Sales to Date: $155.56
Woo hoo! Another sale today, this time for a $100 cutting board. Yesterday, I showed how to enter in a drop ship order and today was more of the same- sending an email to the vendor, letting the customer know their order has been processed and that the shipping details will be coming soon.
My to-do list today has been pretty long and involves cut down costs as much as possible from what the previous shop keeper was paying for. I’m happy to report that in a few hours of work, I’ve cut out $3,048 in annual service fees. My estimate was that this store was only making around $10,000 per year in net profit, so this is a whopping 30% reduction. Let’s see what I did.
First, the site was using Live Chat Inc that cost $36/month. For big ticket items, Mike and I both agree that live chat is an essential function of an ecommerce site. The caveat is that while having live chat does drive sales, it does also take up valuable time. We found that about 20-30% of the chats are previous customers asking about their order or shipping, so if you do a large volume, low margin business, live chat may not be the answer for you.
While the service is useful, I still have a toll free number that I’ve published on the site. I know that the demographic for people buying kitchen islands and counter-tops is going to be well-off home owners, which means my customer base is probably in their 40s to 60s. This demographic still knows how to pick up the phone and call someone when they have a question, so it’s more important that I have a phone than live chat.
Lesson 9: Think carefully about identifying who your customers are. After that, build a shop they would be comfortable shopping at.
So with that said, I feel safe in removing the paid chat for the time being and replacing it with a free version from ClickDesk.com. The free version allows me 1 operator and good enough functionality to do what I need to. You can see me on the site now!
Because I’m an optimization freak, this picture is not really to my liking, because I would rather it be of me in front of a kitchen island, sawing some wood or doing some task that showcases my expertise in the field. That said, it’s better than stock photos or having no picture, as those can reduce the amount of trust between the shopper and you. So by removing paid live chat, that’s $432 in savings.
Next up, is a live phone answering service. Now, I think this is a great service again, for large ticket items, because it builds trust with the customer and your store. Before I purchased the website, I actually called the service to see how they did- and the woman that answered the phone was quite helpful. She couldn’t answer any questions on the products, but she kept a very good act that she was right in the office and that the owner had temporarily stepped out and would call right back. Of course, there was no office, she was sitting in a cubicle with hundreds of other agents and the owner was working his other job. But, she was believable.
Why don’t I need this service? For one, it costs $169/mo. Don’t need to pay that, when I can answer the phones myself and close the deal. Of course, this takes more time of out of my day, but if it takes 5 to 15 minutes to close an average ticket item of $800 with a 20% profit, I can afford to do so. If it ever gets so busy that I can’t answer the phones, then I’ll can always hire an actual outside sales service to take calls or hire a part time person to answer phones. Taking calls myself saved me another $2,028 in potential expenses.
Lesson 10: There are no firm rules on outsourcing. Sometimes it’s better to have someone else do your job. Other times, there is no one that can replace YOU.
The next service to get the boot is an abandoned cart remarketing service called Rejoiner. It’s $49/mo and integrates with your shopping cart to automate sending emails to users who abandon their cart. Once again, another critical tool for large volume orders and in reality, all types of orders. Abandoned cart conversions are often much higher than your standard web visitor by a factor of 3x to 10x. Remarketing is often targeting your abandoned cart visitors, which is why remarketing services like AdRoll and Perfect Audience are taking off.
I looked at the analytics and for the year that the service has been operating, it has only generated 4 conversions after sending 47 emails. As a percentage, 9% isn’t so shabby, when you consider ecommerce sites are often in the 1-3% range. If all our sites converted at 9%, we would be extremely well-off. So why am I taking this service off? Because my goal is to switch to a shopping cart that is automatically going to have abandoned cart emails and not charge me an extra $49/mo for that one service. For what it’s worth, Rejoiner looked quite sleek and if I were doing lots of volume, I might consider signing up for it again, but now is not the right time. Total savings: $588.
Lesson 11: Never believe the hype of services that promise over the top returns. The reality is unless you have a serious leak on your website, you’re only optimizing at single digits at a time.
The next few services that I was taking over were already on a free version: MailChimp, AddThis, Google Apps and Twitter.
I’ll have to admit something, which is that when it comes to social media, I am absolutely terrible. I rarely use social media myself so I often fail to utilize it for business as well. One of my earlier excuses was that I hated going into a dozen different services to post things all over the place. Now there are all sorts of tools like SproutSocial ($49/mo), Everypost ($10/mo), Composer.io (free for now), HootSuite ($10/mo) and Buffer (free). So, if you’re like me and begrudgingly use social media, at least save time with a bulk tool like one of these.
My remaining expenses are pretty fixed, which include:
- Miva Merchant cart ($50/mo)
- Toll free phone service ($10/mo, on top of my regular phone bill)
- Google apps email ($5/mo)
- Search Spring ($100/mo)… why carts don’t have faceting built in still astounds me
My goal isn’t to drop my expenses down to nothing, because at the end of the day, you need to be thinking long term rather than just scraping by with the bare minimum. At the same time, I believe that I’ll be able to get two birds with one stone by switching to a better cart software with easier functionality. More on that soon!
This post is part of How to Run a Chop Shop, a real life blog series on attempting to transform a small ecommerce store into a profitable online business in 365 days.
Grant currently owns and operates two ecommerce businesses selling kitchen products and clothing. He is also a partner in a restaurant franchise with two locations and has over a decade of experience as an entrepreneur and web developer.
He lives in the beautiful city of Seattle, Washington, and when he’s not at his laptop with a coffee, will be found skiing or hiking in the mountains .