Using customer data effectively

In a similar vein, eCommerce businesses enjoy unparalleled insights into customer spending habits when compared to traditional retail. Small businesses can harness this valuable information to target customers more effectively and boost sales.

With just a few additions to your website’s sign-up requirements (or by using demographics report on platforms like Amazon), you can easily track the behavioural patterns of consumers for analysis. Below are two key examples of how you can start using this information to save money.

1. Focus your advertising

Using customer data, you can focus your advertising on consumers who are more receptive to your business’s offers. For instance, you can target specific ages, genders or hobby communities where your product or business is relevant.

As a money-saving exercise, targeting your advertising has three main benefits. Primarily, it helps to lower your customer acquisition costs as you’re no longer having to market to consumers who first need to learn about your product before buying it. Instead, you can target people who are more familiar with your offers, leading to quicker (and easier) sales. Similarly, directing advertisements at specific groups helps to lower your return rate as customers have an established interest in your brand and may already know what to expect when purchasing goods from your business. Finally, you’ll enjoy more available working capital with less money draining into stagnant inventory.

2. Find your par level

eCommerce businesses can hone in on their minimum inventory requirement further by finding their par level. Par level is the optimum level of inventory businesses should have on hand at all times.

Limiting your spending on inventory you may struggle to sell quickly enough (or even at all) can help you save money for other business needs. Although your business’s par level is difficult to identify in the early stages, the quicker you establish this metric, the easier it is to avoid overspending. Find an inventory management system that works best for your needs and begin determining your par level.

3. Work with fulfilment centres

Inventory levels can be further improved by working with fulfilment centres. These are B2B organisations that hold stock for other eCommerce businesses and help handle dispatch and shipping needs.

Small eCommerce businesses can better utilise batch order pricing from manufacturers when stocking fulfilment centres and limit their customs fees if centres are found closer to customers. As before, using your customers’ demographic data is a vital element to make this targeted strategy effective.

Financing your growth resourcefully

With eCommerce having enjoyed unprecedented growth during 2020-21, many investors and lenders will be eager to build upon this success in 2022-23. Fortunately, this means your eCommerce business won’t be short on offers, but you need to think strategically and find the right one for you.

Businesses have two main options to fuel their expansion – debt or equity financing – utilising bank loans and lines of credit to fund growth or win investors’ favour to source necessary capital. This is known as the ‘cost of capital’ and the exact balance of debt to equity ratio is an ongoing challenge for businesses.

In general, you should aim to use the lowest interest rate possible for any loans or credit arrangements you undertake in order to limit your costs. Unfortunately, this often comes with the trade-off of extending the term length which can impact your cash flow for a longer time.

In contrast, equity financing helps you avoid long-term debt obligations but can come with the potential to limit your future profits as dividends are paid to your fellow shareholders instead of being reinvested in your business.

And so, eCommerce business owners will need to carefully balance their growth strategy in the coming years in order to save money on costs and invest in growth opportunities as much as possible. To gain a clearer picture of your investment needs, begin by speaking with your accountant.

Saving on international transfers to your suppliers

As an eCommerce business, you likely need to make regular international payments to suppliers for your landed goods or raw materials. Unfortunately, too often this means small businesses are left paying hefty transfer fees.

WorldFirst offers small businesses a straightforward flat rate on their money transfers and can handle multiple international currencies. Your transfer fee even scales with your growth, helping your business cut costs and use a simplified budget framework.