Each year I run into 20 to 30 retailers that are trying to re-platform their e-commerce websites but lack the funds to start the project. At Accelerate we try to be creative with finding ways to uncover missing revenue, or missing profits, or reducing additional costs to pay for large technology initiatives. This blog post lists several ways in which we’ve found and had success in gettingvcreative in funding e-commerce platform projects using revenue that you’re already capturing. In many cases we are able to cover the entire cost of implementation and software licensing with found revenue, in all cases were able to find at least 30% of the cost of implementation. Here is a quick video and the list…
It Starts With Payment Processing
Most retailers that do under $10 million in revenue have not maximized their payment processing. They oftentimes see retailers paying unnecessary PCI compliance fees, as well as paying escalated rates per transaction because their pricing structure that they set up with the processor is not the best situation for their business. The Challenge is most e-commerce agencies do not understand payment processing. They understand payment gateways, they understand how to integrate a payment gateway, and they do a good job testing the functionality of the payment gateway, but at the end of the day, they do not have the personnel to analyze a merchant processing statement to find hidden fees and overcharged transactions. we find most retailers can reduce their payment processing by up to .5%. If you’re doing $1 million in revenue that is $5,000 in annual merchant processing fees that could be applied to your technology project, if you were doing $10 million in revenue that’s $50,000 in annual merchant processing fees that can be applied to a technology project, and if you doing $25 million in revenue that could be up to hundred thousand dollars in revenue that could be applied to technology instead of merchant processing fees. Auditing your merchant processing on a regular basis is critical to a healthy bottom line and freeing up necessary capital to invest in technology to grow your company.
Hosting hosting hosting
Hosting is another service that is often mis-optimized with lots of inefficiencies due to a lack of understanding of how to scale technology, leading to high costs, a loss of working capital, and missed opportunities. Many retailers overcompensate for poor architecture, or coding, and poor site configuration by throwing extra servers at the problem. Having a well thought out hosting architecture, including a cache strategy that is more complicated than installing a plug-in on your site and hitting go, incorporating a content delivery network, and making sure your images are optimized for web can reduce your annual hosting costs by up to 20% and sometimes more. So, if you do $1 million in revenue and run a single dedicated server environment you are likely paying between $500 and $1,000 per month or $6000 to $12,000 per year. If you’re paying $12,000 per year and you can save 20%, that’s $2,400 per year in savings. if you can see where I’m going with this just dialing in your payment processing and your hosting, as a million-dollar retailer, I likely just save you $7,500 a year. If the implementation of a new e-commerce site is $30,000 those cost savings pay for your new build within four years. and were not done…
Growing Your Revenue, the Often Missed Opportunities
We often see retailers try to re-platform 90-120 days too early. We also like the long game and try to get out in front of opportunities, but when a retailer sees the price tag to re-platform, sometimes we see them retreat all together, when some basic optimizations on the current site can better monetize their current traffic, thus funding the re-platform. We recently posted a blog post about generating more revenue through an analysis on analytics. Here is is the high level thought process you can apply. If you increase your conversion rate by .5% and you increase your average order value by $10 and you’re a million dollar retail business, you can see an increase in revenue of up to $20,000 a month. The gross margins from this additional revenue are likely $3,500 to $7,500. If you made these optimization tweaks and let them work for 6 months, you created an additional $30,000 in margin.
These three strategies implemented, just as outlined above just created an additional $30,000 – $70,000 of working capital in your business. I know it’s tough to believe, quite honestly because most agencies sell conversion rate optimization, but don’t delivery results, and most ecommerce agencies talk about average order value, but don’t delivery high AOV (Average Order Value). What if? What if there really was an agency that could deliver this for you? What if you could work through a 60 day engagement and achieve these numbers. Many of our clients see these types of increases, as we focus on analytics and results. We focus on top line revenue and profitability. We spend every day marketing, analyzing, creating, coding and learning so we can deploy our learnings for your brand.
Add on Fulfillment
What if you could save 20% on your fulfillment costs? Now we’re talking, at a million dollar retail volume, $10,000+ in savings. That additional working capital could help move the technology needle as well. I believe you should be working with someone that understands every aspect of ecommerce, not just design, or not just marketing, but every area. If you have the right partner, you could see up to a $100,000 swing in your business. It’s not about charging for services, or you paying for services. It’s about a company’s ability to unlock value in your business.