This community is full of experienced people and I really hope someone can help me.
I'm still figuring out the best marketing strategy for my store. I'm getting sales, but I'm basically spending more on ads than what I take home. I'm leaving this strategy running because I'm trying to collect data and I'm changing a few things here and there to see how the numbers react. The numbers are not terrible, but the profit is, so there's obviously something I'm missing here.
The point is: I'm not asking how to sell more (store quality, errors, shipping times, etc), I'm asking why I'm not in profit although the data is not that bad in my opinion.
This is a sheet I put together to explain the situation, this is today's data (google ads only, UK only):
Again, I know the result is terrible but I don't understand why (PLEASE let me know if my assumptions are totally wrong):
130 visits with 2 sales (conversion 1.54%) is not terrible
46 pounds revenue before ads is not great I know (23 pounds per unit) but I'm trying to beat the competition and I'm not charging too much (I pay the product 55% of the selling price on my store). Similar store charge between 20-40% more than me, but I couldn't keep the same conversion rate if I do that so... not the solution I think.
70 pounds ads cost to get 130 store visits is not terrible.
Cost Per Click 0.54 is not terrible.
Some days I get 3 or 4 sales, sometimes only 1. I put 2 on the sheet as it's the average. 3 sales would still be zero profit though, just break-even.
The way I see it, I only have 3 options:
1) Charge more to increase the profit per unit, keeping the same conversion rate, but I have no idea how to do that as the store looks already quite good and professional and shipping times are great. The product I'm selling is better than other competitors to be honest but I'm pretty sure that if I increased the price I'd sell less.
2) Leave everything as it is and increase the conversion rate, but... same as 1) I don't have any idea on how to achieve that.
3) Spend less on ads, reducing the CPC and keeping the same amount of visits per day and sales. No idea how to do this. 0.54 doesn't look so bad to me. The fact that my break-even CPC is 0.35 looks very suspicious to me, maybe I'm really not charging enough...
Based off of what you described there, you won't be in business too much longer if you keep going at the rate you are. Unless you have very deep pockets and just like throwing money at the wall and hoping it sticks. You need to let the data do the dictating for what your decisions are. In my opinion, your best options if you really don't want to raise your prices are to decrease your cpc bids to at least break even levels. Meanwhile you should be focusing on ways to lower your costs (bulk purchases, different supplier if that is possible etc) in addition optimizing your ads account to lower ad spend. Those a just a couple band aid fixes for now. There is much more than product cost that goes into e-commerce conversions. If you'd like to discuss further contact me through my website. I can take a quick look at your site / ads account and see where there is room for improvement
Thank you for your reply.
I know I can do better with costs, but not enough to be a profit. I guess a lot of stores are selling products at 40/50 dollars, making a 25/30 dollars profit. In my case, I can't really change that.
So my question still stands, if I have a profit margin of 25 pounds per unit sold (40-15) and I have a decent conversion rate of 2% and a cost per click on my ad of 0.6/0.7 pound which again is not terrible, this means that every 50 visits I get a sale and a profit of 25 pounds. To get those 50 visits with my CPC, I need to spend 32 pounds (50*0.65) which is 7 pounds more than my revenue. Considering that the terms of the equation are not bad, where is the problem? I can't understand how the situation can be so bad if the numbers are kind of ok, not great but ok.
Is it bad to have a 2% conversion rate? and a 0.6 CPC? From what I can read online it doesn't seem so, not for e-commerce at least. Or maybe low-ticket products must cruise at a higher rate?
I wonder why I can't make a profit even though my numbers are within the industry standards... how can I generate 50 visits per day spending less than 25 pounds? My niche is very competitive so the organic traffic is not really a viable option for now as the store is quite new.
I'd love to hear some numbers form other users, conversion rate, average profit per order, visits per day, cost to get those visits.
First off - keep up the hard work! You sound intent on turning your business into a profitable enterprise, stick with it!
Second, I just wanted to recommend a Shopify calculator app that you might find helpful in your efforts to increase your store's profits.
BeProfit - Profit Tracker makes sense of your store's complex data and turns it into easy-to-understand graphs & charts.
BeProfit lets you:
- Understand complex business metrics
- Connect metrics once with smart integrations
- Get super intuitive visuals and graphs
- Spot what factors need improvement to increase profits (this sounds most relevant to your question)
- Track your profit history over time
- Make data-driven decisions to optimize your store (this will also help you!)
Give the app a try, here: https://apps.shopify.com/beprofit-profit-tracker
I should also mention that I'm on the BeProfit team, so if you have any questions about the app at all, please let me know. Good luck!