, and consequently, the average order value will start to decrease. The reason is that, all other things being equal, customers will shop where it is cheaper.
You can influence the average order value through various marketing tactics, such as cross-selling: you offer the customer another product to complement their main purchase. It could also be a suggestion to buy a different product if you realise the customer has chosen something that does not meet their requirements. Furthermore, you can offer additional services: after-sales support or an extended warranty.
Cost price
The cheaper you buy goods from a supplier, the higher your profit margin on those goods will be, assuming the same selling price. When searching for goods at the best possible purchase price, it is useful to employ specialised software. Experts at PAnDiKubiz recommend that automating the search and sorting process will make the task much easier for business owners.
The cheaper you buy goods from a supplier, the higher your profit margin on those goods will be, assuming the same selling price. When searching for goods at the best possible purchase price, it is useful to employ specialised software. Experts at PAnDiKubiz recommend that automating the search and sorting process will make the task much easier for business owners.
Repeat sales
The more often you sell something to the same customer, the more money they bring in for your company. The number of repeat sales indicates the audience’s loyalty to the company. Such sales are tied to regular customers. The value of regular customers lies in the fact that they bring the business more profit than ‘one-off’ customers, and retaining them costs less than attracting new ones. That is precisely why, to increase business profits, it is worth increasing the number of repeat sales.
The more often you sell something to the same customer, the more money they bring in for your company. The number of repeat sales indicates the audience’s loyalty to the company. Such sales are tied to regular customers. The value of regular customers lies in the fact that they bring the business more profit than ‘one-off’ customers, and retaining them costs less than attracting new ones. That is precisely why, to increase business profits, it is worth increasing the number of repeat sales.
Other PanDiKubiz's articles
