Raise your hand if you want to grow your eCommerce Business in 2022? I’m pretty sure that at least 99% of your want to, that’s why you’re here, right?
But it’s not enough to just say, hey I want to increase my sales by 20%, you have to be able to articulate how you’re going to do that so you can build out an action plan and actually achieve those goals.
Today we’re talking about all the growth levers you have at your disposal so you can decide which match up with your initiatives for the year and hit the ground running.
What You’ll Learn
- How to calculate and set realistic revenue and profit goals in your business
- The 5 key performance indicators (KPIs) that you can leverage to reach your revenue and profit goals
- Ideas to increase your traffic, conversion, average order value, and gross margin
Read the Full Episode Transcript
There’s no denying the last 2 years have been a crazy ride for the entire human race but the growth and resiliency I have seen among scrappy eCommerce entrepreneurs like you has been so inspiring and I’m so grateful to be even just a tiny part of that.
One of my clients messaged me the other day to say that her business was up 20% over the prior year and that the contribution of the eCommerce division of her business matched her in-person sales when it has never been more than 10% in the past.
She sent that message to thank me and while I’m grateful for the recognition of all that she learned from me, it was her willingness to be open, to being coachable, for never resisting the changes, for leaning in, for getting out of her comfort zone and for getting shit done!
I’m taking a cue from her and you should too. Change can be scary, learning new software programs can be scary, hiring help or outsourcing manufacturing can be scary… but when you have a clear vision for where you want to go, a willingness to learn, a positive attitude and you take ownership over the success of your business there is little that you can’t achieve my friend.
And since I know that 99% of you want to keep growing your business in 2022, today we’re talking about all the growth levers you have at your disposal so you can decide which match up with your initiatives for the year and get crackin’.
This list is something I made on a whim while creating the Yearly Ops and Marketing Calendar for The Lounge Membership. It’s a small piece of a much larger and more badass tool to help eCommerce entrepreneurs plan the entire year in their business and keep them accountable along the way. I’m super proud of it, and while the entire tool is only available inside the membership, I wanted to give you the goods on how you can actually grow your business in the new year.
Because it’s not enough to just want to increase your sales by 20%, you have to be able to articulate how you’re going to do that so you can build out an action plan and actually achieve those goals.
Setting revenue and profit goals
Before you can decide which of these growth levers you’re going to focus on, you need to have a goal in place for both your revenue and profit goals. You’ll also need to do a little math to figure out what KPIs you’re going to focus on to reach those goals.
In eCommerce there are essentially 5 key performance indicators (KPIs) that you can improve upon to get to those revenue goals.
- Increase your traffic
- Increase your conversion
- Increase your average order value
- Increase your gross margin, or
- Increase your return customer rate.
So when it comes to hitting that goal of a 20% increase, which of those KPIs are you going to focus on?
How does improving your KPIs affect revenue?
Well, first you gotta do some math to figure out how an increase in KPIs affects that topline revenue number. And spoiler alert, it’s unlikely that focusing on any ONE of them is going to yield the results you want because a big enough increase in one KPI is probably not realistic.
For instance, let’s say you are currently doing 300k in revenue for the year.
- Your average monthly traffic is 20,000 sessions
- Your conversion rate is 2%
- Your AOV is $62.50
- And Your gross margin is 60%
If your goal is to increase your revenue by 20%, that’s an additional 60k for the year.
So how do we get there?
If we’re only going to increase just one of those KPIs, we’d need to increase it by 20%.
So what would that look like…
- Increasing our traffic by 4,000 sessions per month
- Or increasing our conversion to 2.4%
- Or increasing our AOV by 12.50 to $75
Let’s say we don’t actually care about the revenue number… we’re really just trying to make more profit.
If our sales are 360k, at a 60% margin, our gross profit is $216,000. If all our other KPIs stay the same and we just want to hit that same gross profit number, we would have to increase our margin to a whopping 72%!! That’s probably going to be a little harder to accomplish.
So what if we just made incremental increases for each of these 4 levers? Traffic, conversion, order value, and margin.
Well, if we split the increase evenly, then we’re looking at…
- A traffic increase of 1000 sessions per month
- A conversion increase from 2% to 2.1%
- An AOV increase from 62.5 to 65.63
- And a gross margin increase from 60-63%
Those all seem a lot more doable, right?
