In the ecommerce sector, businesses face increasing demands for service speed, quality, and flexibility every year. At the same time, logistical costs continue to rise, including disruptions in supply chains and higher delivery expenses. Adapting business processes quickly may require additional financial resources. To remain profitable, it is important to constantly analyze operational costs and look for ways to optimize them.
How to reduce costs without losing efficiency? In this article, we will discuss 10 practical cost-saving tips for ecommerce businesses.
What Is Included in the Ecommerce Fulfillment Costs?
Operational costs in the online business sector are expenses necessary to ensure the daily functioning of an online store. These costs make up the main part of the company’s budget and help maintain a high level of service. Expenses may vary depending on the scale of the business and marketing strategies, but they typically include:
Rent and maintenance of warehouse facilities.
Inventory storage and conducting stocktaking.
Order fulfillment, packaging, and shipping of products to the end customer. This is one of the most significant cost items for online stores.
Website development and maintenance, purchase and renewal of domain names, hosting, as well as software licenses. If the company operates through marketplaces, they charge commissions, transaction fees, and other payments.
Customer service – expenses for call centers, support services, chatbots, loyalty programs, and feedback services.
Marketing and advertising – expenses for promotion, paid search ads, social media marketing (SMM), email campaigns, and influencer collaborations.
Reverse logistics – costs associated with returning products from the end customer to the warehouse, inspecting them for compliance with the return policy, restocking or disposal.
Employee salaries – from managers and marketers to IT specialists and logisticians. In addition to base salaries, this includes bonuses, social security contributions, staff training, and other expenses related to human resources policies.
How to Manage Ecommerce Costs Effectively?
Excessive expenses can reduce business profitability, while over-saving can negatively impact service quality. To remain competitive, it is important to find solutions that reduce costs without sacrificing efficiency. Let’s explore key strategies for optimizing ecommerce expenses.
1. Review your supplier agreements
Companies often fall into the trap of unfavorable contracts by signing agreements that increase costs and complicate logistics. Don’t be afraid to negotiate with suppliers. Through negotiations, you can reduce purchase prices, get discounts on bulk orders, or arrange for deferred payment.
Regularly compare current terms with market offers to avoid overpaying, and always have a backup option. Having an alternative supplier allows you to respond quickly to delivery issues or changes in terms, minimizing financial losses.
2. Optimize inventory management
For any online business, inventory is a strategic asset that determines the financial stability of the business. You invest a significant portion of your capital in products, and for them to start generating profit, they must be quickly turned over.
If the products remain on the shelves, it will lead to additional storage costs and, over time, losses due to obsolescence or reduced liquidity. On the other hand, if the products are in high demand and their stock is not replenished in time, you will lose customers and, consequently, profit.
As you can see, inefficient inventory management inevitably leads to two scenarios: excess or shortage of products. And in both cases, you lose money.
How to avoid these problems?
Use the Just-in-Time (JIT) methodology, meaning you should purchase goods as needed. This will reduce additional storage costs, minimize the risk of product obsolescence, and prevent cash flow from being tied up in excess inventory. However, keep in mind that for this method to work effectively, you need a well-organized logistics system and reliable suppliers who can promptly fulfill orders.
Track inventory in real time. Modern Warehouse Management Systems (WMS) and ERP systems allow you to monitor product movement, keep track of stock levels, and prevent shortages or overstocking in real time.
Use analytical tools and sales data to forecast market demand. Analyzing seasonal fluctuations, trends, and customer behavior will help you more accurately determine purchase volumes, avoiding unsellable stock and shortages of high-demand items.
Sell off slow-moving inventory. If a product isn’t selling well, there’s no point in keeping it in storage for years. Run promotions, sales, or special offers to free up warehouse space and reinvest the recovered funds into your business.
3. Optimize product placement in the warehouse
If products are stored chaotically, employees spend more time searching for them and assembling orders. This increases labor costs and slows down processing speed. For cost reduction optimize your storage layout:
Divide the warehouse into logical zones based on product types and sales frequency. Place the most popular items closer to the order-picking area to speed up order fulfillment. Heavy and bulky items should be stored near the shipping zone for easier handling.
