Is Gaining Sales the Only Thing You Should Worry about?

Is Gaining Sales the Only Thing You Should Worry about?

It’s time to abandon a revenue-focused approach.

As Shopify store owners, boosting sales has always been our number one priority, as that's where our revenue comes from. Obsessed with the stories told by other entrepreneurs, we often tend to gauge our success or set our goals around one metric only: revenue. The higher it is, the better we feel.

While it is a crucial metric, revenue is not ultimately the one thing your business circulates around. There are many other factors you should consider if you want to grow sustainably. The earlier you take them seriously, the better your business will thrive in the long run.

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When it comes to money, it’s the profit that you should worry about instead of revenue. The profitability of any business depends heavily on revenue and cost, as the formula speaks itself. In many cases, regardless of how much revenue has been generated, high costs may cause a real headache for a business owner. Thus, cost management plays a vital role in the success of your business, especially in the world of e-commerce and dropshipping.

On the other hand, it’s not wise to stick to an approach of money-above-all. At the end of the day, we all long for an outstanding brand, happy customers, and a productive operation. These are factors that will influence the general health of your business badly if neglected.

In this article, we are diving into the alternatives of a revenue-first approach. By the end of this, we hope you can form a more holistic approach to the way you run your dropshipping business. Consequently, by being aware and informed of what you can focus on, you can make better decisions that will bring satisfying outcomes.

Profit and Cost Awareness

According to Shopify, not focusing on profit and cash flow is one of the ten mistakes startup businesses usually make. Simply put, you should be really good at doing business math.

Imagine your Shopify store has 10,000 visitors this month who made 100 sales (the conversion rate is 1%) with an average order value of $20. With a profit margin of 20%, your profit will be approximately $400. If you think this number looks pretty good, then look at your expenses. What if the total expenditure is time-folding that profit? Although these rough estimates do not reflect exactly your real financial statement, the point is to always consider your cost and profit along the way.

Profit and Cost Awareness - DSers
Source: Freepik.

Now, let’s take a look at three significant expenses every e-commerce owner faces. A better understanding of their nature and the importance of tracking them effectively will benefit you in the end.

Cost of Goods Sold (COGS)

If you know what Cost Of Goods Sold is, chances are you have treated it as a fixed number.

In reality, this kind of cost might fluctuate more frequently than you imagine. As a consequence of sales promotion, inventory adjustments,  negotiation, or rising demand, it’s normal to see your Aliexpress suppliers change COGS regularly.

Ignoring this slight shift in COGS doesn’t seem to cause a big deal at first. However, if you start having 1000 orders per day, an increase of $1.5 COGS would cost you an extra $1500. Without you noticing, this is no good news. So to keep up with the changing COGS and respond promptly are essential steps for every shop owner to better manage their COGS.

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The best way to track your COGS is to do it spontaneously, in real-time. This task seems intimidating, especially if you have a significant number of products and variants in stock. However, there are plenty of tools available out there that will lift the pain of COGS tracking off your shoulder completely.

Once you can keep an eye on your changing COGS, you will act upon it more smartly. For example, if you notice a rise in COGS, you can instantly adjust your selling price or cut down on discounts to protect your profit. In short, the more alert you stay to COGS, the less likely it will hurt your profit later.

Shipping Cost

So often, we come across a product on Aliexpress with a shipping cost that is greater than its COGS. This makes shipping costs a big proportion of your product’s cost structure. You know you can’t afford to neglect it. And at the same time, you also know that shipping-cost calculation is far from a simple thing.

On the one hand, it’s hard to get an accurate number to keep track of. You might be provided a report on shipping costs from your suppliers, but it’s not entirely accurate. You need a tool to tell you exactly how much shipping service costs you.

On the other hand, the nature of shipping leads to the need to differ shipping fees. These differences are determined by product (weight, size, quantity) and destinations. Specifically, you will need to calculate shipping costs based on variants (product) or country states (destination).

Thus, accurately tracking your shipping costs and customizing them at a specific level will eventually help you to better manage your cost structure. With a plethora of shipping apps that you can choose from, you might want to have a cost-monitor tool that allows you to integrate your shipping app into it.

Advertisement Cost

In the world of dropshipping, running advertisements is the main source of traffic that leads to sales. The prevalence of Google Ads and Facebook Ads or the emergence of platforms link Pinterest and Tiktok are just too hard to ignore.

Besides having a general idea of how much these platforms should cost you, you need to be aware of the proportion of ad spends in the total cost. Sometimes, it’s acceptable yet painful to have a figure of 50% and you know there’s no other option but keep running ads.

In this case, all you can do is looking for ways to bring that hefty percentage down. Adjust your ad audience, increase engagement activities, increase the CTR (Click through rate) for the purpose of decreasing the CPM (Cost per Mille) are some advice you can take.