Break it down, get specific
When you’re sitting down to map out your goals for the new year, this is how I want you to approach it. Get clear on your new KPI goals so that you can hold yourself and your team accountable.
When you know what you’re aiming for, you can pick and choose some activities to help you reach each of these new goals.
Remember, you don’t have to DO ALL THE THINGS!
Depending on how big those increases are, you likely only have to do 1, maaaayyyybe 2 under each bucket to reach the goal you’re trying to reach. It’s a lot easier and more fruitful to focus on doing 1 thing REALLY well than it is to do a bunch of things half-ass.
Pick the ones that feel good, that maybe even feel easy, that you’ve already been thinking about but haven’t quite gotten around to implementing. Focus on that for a bit and then, depending on how your year goes, you can always layer in more.
What can you do in your business to increase your traffic?
This is the easiest but most expensive way to build traffic. Check out episode 91 of the podcast if you want to dive deeper into paid ads.
Partnerships and/or collaborations.
Aside from ads, this is the fastest (and my favorite!) way to get in front of new audiences.
Dedicated launch cycles
You could also commit to launching regularly in your business when it comes to dropping new products, for example. Having so much excitement and hype around your brand is a great way to get seen by new customers.
Last but certainly not least is revamping your email marketing strategy. Here’s the thing… increasing traffic isn’t limited to new traffic. Bringing your customers back to your site is traffic, too. And doesn’t it sound so much less daunting to bring back your existing customer than it does to find new ones?
Often, eCommerce entrepreneurs tell me they want to know how to increase their conversion. And while this is a great goal and I’m going to give you some ideas on how you can do that. In most cases, the need for traffic is bigger than the need for a conversion increase.
BUT… that doesn’t mean that an incremental increase in conversion isn’t possible or warranted. Especially as we’re talking about gaining smaller increases across all of our KPIs instead of just one.
Just don’t hide out in the back end, away from the scary things like marketing your business.
What can you do to increase conversion on your website?
Focus on getting more relevant traffic
I know you’re thinking wait, we’re supposed to be focusing on conversion, not traffic… but not all traffic is created equal. If the traffic you’re attracting isn’t really interested in what you offer, then it’s no use spending your time to get them to your website! Aim for quality over quantity.
Update your product descriptions.
This is best for those who have evergreen products that stay around for a while. If you’re a boutique that turns and burns your inventory pretty quickly, just focus on new products, don’t bother updating your older items. Listen to episode 71 with Conversion Strategist Reese Spykerman, where we talk about the anatomy of a product page that converts.
Create more exclusive or limited edition products
This is one of my favorite ways to increase conversion. The fact is, humans are notoriously lazy and big procrastinators. If they think they have forever to snag something, they’ll wait forever.
Creating cycles of limited edition products in your business is a great way to add urgency without feeling icky. And you don’t have to do this constantly, because that can be exhausting. Pick a few key times throughout the year to implement this.
Increasing your AOV
This is usually the easiest one to implement and see results with.
As you’ve probably heard me say before, there are really only 3 ways to grow your business. Acquire new customers, bring your existing customers back more often, or get them to buy more when they’re already shopping. And that’s where building up that AOV comes in.
Add a cross-sell app
The easiest way to increase your AOV is to add a cross-sell app. My favorite app right now is Selly. It has a ton of features built right in and it’s super awesome.
Create digital products
Most of us don’t associate digital products with physical product-based businesses, but if it makes sense for your product or industry, it’s a great semi-passive way to add a few extra bucks to your bottom line. Sure, they take a bit of effort upfront but you don’t have to carry inventory and they are essentially pure profit! I talk more about that in episode 30 of the podcast.
Increasing your margin
This is one aspect I think we don’t focus on nearly enough. And of course, there are so many variables that go along with this depending on your product, your industry, are you making your own products and buying raw goods or reselling others you buy at wholesale… do they have MAP pricing, etc.
A true healthy gross margin is 60%, so if you’re there, you’re doing great. That doesn’t mean there isn’t room for improvement… but things are looking good. If you’re significantly lower than that and you don’t see a way to increase it then you’re going to have to focus on making up the difference with high volume to turn a decent profit. That’s more like the Amazon or discount store model. They’re not making a lot on any individual item, but they’re selling so many items it doesn’t really matter.
