Monetary Maximums – How To Maximize Profits By Minimizing Costs (Part III)

So here we are at the third installment of how to be a successful entrepreneur by maximizing profits while minimizing costs.  E-commerce is such a wonderful avenue for selling products because it already comes with built in savings.  Meaning, doing business virtually will save on some pretty obvious expenses.  However, there are also many ways an e-commerce business can experience losses – and these losses eat into profits.  Minimizing losses by making smart choices is a great way to minimize those costs, and maximize revenue.

In e-commerce there is no need for an actual brick-and-mortar store in which to peddle your wares so there is no rent, upkeep, insurance, interior design needs, and no theft.  Or is there?  If you do not have an actual store, how do you experience theft?

You can experience loss through theft even in an e-commerce environment, and that is an expense that you can totally avoid, or at least minimize.  All businesses lose a substantial amount of revenue through shrinkage (fancy-dancy word for lost inventory / money due to theft).  In fact, last year shoplifting alone created a $48.9 billion dollar loss among retailers. [1]  So, just not having to deal with that saves e-commerce folks crap tons of moola!  But, you are not exempt my friend.

Huh?  Is there virtual shoplifting?  No, but yes.  Confused?  Me too.  Let’s clear that up.

STOPPING SHRINKAGE.  First, depending on the size of your business, there may be a need for employees to help make the products, and where there are employees there is a possibility of theft.  In an ideal world we would have only our nearest and dearest making our products.  Aunt Betty would sew, your Grandma would bedazzle and your bestie would do all the packaging and not one person would steal even a button from you.  Sigh.  We do not live in that world unfortunately, so we need to find and use employees that we can trust.

Furthermore, if you need to store your wares, pick a place that is reputable, such as Amazon FBA for example.  If you go someplace else it is possible to lose some inventory there via theft.  In short, where there are people besides yourself handling your product there is always the possibility for theft.  So, the golden rule with e-commerce is to only have people whom you trust handling your inventory.  Research your storage and fulfillment providers, make sure those who are making your products are reputable and not some shady, back-of-a-dark-alley type set-up.  Shrinkage is a totally avoidable expense in e-commerce.  Choose wisely.

SENSING SEM (SEARCH ENGINE MARKETING) SCAMMERS.  Unfortunately, shoplifters and employee theft is not the only place you can possibly encounter shady people in e-commerce. There are many fake and untrustworthy marketers out there claiming to advertise your business and they simply don’t deliver.  Depending on the size of your business, marketing outside of social media and your friend network may be a good idea.  However, you need to be able to sense the scammers.  If you are contemplating hiring a marketing firm to increase your SEO (Search Engine Optimization) ranking; meaning, you want more hits on your seller pages than for other comparable product pages, then you need to be diligent in your hiring.  Search engine statistics are extremely important for e-commerce, but if you do not have a marketing company that delivers, then you are just throwing money out the door.

CURSING THE CHARGEBACKS.  Unfortunately, businesses experience chargebacks – which are when a consumer requests a refund on their credit card for a purchase that they contend is fraudulent, never received, or received damage and no refund is offered.  There is no real way to completely avoid chargebacks, but being prepared for them and having a strategy to minimize them is very important for e-commerce business owners.  Here are some ways to cut down on the chance of experiencing chargebacks:

  • Have your business name on appear on the receipts / PayPal transactions. Most people will check their banking or credit card statements to see where there money has gone. If your business name doesn’t appear on the statement, or if there is some weird acronym for your business that is not identifiable to the consumer, this can send them running to call the 1-800-you-took-my-money hotline. Having a clearly identified name appear on all transaction records is an easy fix to eliminate those mistaken fraud claims.
  • You gotta have customer service. The first thing a consumer is going to do if they have an issue with a product, haven’t received a product, or have a question about billing is to try and contact the company where they bought the product.  If there is no phone number, e-mail address or any other way to contact you then what will they do?  Yup, exactly, they will be hitting the 1-800 line again and you will have another chargeback.  Always have a customer service network in place.    Your customers are your life in any business.
  • Be willing to accept returns. Listen, no one wants to offer a refund.  No one.  The idea is to sell, not to sell and take back. It is a hassle and it is discouraging to have someone want to return an item.  So, the temptation is to say NO REFUNDS.  However, what happens when a customer legitimately gets a defective item?  What happens when their ‘Merch is Sexy’ T-shirt comes and it says, ‘Lurch is Sexy?’  Is this what they ordered?    Should they get what they ordered?  Yes.  If you offer returns and exchanges you will make your customer feel at ease and they will be more likely to shop with you again, even if they have a defective product.  But, if you do not offer returns then they will be dialing that 1-800 number to get their chargeback faster than you can blink.  Return policies are a good thing.  Trust me.

So there you have it.  The 3rd and final installment of how to minimize costs to maximize profits – and this one was all about how to avoid unecessary losses due to shrinkage, fake marketters and chargebacks.  Sometimes the best thing you can do for your business is to prepare for the worst.

[1] Reiley, K. (2017).  Time Online. Retrieved from:

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