Brand Reputation

If you have found a niche market and have successfully been selling unique products to its buyers, well, congratulations. This should not be a termination of your efforts, in fact, it’s the beginning of something else: brand reputation.

The rise of dropshipping has brought many entrepreneurs on board, which resulted in greater competition than ever. Standing out and maintaining your reputation matter to your business than you have assumed. It is true that “the company that builds a strong brand is usually the one that will last”, as Niel Patel once said.

Brand Reputaion - DSers

From many steps you can take when it comes to your branding, choose the ones that are relevant to your uniqueness and echo your brand voice.

Make sure you keep feeding your audience relevant content (information and visual elements) because it was why they chose you in the first place. Furthermore, try to use content generated from your customers, because that kind of content is “transparent, socially-integrated, personalized, data-driven and insightful”, as Tomer Tagrin (co-founder and CEO of Yotpo) said.

At the end of the day, remember that your brand is more than what you sell. The better you can assist your customers to relate themselves to your brand, the more benefits you can yield.

Customer Satisfaction

In the absence of brick-and-mortar stores, a customer’s shopping experience starts from the moment they land on your website till long after they purchase your product. So you should be able to fulfill your customer needs and expectations even when you can’t see them.

Think of your customer shopping experience as a journey and try to anticipate or even embark on it. If there is any difficulty or problem arises during the shopping process, your team and partners should be the one who faces it first, not your customer. For instance, review your Transaction and Checkout Process. Is it already secure and seamless at the same time?

Customer Satisfaction - DSers
Source: Freepik.

In the world of dropshipping, the fact that you can’t control inventory and fulfillment may badly affect your customers’ moods. What if the order is delayed unexpectedly or didn’t arrive? What if the item received were significantly different or in damaged conditions? What if your customers got angry and requested a refund?

Of course, in these cases, you want to mollify your customers right away, but the consequences are painful to even think about. Facebook may ban your account due to repeated negative reviews you receive.

Or a hold will be temporarily placed on your Paypal transactions funds until a dispute or claim is resolved; or worse if you receive what’s called a “chargeback” that comes with a processing fee.  Avoid these hassles by communicating clearly with your customers about what can they expect from your service (products, shipping tracking, instant customer support). And respond promptly to their inquiries.

Measuring your customer satisfaction is another approach you can take if you don’t know where to look at. It is now easier to attain valuable feedback from your customers than ever before. Try these methods to see your business from another perspective, maybe you can pinpoint some potential pitfalls and prevent yourself from having to deal with an angry customer in the future.

Virtual Assistant

It is common for store owners to hire virtual assistants to help co-operate their businesses. The tasks could range from setting up product pages and fulfilling orders to running Ad Campaigns and monitoring stores’ finances. As a result, you can save tons of time to concentrate on more important tasks.

Virtual Assistant - DSers
Source: Freepik.

However, there’s a risk when having people involved in the operation without your supervision.   Information could be stolen, resources could be over-exploited or ads accounts could be deactivated. In other words, your virtual assistants might cross a line or even cause troubles behind your back.

Be aware of this. Apply any prevention practices you can think of. For example, first and foremost, you can inform your staff about the code of conduct or company policy concerning the information. Also, you can simply require them to have regular reports or updates of task accomplishment via platforms like Monday for example. Alternatively, you can assign roles with certain access levels to your system so that your staff won’t see and do everything you don’t want them to.

There’s always at least one method that is suitable for you. Get everyone to be mindful about it and the worrisome situations will be well avoided.

Team Productivity

No matter how efficient your operation appears to be, there are always some aspects to work on to boost your team’s productivity even higher.

Don’t underestimate the importance of experiments. Don’t let assumptions or previous outcomes hold you from having new angles of media materials, ad copy, or even target audience. Unless there’s a prove (data) that tells you whether this experiment is not working, you might come very close to a big opportunity.

Time management is another aspect of productivity you can seek improvement. Divine your team tasks into small chunks and set deadlines for each other them everything. Task, such as writing product descriptions for one product or editing an ad photo, should be achievable within the time frame. Along the way, try this Pomodoro Technique, you can be amazed by how much work you have completed at the end of the day.

The Bottom Line

With the fierce competition of the industry and increasingly demanding customers, it seems harder than ever to keep your business afloat or thriving. Having orders is a great success, but maintaining that success over a longer period of time requires extra focus and efforts on different areas of the business.

At this point, after going through many factors that are as important as gaining sales, we hope you have acquired a better understanding of a holistic approach to running a dropshipping business. With that in mind, you can generate more sustainable positive outcomes that align with your initial vision and ambition.

About the author: Nick Nguyen is currently a marketer at TrueProfit - a profit calculation tool for Shopify store owners. He enjoys writing stuff about technical tools to help e-commerce entrepreneurs run their businesses smartly.

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