No matter what your unique situation, there are definitely some things you can focus on.
Focus on your high-margin products
This is probably the most overlooked because even if you are at 60% gross margin across all your products, it’s unlikely that you’re getting the same margin across everything. It’s more likely you have some items with a 50% and others with 70% for instance.
Look at those higher-margin products and think about how you can capitalize on those this year.
- Do they just need more attention in your marketing materials?
- Can you expand your line of those so you can sell more of them?
- Is there a way you can do limited-edition versions of them?
Remember, it’s always easier to create variations of something that people love than it is to create brand new products.
And the easiest example here is a line of candles. Maybe there is a specific jar style that is way more cost-effective than another. So in addition focusing on your scents, lean into that jar style from a decor perspective. When you release a limited edition scent, do it in that jar only.
Or maybe you sell wax melts in addition to your candles and the margin on those is better because it’s less material cost and lower shipping costs. So maybe you feature them more in your content, or do limited edition scents only in those.
Lower your shipping costs
Now, how you do this is going to depend on where you’re starting. If you’re still paying retail shipping costs, make sure you stop that shit right now. At a minimum, purchase your shipping through Shopify, or PirateShip, or even your shipping tool like Shipstation.
Go direct with carriers
Go directly to the shipping carriers and open up your own accounts with them. You can negotiate better rates than you can get anywhere else when you go direct.
Use consistent box sizes
You can even get better rates when you have consistent box sizes. Thanks to the addition of dimensional weight shipping, if you stick with 3 main box sizes, the carriers will give you lower rates.
Ask your vendors to ship to you under your accounts
You can also start having your vendors ship you under your own accounts instead of theirs so you can get your better-negotiated rates. For instance, FedEx has a program called FedEx Ground Collect. Your account gets a coded name that your vendor uses to ship your product so you don’t have to give out your account number and then the rate is based on your negotiated rates instead of whatever the vendor is deciding to charge you. I’m sure UPS has something similar.
Pre-negotiate shipping credits for lost or damaged packages
Instead of having to submit a claim every time, they will just automatically credit you a predetermined amount on your invoices. Even if the credit is less than you would receive if you submitted a claim for each one… think of the time, energy and effort you would save. So worth it.
Automate and streamline operations
This one is less obvious and counterintuitive because it means spending more on platforms and systems to help you automate, but if it means your team is more efficient so you can either spend less on payroll overall or get more done because they can be more productive while they work, either way… it’s a win.
Customer return rate
Here’s the deal. It’s too damn hard to calculate the impact on your numbers that increasing your return customer rate would have… or I’m just not smart enough to figure it out.
Essentially, increasing your return customer rate is really just about increasing your traffic. You can still look at that rate individually to see if you’re moving in the right direction. It’s just not part of the calculation we did earlier. So think of it as part of your traffic building, but report on the rate to make sure it’s actually making an impact.
How do you feel about increasing your KPIs in 2022?
Do you feel you have a better understanding of how to actually approach growing your business? Do you feel like if you just took some time out to crunch these numbers, you’d be able to create a solid plan for the year ahead that doesn’t feel as daunting as just saying let’s increase sales by 20%?
Anytime you’re setting goals, I will always encourage you to break them down as much as possible. It’s a lot easier to wrap our heads around raising our AOV by $3 and increasing our traffic by 1000 sessions per month than it is to increase revenue by $30,000.
Not sure when to focus your time and energy?
If you’re not really sure where you fall in terms of performance and if there might be one KPI you need to focus on more than another because you have nothing to compare it to, listen to episode 19 of the podcast where I walk through eCommerce and email marketing benchmarks to gauge your success.
You may find that you’re already off the charts in conversion and that it might be more beneficial to put more weight on the other KPIs, or the opposite could be true. Maybe your conversion is in the toilet and you should spend more energy improving that before you put a ton of resources into driving traffic, for example.
Lastly, if you want more support around this, not only identifying where you should focus but also having me hold your hand while you implement everything, consider joining me in The Lounge Membership. Doors are open right now and I would love to have you inside. You can head to click here to learn more about it.