In easy words, operating cost is the expenditure by the businesses for the maintenance of daily activities. Expenses on marketing, administration, technology, and wages are operating costs. It helps in indicating the efficiency of a business. With the emerging technology, eCommerce has made a substantial reduction in operational costs.
Easy distribution of products
Online websites have a well-defined structure of product suggestions, descriptions, pricing, and payment methods. While in a brick-and-mortar store the seller has to showcase the products until the buyer gets satisfied. E-commerce platforms have made the selling process much more convenient by reducing various costs such as electricity bills, rent, and wages.
Physical stores have to maintain a huge amount of inventory of various products. For inventory management sellers have to incur warehouse expenses. The inventory needs to be maintained as well to avoid losses. In online stores, there is no need to manage huge inventory.
Reduction in wages
Managing several customers at a time is not an easy task. Traditional stores require a good amount of manpower to deal with several customers at a time. Online stores are accessible anytime for the customers without the interference of organizational employees. E-commerce businesses eliminate the requirement of many employees such as salespeople and cashiers thus leading to a reduction in wages.
To reach national and international clients businesses have to incur costs. Online platforms provide global reach to businesses without incurring extra costs. There is no need to set up physical stores across the world to build international and national brands. Customers can place orders and make payments hassle-free while being anywhere across the world.
How do reduce eCommerce operating costs?
Less operating costs are beneficial as it ensures positive yield from the business required for its perpetual growth. One can use these tips to get a drastic decrease in operating costs of the company.
Mutual agreement with suppliers
The cost of the raw or intermediate goods used for the production of the final goods can be reduced by negotiating with the supplier. If the deal proves to be mutually beneficial no party will disagree to negotiate.
Ways to negotiate with the suppliers
- Counter offers should be made to reach lucrative deals.
- Maintain a good and healthy relationship with the suppliers.
- Never rely on a single supplier. Talk with multiple suppliers to get the best deal.
Proper packaging of goods can reduce unnecessary costs. Right packaging involves the use of the right size of boxes, bubble wrap for non-fragile items, and the use of environment-friendly material.
Ways to reduce packaging cost
- Not every product will require large boxes, some may be able to fit into a paper bag or padded envelopes.
- Pack the products properly so that you don’t have to incur the cost of damage in transit and repackaging.
- Use automated machines to prevent wastage of material.
- Focus on the elimination of non-print packaging costs.
- Rely on single or few suppliers to reduce the packaging cost unfailingly.
Outsource business activities
By outsourcing basic activities a business can focus more on the core functions of a business. Outsourcing activities can help businesses to cut down unnecessary expenditure on employees and other related requirements.
Activities that can be outsourced
- Customer Service
- Content Writing
- IT management
Automation in business requires the least effort from humans to perform activities. Following are the ways to leverage automation in a business –
- Automatic emails: Use automatic emails to remind the customers of the brand and provide relevant offers for retaining the customer. Depending upon the need, customized emails can be sent to them for successful conversions.
- Automate business processes: Leverage automation in business processes such as onboarding, adoption, and implementation. It takes a huge amount of time to perform such activities manually.
- Automate data collection: Automating data collection is an excellent way of maintaining quality and consistency in data collection. Manual data collection and maintenance is a tiresome task that should be replaced with a better and faster alternative.
E-commerce is emerging as an excellent medium through which developing nations get access to global markets. Trade with the rest of the world helps such nations in strengthening their economy. Online selling has resulted in reduced costs for various business activities. The decrease in cost can help businesses to focus on more relevant operations.
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