What is a good profit margin for (an) online store?
If you're an online store owner selling tangible products, whether you are running it on a
Shopify platform, WooCommerce platform, or BigCommerce platform or other e commerce platform,
then this video is designed right for you.
Having a good profit margin ensures your store's longevity.
So it continues to be sustainable and profitable, and you can pay yourself a salary.
In this video itself, I'm going to break down the different costs of running an online store
what you need to take note of and how to audit your store so you know where you can actually
reduce costs.
I'm Clarice Lin, the ROI Doctor who helps small businesses and online stores get more
traffic and sales by getting on Google and YouTube page one.
Knowing about your profit margin is absolutely critical.
It's an indicator for you to know whether your business is healthy, whether it's going
to grow, whether it's going to be sustainable.
And from the stats that I've pulled from the New York University's Stern School of Business,
it shows that for online companies, a good gross profit margin lies between 42% to 60%.
And that's for January 2022.
And for Amazon itself, you can see the numbers right here, it shows that for January 2021,
the gross profit margin for their business was about 42%.
How do you calculate gross profit margin?
First, you get your net sales number, which is minus off the defects, discount and refunds
that you have.
So that's your net sales, (divided) over your cost of goods, like how much you bought your
goods for or how much you spend on the manufacturing costs.
So that gives you the percentage that I was talking about earlier, there's between if
you have a between 42% 60%, then you are in the healthy range.
If you have done your math and you're having those numbers, then congratulations.
But before you get all excited about this gross profit margin percentage, let me tell
you this, you have to also consider your operating costs.
If you're running a Shopify store, these are the list of costs or operating costs that
you need to consider as well.
If you're paying someone to help you, whether you have an accountant to help you.
So you have to take into consideration the subscription for your Shopify store, depending
on which plan that you have chosen and a domain name that you have to pay annually.
And if you're buying any apps that's costing you money, any monthly additional costs that
you have incurred.
Or if you're running ads, then you have your ads costs as well, Facebook ads costs if you're
running Facebook ads, and also your shipping costs if there's any.
So make sure you consider that and any fees or bank transaction fees that you need to
take into consideration as well.
And of course, the email marketing fees, you also want to set up an email marketing tool.
So you can capture the contact details of anyone who has come to your store, and is
not ready to buy from you the first time.
So get their details, so you can contact them at a later date.
So you need email marketing software tools; if you're running WooCommerce store, then
you would not need the subscription from Shopify.
So your WooCommerce is free.
Basically, you can have that free setup.
So the only costs you might also incur as a result is maybe your hosting, you have to
set up your own hosting.
So you need to take that into consideration.
And if you are using any plugins as well, I'm going to put up a summary of all the different
costs right here.
Once you have all of his operating costs totaled up, then you need to deduct this operating
costs from your gross profit margin and whatever money that's left from that that's the money
that's left for yourself.
And of course, if you need to pay your company taxes, and that's a different story.
So eventually, you have to work out a number that is right for you.
In general, to increase the profitability of your store, there are two ways, one is
to get in more revenue.
And the other way is to reduce your costs.
Ways to reduce your operating costs is for example, looking at your cost of goods, if
you're buying them in bulk, or you're manufacturing in bulk to see where you can actually reduce
the entire cost of the goods so you can have a higher margin when you sell them.
Or you can increase the sales of your products.
If you're building your store to be selling products of a higher end, that could also
increase your profit margin as well for your product itself.
So take that into consideration and shipping costs.
For example, instead of having a singular shipping costs for each of your products when
you send them out, see if you can make any arrangement of shipping companies that can
negotiate a better deal for your shipping costs so you can actually reduce them.
Another way to increase profitability is to review the conversion rate of your store to
see how many store visits you're getting and how many of them convert into sales.
See if you can increase the conversion rate.
I have another video right here where I talk about how you can improve the store conversion
rate for your business.
So you can check it out right here.
Check out that video.
If you're struggling specifically on how to convert people who add to cart but don't buy
eventually you can also check out my other video right here.
So then I'm going to explain in different ways on how you can improve your store, improve
your checkout process, so you get higher conversion rate, which translates to more sales.
Another way to improve profitability of your store is actually to get more free traffic
where possible, get your store products listed on Google free listings and Bing shopping
free listings as well.
I have another video right here on how to get on Google free listings.
Check that out and Bing free listings as well.
That's the other video, I highly encourage you to check out.
So make sure you are there, make use of these opportunities.
And then you can decide from there later on if you want to run any ads.
That's a different story altogether.
And if you're running ads, then maybe it's time to also review your ads costs, advertising
costs to see if you are minimizing your ad costs.
Are your ad campaigns efficient.
Are they optimized?
Are they converting as many visitors as possible?
Are you targeting the right audience?
So there's another video I've created right here, you can check it out on how to reduce
your Facebook ads marketing costs.
So do check that out.
So that's going to help you to maximize your advertising budget.
And if you're also running paid campaigns, for example, if you're collaborating with
influencers, or you're on marketplaces, go to your analytics and see if those traffic
from those sources are actually creating more sales and customers.
Make sure that all these store visitors don't just arrive at your store and just leave,
make sure you set up an email marketing, capture their details, so you can contact them again
to tell them more about your products and maybe they might decide to buy at a later
date.
Those are different ways where you can increase your store traffic and increase your conversion
rate and get more sales for your store.
If you want to have a clearer view of all the marketing channels that you can leverage
on to get more traffic to your store, check out my Shopify marketing guide that's also
suitable for WooCommerce store owners if you would like, the link is down in the description
and pinned comments below.
I explain about the different marketing channels and what are the different pros and cons that
you need to take note of so you can choose the best channel that can get you the most
sales.
And if you require one on one guidance to help you get more traffic and sales for your
online store, do check out my link in the description below, my services page I help
with Shopify and WooCommerce store owners to get more traffic and sales for their online
store.
So do check that out.
If you enjoyed this video and found it useful please give it a like, subscribe to my channel,
turn on the notification bell so you don't miss future videos on how to get more traffic
and sales by getting on google and youtube page one.
I'm Clarice Lin signing off.
I'll see you in the next video.
Bye