5 Cost Containment Strategies for Online-Only Businesses
While online-only businesses may not have many of the same expenses as brick-and-mortar companies, they do have plenty of expenses to consider. Running an online-exclusive company isn’t cheap, which is largely what causes many of them to fail. According to one survey, 32% of small online business owners stated that insufficient funds lead to closure. If you’re wondering how you can save more money, the following are some effective cost containment strategies for online-only businesses to implement.
1. Optimize Shipping
One of the biggest costs that many online businesses face is shipping. Although customers who buy products online may favor businesses that offer low shipping costs or even free shipping, this can hurt your business if you’re not careful.
You can reduce shipping costs in various ways, one of the most effective of which is to use a reliable shipping platform.
When looking for the ideal shipping software for your business, there are some criteria it should meet. First, ensure that it works with multiple carriers and allows for comparisons between each to help further reduce costs. The right platform will also include marketplace integration, along with live or near-real-time reporting capabilities. This can go a long way in cutting down on the costs related to shipping.
You can also save on shipping with more efficient packaging. Use only the amount of protective materials you need to keep items intact. You can also save by opting for smaller packaging sizes.
2. Spend More Time on Customer Retention
Online businesses can reduce costs by focusing less on acquiring new customers and, instead, boosting retention. Keep in mind that acquiring a new customer can cost as much as five to six times the cost of retaining an existing one. You can retain your current customers in a number of ways, such as:
- Provide exclusive deals and discounts. One of the reasons customers of online businesses often remain loyal is the chance to receive the occasional deal or discount. Customers may want to make repeat purchases based solely on the quality of your offerings. But you can encourage even more sales and long-term loyalty with deals that are exclusive to repeat customers. You can also offer deals for new customers or referrals.
- Offer top-tier customer service. Another reason customers are likely to stay with you is reliable customer service. Responding quickly and helpfully to customer questions and requests will make you appear more trustworthy and dependable than competitors with inferior service.
- Respond well to negative comments or complaints. If customers are unhappy with your service or offerings for any reason, make sure you listen to these complaints and criticisms. If a customer leaves a negative review, leave a thoughtful response and demonstrate that you’re working to provide a better experience. Customers who feel heard will be more likely to give you another chance.
3. Conduct an Expense Audit
Online businesses have to deal with many types of expenses, particularly as they grow. As a result, there might be certain errors in billing or inefficiencies that lead to unnecessary spending that you can’t afford. One of the most effective cost containment strategies for counteracting this is to audit your expenses.
With the help of professional auditing services, you can get a comprehensive audit for all of your major and minor expenses as an online-only business. While you may not have to spend money on a physical facility and utilities, there are many other costs. These could include:
- Merchant processing
- Bank fees
- Telecommunications systems
- Shipping and freight
- IT systems
Conducting an in-depth audit of these and other costs can identify any issues and help further optimize spending.
For expense auditing services that can cut down on your costs as an online business, consider turning to the experts at Util Auditors.
4. Negotiate Reduced Credit Card Processing Fees
Credit card processing is another potentially huge expense for online-only businesses. You may not be able to negotiate certain fees, such as those paid to major credit card companies. But you can often do so with processors. You may be able to negotiate various fees with your processor, including:
- Online reporting or statement fees
- Annual fees
- Setup fees
It helps to have been in business with your processor for a while; they’ll be more open to negotiations in an effort to keep you as a loyal customer. If you find that your processor isn’t up to par, you may want to consider making the switch to a competitor. You can also look at other competitors when negotiating fee reductions; be sure to mention any competitive deals you find to your existing processor.
5. Use Your Marketing Budget Wisely
As an online business, you’ll need to invest and engage in plenty of marketing to help you stand apart from competitors. Maximizing exposure might be the primary goal for many businesses. But it’s important to hyper-target campaigns to reach the right people at the right time. Gone are the days when the “spray and pray” method of marketing and advertising worked. Ad blindness is a real problem as people see as many as thousands of ads online every day.
You can optimize your online efforts by identifying the channels that work best for you. Specifically, you can do so by calculating the return on investment (ROI) for each platform you’re currently using. This is the amount you receive in return for the total amount of money you invest in each platform. You can also identify your target audiences through market research and determine how best to reach them. More efficient advertising plays a critical role in cost containment strategies for eCommerce businesses.
Get Started on Your Cost Containment Strategies
By implementing these and other cost containment strategies, you can get the most from your budget and fuel your online business’s success. For assistance with cutting down on various costs and maximizing profitability, consider getting an expense audit from Util Auditors. We can take a closer look at all of your expenses, including shipping and credit card processing, to identify billing errors and other issues that might be costing you more than you should be spending.