As owners of Shopify stores, making more sales has always been our number one goal, since that’s how we make money. Because we are so interested in the stories other entrepreneurs tell, we often only use revenue to measure our success or set our goals. When it goes up, we feel better.
Even though revenue is an important metric, it is not the only thing that your business is based on. If you want to grow in a sustainable way, you should also think about a lot of other things. The better your business will do in the long run, the sooner you take them seriously.
When it comes to money, you should focus on the profit, not the revenue. As the formula shows, a business’s ability to make money depends a lot on how much money it brings in and how much it costs to run. Even if a business is making a lot of money, high costs can be a real pain for the owner in many situations. So, cost management is very important to the success of your business, especially if you do e-commerce or dropshipping.
On the other hand, it’s not smart to put money before everything else. At the end of the day, everyone wants a great brand, happy customers, and a business that works well. If you don’t pay attention to these things, they will hurt the overall health of your business.
In this article, we’ll look at the alternatives to a “revenue-first” strategy. By the end of this, we hope you’ll have a better idea of how to run your dropshipping business as a whole. So, if you know what you can focus on and are aware of it, you can make better decisions that will lead to better results.
Mindfulness of Profit and Cost
Shopify says that one of the ten mistakes that most new businesses make is not paying attention to profit and cash flow. To put it simply, you should be very good at math for business.
Say you have 10,000 people visit your Shopify store this month, and 100 of them buy something (the conversion rate is 1%, and the average order value is $20). Your profit will be about $400 if your profit margin is 20%. If you think this number is good, look at how much you spend. What if the total cost is more than the total profit? Even though these estimates aren’t exactly the same as your real financial statement, the point is to always think about your costs and profits.
Now, let’s look at three big costs that every online business owner has to deal with. You will be better off in the long run if you know more about their habits and how important it is to track them well.
Price of Items Sold (COGS)
If you know what COGS is, you’ve probably thought of it as a fixed number.
In reality, this type of price may change more often than you think. It’s normal for your AliExpress suppliers to change COGS often because of sales promotions, stock changes, negotiations, or rising demand.
At first, it might not seem like a big deal to ignore this small change in COGS. But if you start getting 1000 orders a day, a $1.5 COGS increase will cost you an extra $1500. This is bad news that you might not even notice. So, for a shop owner to better manage their COGS, they need to keep up with how COGS change and respond quickly.
The best way to keep track of your COGS is to do it on the spot, as it happens. This task seems hard, especially if you have a lot of products and different kinds of those products in stock. But there are a lot of tools out there that will take the burden of COGS tracking completely off your shoulders.
Once you know how to keep track of your changing COGS, you will be better able to act on it. For example, if you see that your COGS are going up, you can change your selling price right away or cut back on discounts to keep your profit safe. In short, the more you pay attention to COGS, the less likely it is that it will hurt your profit in the future.
Shipping Cost
So often on AliExpress, the cost of shipping is more than the cost of goods sold (COGS). This means that shipping costs are a big part of how much your product costs. You know you can’t leave it alone. At the same time, you know that figuring out shipping costs is not an easy task.
On the one hand, it’s hard to keep track of an exact number. Your suppliers might give you a report on shipping costs, but it might not be completely correct. You need a tool that can tell you exactly how much it costs to ship something.
On the other hand, there are different shipping fees because of how shipping works. These differences depend on the product (its weight, size, and number) and where it is going. In particular, you’ll have to figure out shipping costs based on product variations or country states (destination).
So, keeping track of your shipping costs accurately and tailoring them to a certain level will help you better manage your costs in the long run. You can choose from a lot of shipping apps, so you might want a cost-monitoring tool that lets you connect your shipping app to it.
Advertisement Cost
In the world of dropshipping, running ads is the main way to get people to your site and make sales. It’s hard to ignore how common Google Ads and Facebook Ads are, or how platforms like Pinterest and Tiktok are becoming more popular.
You should have a general idea of how much these platforms should cost you, and you should also know how much of the total cost goes to advertising. Sometimes it’s okay, but still painful, to have a 50% number and know that you have to keep running ads.
In this case, the only thing you can do is try to find ways to lower that high percentage. You can lower your CPM (Cost per Mille) by changing the people who see your ads, doing more things to get people interested, and increasing the CTR (Click through rate).
