Running a profitable eCommerce operation is always challenging and can be especially difficult for traditional "brick and mortar" retailers. Today's shoppers are armed with powerful tools to make educated choices. In certain circumstances, these tools can also identify underpriced items at a given retailer. This can lead to a flurry of purchases of such items, with the retailer losing money on each sale.
CHALLENGE:
A large, molded plastic item triggered a $30 parcel surcharge for eCommerce orders shipped to customers. Being unaware of this, the item was priced at retail as if it had normal freight and offered with "free shipping." Google Shopping and similar applications identified this retailer as having the best deal on the item. Sales spiked, but there was a loss on every item sold.
SOLUTION:
We implemented a "Freight Cost by SKU" analysis and identified the outlier item. The retail price was adjusted to offset the expense. Sales did decline, but the remaining sales were profitable.
KEY TAKEAWAY:
Applying actual costs to specific items - in addition to understanding freight costs at a vendor level - is a critical component of effective profitability management, especially in eCommerce fulfillment.
Comments