Synopsis: In today’s blog, we will provide an overview of key financing strategies that platform sellers can use to enhance their profitability.

The Indian eCommerce sector has been rising rapidly on the back of exponential growth in smartphone and internet penetration. Indeed, India’s online retail penetration is forecasted to reach 10.7% by 2024; it was a mere 4.7% in 2019. Furthermore, even Indian online shoppers are projected to rise to 220 million by 2025.

While these trends bode well for the platform merchants, a critical issue remains: how to capitalize on these soaring trends to improve the business’s bottom line, i.e., profitability. After all, it is the profit margin, which indicates whether the platform seller is growing, whether it has been pricing its products correctly, and whether it is getting the biggest bang for its buck (expenses).

So, what are some of the major financial tips that platform merchants can use to rally their profitability? Read on.

5 Financial Tips for Improving Profitability That Platform Merchants Must Know

A firm’s profit margins determine whether it is barely surviving or thriving. Here’s what you can do to increase your business’s profitability while advancing its long-term prospects. 

1. Cut Down Operating Expenses by Streamlining Processes

The most effective method for improving business profitability is to cut down on frivolous expenses and inefficient operations. To do this, platform sellers must carry out a comprehensive audit of their operations, pore through their expense sheets, and streamline operations by reducing unnecessary expenses. 

For instance, let go of fancy packaging (unless you are targeting high-end markets), avoid inventory markdowns, shun excess staffing, downsize office space, and manage cash better by aiming for higher vendor discounts.

Additionally, operating expenses can also be lowered by automating repetitive tasks that take up significant chunks of time and manpower, primarily administrative tasks.

2. Price Your Products Strategically

Another way to boost your profitability is to opt for a price hike. While some platform merchants may balk at the idea of raising prices for fear of alienating their customers, this strategy can do wonders for a business with strong moats.

Start out by conducting in-depth competitive benchmarking, which means analyzing the price range of your peers. Also, take stock of your consumer base: is it very price sensitive, or is it amenable to pay a markup for sustainability? In fact, over 94% of sampled Indians are willing to pay higher for ethically produced goods.

Furthermore, consideration must also be given to the economic outlook. Hiking prices might not be a great idea in times of soaring inflation on necessities, but it could work for luxury goods.

Additionally, you can leverage the dynamic pricing method for your bestseller products. Tiered-level pricing is also an effective way to grow profits.

3. Scale Up The Average Order Value 

Average order value (AOV) refers to the total amount spent by a consumer per transaction. Here, the focus is on maximizing a customer’s spending by offering them several incentives. For example, bundling up products by combining top sellers with other high-margin goods.

You can also try upselling and cross-selling products by recommending relevant complementary items. For instance, coffee beans with a French press, customized laces with sneakers, or “his and her products” as potential gift ideas; basically, analyze your sales data for relationships between the sales of certain products and make a conjunctive offer on them.

Furthermore, you can also incentivize additional spending by stating a minimum threshold limit to avail of free shipping. You may also offer deals and price discounts on high-margin goods to push their sales, especially during festive seasons.

4. Build Brand Reputation

Armed with a strong brand value, you can demand higher prices for your products, thus substantially improving your business’s profitability. To illustrate, many brands employ a prestige-pricing policy where they offer high-quality goods at massive markups that customers don’t mind paying for.

One way to go about bolstering brand repute is to offer superior customer service, which translates to better after-sales service, easier returns, and replacements. This should be done even in cases where the transaction is no longer profitable as the firm earns massive dividends in the form of customer loyalty and great testimonials, which function as referral marketing—a great add on for a platform merchant’s bottom line in the long run. 

Another way is to offer features that aren’t already available on the platform. You can customize and rebrand your products page aesthetically while making it easier to find products by adding proper product descriptions and usage. You can also make your brand appealing by humanizing it as an ethical, sustainable, and authentic business. 

5. Retain Your Customers

It is far easier to retain customers than acquire them anew, and a lot more profitable. By offering loyalty programs and personalized deals, such as birthday discounts, or extra reward points for shopping during the anniversary month, you can boost your sales and profits by incurring lower expenses. 

You should try out different offers through A/B testing to gather information about which techniques work and result in higher profits after accounting for discount coupons. It is imperative to be smart about the discount offered as well as its timing, as this financial strategy can be counterproductive when not planned right. 

Finally, you don’t always need to overhaul your business model to improve its profitability. Better vendor relationships, dynamic pricing, and better cash flow management can go a long way in refining your bottom line.

Manage Your Cash Flows Better with Protium

However, when things become untenable, such as the economic environment turning unfavorable (e.g., lockdown) or massive cashflow mismatches, or when you believe you need to redirect your business’ direction, get a business loan.

At Protium, we offer business loans to the sellers on the marketplace against their confirmed dispatched orders, thus easing any working capital woes cropping up between the dispatch and payout times.

Apply today for a working capital MSME loan at Protium to avail of customized and competitive loan terms, or reach out to us at 8828827800.