Profitable online store. Part I: An Overview of Metrics and How to Increase Profit

    Each owner of an online store sooner or later thinks about activities aimed at increasing profits. As a rule, these events come down to random changes in the design of the site and testing a new advertising channel. They have no system.

    The fact is that most managers do not have a vision of what and how the profitability of the store affects and with what metrics you can track the current state of affairs. As a result, instead of real work to create a profitable online store, the head solves private issues, such as " pour money into the context or work on usability ."



    What determines the profit of an online store?


    In a retail online store, profit is the difference between revenue and variable costs.

    Profit = Revenue - Costs

    It can be seen from the formula that to increase profit it is necessary to increase revenue and reduce costs. The revenue of an online store depends on the number of orders and the size of the average check. The number of orders and the average check ... In general, take a look at the diagram:



    Red metrics show how you can increase the profit of an online store. Let us dwell on them in more detail.

    Number of visitors

    Visitors come from different advertising channels. The main metric of any advertising channel is ROI - return on investment ratio. To calculate the ROI of an advertising channel, we use the formula: (Additional profit / investment in advertising) * 100% .

    The formula shows that you can evaluate the effectiveness of an advertising channel only by the profit that they bring. The advertising channel ROI must be at least 100%. Otherwise, the channel is unprofitable and should be abandoned, or optimized.

    Ways to increase profits online store:
    1. Channel Expansion with Maximum ROI
    2. Optimization of advertising channels with an average ROI
    3. Optimization or abandonment of channels with low ROI.


    Conversion rate

    The most favorite metric by most agencies is the site conversion rate. Strictly speaking, the conversion rate must be considered in the context of specific advertising channels. However, you can make a small generalization and call the conversion rate the overall ability of an online store to turn visitors into buyers.

    There are many factors that influence conversion (topic of a separate article). In this article, we restrict ourselves to listing ways to increase conversion:

    A way to increase the profit of an online store:

    1. Custom Script Improvement
    2. Improving the information architecture of the store
    3. Improving the online store interface
    4. Online merchandising.


    The average number of repeat orders per customer

    On repeat sales, some online stores make cash. If after the first sale you lose contact with the client, then with a high degree of probability you will have to "buy" this client again.

    "Sell the customer again" VS "Buy the customer again"? The choice is obvious.

    The way to increase profits online store:

    1. Implementation of the e-mail marketing system.


    Average number of items in the basket

    As practice shows, most online stores have the potential to increase the number of goods sold to one customer. The potential is realized through the sale of related products, the use of sets of goods and so on. We mark.

    The way to increase profits online store:

    1. Implementation of a cross-selling system .


    Cost of goods

    There are two ways to increase the cost of goods sold:

    1. Raise prices for all products
    2. Recommend to visitors more expensive products than they planned to buy initially.


    The second method is simpler, but only works for those visitors who take advantage of the recommendation. This is a smaller part of all traffic.

    The method associated with lowering prices for all goods involves risks of reducing the number of sales. However, with the right marketing strategy, it is possible to increase prices without significantly reducing sales. The key role in this issue is played by the positioning of the online store and increasing customer loyalty.

    The way to increase profits online store:

    1. Upselling system implementation
    2. Improving the marketing strategy of an online store.


    In the following articles of the “Profitable Online Store” series, a detailed description of specific ways to increase profits.

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