Optimize pickers’ routes to minimize unnecessary movement.
Track product locations in real time.
A well-organized warehouse layout will speed up picking, packing, and shipping, ultimately improving overall operational efficiency.
4. Combine the assembly of similar orders to reduce processing time
Instead of having employees pick each order separately, group orders with identical or similar items and process them simultaneously. This will reduce the workload on staff, improve picking accuracy and speed, and help lower labor costs.
5. Monitor packaging costs
Packaging is a significant part of operational costs. Its expense is driven not only by the cost of materials but also by inefficient packaging processes, oversized packaging that increases costs, and product damage caused by ineffective packaging solutions.
How to reduce packaging costs:
Optimize box sizes: choose packaging that matches the size of the product. Oversized boxes not only increase material consumption but also raise logistics costs, especially when shipping fees are based on dimensional weight.
Choose sustainable materials: instead of standard packaging materials, use recycled cardboard or biodegradable fillers. These options can help reduce costs in the long run while also being environmentally friendly.
Buy packaging in bulk: ordering large quantities allows you to negotiate discounts or special terms with suppliers, reducing overall costs.
Automate the packaging process: automation enables faster, more cost-effective, and efficient packaging, reducing labor expenses and minimizing errors.
6. Reduce shipping costs
The higher the logistics costs, the lower the profit margin, and excessively high shipping fees can drive customers away.
Review your agreements with carriers—compare rates from different providers and negotiate volume-based discounts. Utilize warehouse hubs near target regions to shorten shipping distances. Additionally, consider setting up pickup points, allowing you to reduce logistics costs and offer customers a more economical delivery option.
7. Minimize the number of returns
Each return incurs additional costs, including shipping, reprocessing, product inspection, and potential disposal. To reduce costs, focus on minimizing the number of returns.
Start by improving the quality of product information. Provide detailed descriptions, high-quality images, and honest customer reviews to ensure buyers fully understand what they are purchasing. Assist customers in selecting the right product, especially for clothing and footwear. Pay special attention to packaging and secure shipping to prevent damage during transportation.
8. Enhance employee training
Don’t cut costs on employee training. A highly skilled workforce not only works more efficiently but also minimizes errors. This helps reduce additional expenses for correcting mistakes and speeds up task completion.
9. Outsource some or all fulfillment operations
Not all companies have the resources to rent warehouse space, maintain staff, and manage their own transportation. In this case, you can outsource fulfillment to a third-party provider. 3PL companies have the expertise and infrastructure to efficiently handle order processing and shipping. This approach ensures consistent service quality, reduces costs, and creates a flexible, scalable order fulfillment system.
10. Invest in automation
Manual warehouse management and order processing inevitably lead to errors, delays, and additional expenses. To reduce ecommerce operating costs, automate all routine and repetitive processes. Priority should be given to automating operations where the risk of errors is highest.
Processing and receiving shipments;
Goods movement;
Product placement in the warehouse.
Modern warehouse management systems (WMS) provide full control over warehouse operations, automatically calculate optimal routes, and distribute workload among employees. By integrating with barcode scanners, they improve inventory accuracy and minimize the need for manual labor and associated costs.
Additionally, automated systems provide detailed analytics and reports, helping you make informed decisions regarding procurement, logistics, and business process optimization. As a result, your company will benefit from a more efficient, transparent, and cost-effective inventory and order management model.
Ysell.pro – Lower Costs, Higher Efficiency
Optimizing ecommerce fulfillment costs is not a one-time action but an ongoing process that requires attention to detail and the use of efficient tools. Ysell.pro is a comprehensive system that automates key business processes and helps reduce costs at every stage—from inventory management to order delivery.
With Ysell.pro, you can efficiently manage all warehouse operations, track inventory levels in real time, and optimize product placement. Integration with marketplaces and shipping services will speed up order processing, while built-in analytics will help you make more informed management decisions.
By simplifying and optimizing all processes, you will reduce costs and build a solid foundation for the growth of your business.
