Covid-19 accelerated the focus on e-commerce for many companies. However, online retailers developing a digital offering are still susceptible to reduced profit margins due to unanticipated costs.

According to Pitney Bowes, it is essential for businesses to refine their cost management strategies and understand where, and how, to invest in the business for maximum benefit.

“Transitioning to a new operating model quickly can be confronting for organisations and can often lead to issues with cost management. However, organisations can scale operations and increase profitability with discipline and planning, to minimise or avoid any disruption to their traditional business,” Pitney Bowes Australia and New Zealand head of shipping, Ben Seal said.

One key area of focus is cost management. Understanding different revenue streams is critical for any organisation. Knowing where money is coming from, where it’s going, and the potential for any losses or missed opportunities can have a big impact on the bottom line.

Online businesses should follow the path that customers take before they finalise a transaction so they can uncover any unexpected costs, including excessive shipping costs, poor pricing strategies, and excessively high customer acquisition costs.

“Issues with cost management are typically the result of small, repeat transactions that aren’t regularly reviewed or closely managed, rather than attributable to larger transactional issues. Understanding the customer journey can help to identify where money is being lost so this can be addressed, reducing costs,” Seal explained.

By investing in solutions that streamline the ordering process, companies can reduce the number of abandoned carts and lost sales. Once these orders are placed, the next step is to improve the customer experience and create customer loyalty by focusing on a customer’s lifetime value and not just the individual transaction. Facilitating access to different delivery options for customers depending on their location can contribute to this, especially as it provides a more streamlined process for the customer and they are likely to return as a result.

Customers will consider the ordering and shipping process, pricing, product quality, when they engage with online retailers and it’s critical that organisations consider each of these elements.

“Profits should be reinvested into the business to continue making high-quality products for customers, while also improving the customer experience. It’s important that companies understand how to continue pleasing customers while also making a profit,” Seal said.

One critical step is understanding how careful planning in the shipping process can lead to better customer experiences without cutting profits for the company. Customers will often select free shipping to avoid excessive shipping costs. However, this can lead to higher costs for the company when shipping fees can’t be recouped. To avoid this, companies could consider integrating shipping costs into orders, or setting limits or minimum order amounts to qualify for free shipping.