4 ways to optimize your eCommerce overhead costs

*This article was written by Lucy Manole, a creative content writer and strategist at Marketing Digest.

There are plenty of overhead costs associated with running an eCommerce store. Warehouse rent, software subscriptions, shipping, and customer service are only a few of them.

While each of these expenses is necessary, they can quickly shoot up when unmanaged – affecting your margins significantly. Moreover, with rapidly changing market conditions, it can be difficult to keep these costs manageable at all times.

You already know the consequences of bleeding money to overhead costs: decreased agility, lower scalability, and increased financial stress.

In this article, we’ll look at four ways you can optimize your eCommerce overhead expenses to protect your bottom line:

1. Promote products over the brand

Shoppers visit your online store with a clear, simple goal – find and buy products.

Of course, your brand’s presence plays a role in the traffic you get and the subsequent conversion. However, your customer’s primary driver of purchase decisions is how well your products address their needs.

Rather than focusing on brand marketing, which can be costly due to its top-of-funnel nature, you can directly target shoppers. 

Promoting your products, their features, and the problems they solve speaks directly to your audience and attracts higher intent traffic. Additionally, product-specific campaigns are easier to track, optimize, and scale.

You can take a page from SaaS brands’ product-led growth strategies. PLG SaaS brands succeed by sharing their product’s value upfront, thus capturing loyal customers and building a brand along the way.

Similarly, you can market the products on your eCommerce store by talking about their benefits and sharing real-world use cases right in the ads or listings.

These promotional messages will resonate better with your potential buyers because they actually need the product, boosting your marketing efforts’ ROI.

To get started, audit your current marketing assets for each item listed on your catalog. Create more content (images and videos) and upload it to your product pages. Then, write stories around those products based on features and customer reviews and share them on various platforms.

2. Switch to zone-skipping or consolidated shipping

Zone-skipping and consolidated shipping are two effective logistics strategies to minimize supply chain-related eCommerce overhead expenses.

Zone-skipping sends your products directly to a delivery zone near the target addresses before handing them over to the last-mile carrier. 

Consider you have to ship products from New York to California. Instead of sending individual packages, you can ship them in bulk to a West Coast facility. Then, the last-mile carrier will distribute them to your customers.

Consolidated shipping bundles multiple small shipments into a large one. It can be a great option for you if you are frequently sending orders to a group of nearby zip codes.

This can be slightly more time-consuming than zone-skipping, as the consolidated shipment may travel through multiple hubs or zones.

Both techniques reduce fuel surcharges, lower handling costs, and improve delivery efficiency, especially during peak seasons. 

You can choose from platforms like ShipBob, ShipStation, and EasyPost. These solutions integrate with major eCommerce carriers and have automation capabilities. If your store handles high volumes of orders, consider partnering with 3PLs.

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3. Re-merchandise returned goods

Not all returned goods are damaged or defective. Many returns arrive in near-perfect condition, sometimes just unboxed or slightly used. These units can be re-merchandised to recover some of their value and reduce waste.

The first step in this process is to classify all products your customers return. Segment the non-defective returns as “like new” or “open box” to set accurate expectations. Create a dedicated section for these goods on your website, making it easy for value-driven buyers.

Another technique is bundling.

Add these units as freebies or discounted add-ons to existing packages on your catalog. This approach caters to various customers and increases brand affinity. Moreover, bundling can clear storage space faster and prevent unnecessary inventory buildup.

Re-merchandising, in short, optimizes overhead costs associated with warehousing and disposal while reducing write-offs and delighting buyers. In the long term, it improves sustainability, enhancing your brand’s appeal.

Software solutions like Outvio or Loop can help track returns, automate sorting, and spot resale opportunities.

4. Implement least-cost payment routing

Payment processing fees can be a headache. If your eCommerce store handles lots of orders, even a small percentage fee can eat into your profit margins. The problem is compounded by international sales, making it a major contributor to high overhead costs.

A primary cause behind this is that eCommerce stores seldom revisit their initial payment partner choices and settings. This often happens because store owners get busy with day-to-day operations and strategic growth initiatives.

Therefore, the solution begins with auditing your effective rates and researching various payment processors.

Note that different processors charge differently based on card type, bill amount, payment method, and risk level. You should compare rates to determine which processor provides the best rates for which type of transaction.

Least-cost routing (LCR) solutions do this automatically. When a customer chooses a particular payment method, the LCR directs them to the processor with the lowest applicable fee. This protects your margins without affecting the customer experience.

Solutions like Spreedly, Payrix, or Stax can help you implement LCR effectively.

Additionally, you can incentivize alternate modes of payment, such as ACH or bank transfers, that charge comparatively lower processing fees. You can offer small discounts or reward your buyers with loyalty points and coupons.

Wrapping up

Optimizing overhead costs is crucial for building a lean, scalable eCommerce brand. Teams must monitor hidden costs in marketing, logistics, inventory, and checkout processes to keep expenses low.

You can start by marketing your products to the end buyer rather than promoting your brand to a broader audience. Then, cut logistics costs through zone-skipping and consolidated shipping methods.

Resell returned goods by tagging the non-defective items appropriately and making them easier to find on your platform. And finally, leverage LCR to optimize payment processing fees and maximize margins.

8fig’s flexible funding covers your overheads, inventory, and more – so you can scale without the stress.

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Have article ideas, requests, or collaboration proposals? Reach out to us at editor@8fig.co – we’d love to hear from you.

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