Reputation of a Brand
If you’ve found a niche market and have been selling unique products to people in that market, that’s great! This shouldn’t be the end of your work. Instead, it should be the start of something else: your brand’s reputation.
As dropshipping has become more popular, more entrepreneurs have started doing it. This has led to more competition than ever. You may not realize how important it is for your business to stand out and keep your good name. Niel Patel was right when he said, “The company that builds a strong brand is usually the one that will last.”
When it comes to your brand, there are many steps you can take. Choose the ones that fit with what makes you unique and match your brand voice.
Make sure you keep giving your audience useful information and images, since that’s why they came to you in the first place. Also, try to use content that was made by your customers. Tomer Tagrin, co-founder and CEO of Yotpo, said that this kind of content is “transparent, socially integrated, personalized, data-driven, and insightful.”
Remember that your brand is more than what you sell at the end of the day. The more you can help your customers connect with your brand, the more benefits you can get.
Customer Happiness
Since there are no physical stores, a customer’s shopping experience starts as soon as they land on your website and continues for a long time after they buy your product. So you should be able to meet the needs and expectations of your customers even if you can’t see them.
Think of the shopping experience of your customers as a journey, and try to plan for it or even go on it with them. If a problem or issue comes up while a customer is shopping, your team and partners should deal with it first, not the customer. Check your Transaction and Checkout Process, for example. Is it already both secure and easy to use?
In the world of dropshipping, not being able to control inventory and fulfillment could make your customers very unhappy. What if the order is late or doesn’t show up at all? What if the item I got was very different from what I ordered or was damaged? What would you do if one of your customers got mad and asked for a refund?
Of course, you want to make your customers happy right away in these situations, but the consequences hurt just to think about. If you get a lot of bad reviews, Facebook may close your account.
Or, your PayPal transaction funds will be put on hold until a dispute or claim is settled. Even worse, you could get a “chargeback,” which comes with a processing fee. You can avoid these problems by telling your customers what they can expect from your service (products, shipping tracking, instant customer support). And answer their questions quickly.
If you don’t know where to look, you can also measure how happy your customers are with your business. Now more than ever, it’s easy to get useful feedback from your customers. Try these ways to look at your business from a different point of view. You might be able to spot some potential problems and avoid having to deal with angry customers in the future.
Virtual Assistant
Virtual assistants are often hired by store owners to help them run their businesses. The jobs could include setting up product pages, filling orders, running ad campaigns, and keeping an eye on the stores’ finances. So, you can save a lot of time and put it toward more important things.
But there is a chance of something going wrong when you let other people help without your supervision. Someone could steal information, use up too many resources, or turn off ads accounts. In other words, your virtual assistants could do something wrong or even cause trouble while you’re not looking.
Keep this in mind. Use every safety measure you can think of. For instance, you can tell your staff first and foremost about the code of conduct or company policy about the information. Also, you can just ask them to give you regular reports or updates on how their work is going through platforms like Monday. You can also give your staff roles with different levels of access to your system so they don’t see and do things you don’t want them to.
There is always at least one way to do something that works for you. If everyone is aware of it, the scary things will be less likely to happen.
How Well a Team Works
No matter how well your operation seems to be running, there are always things you can do to make your team even more productive.
Don’t forget how important experiments are. Don’t let assumptions or past results stop you from looking at media materials, ads, or even your target audience from a different angle. If you don’t have proof (data) that this experiment isn’t working, you might miss a big chance.
You can also improve your productivity by getting better at managing your time. Break up your team’s tasks into small pieces and give each other due dates for everything. Tasks, like writing a product description for one item or editing a photo for an ad, should be doable in the time limit. If you use the Pomodoro Technique along the way, you might be surprised at how much work you get done by the end of the day.
In conclusion
With so much competition in the business world and customers who want more and more, it seems harder than ever to keep your business going or making money. Getting orders is a great success, but keeping that success over time requires more focus and work in different parts of the business.
Now that we’ve talked about a lot of things that are just as important as making sales, we hope you have a better idea of how to run a dropshipping business as a whole. With this in mind, you can come up with more long-lasting good results that are in line with your original vision and goals.