What are the 5 key levers that drive profits in ecommerce?

Ask most ecommerce owners how they want to grow profit, and the answer comes back in some version of the same word.

Sell.

It's not wrong, revenue is one of the levers that drive profit, but it's only one of five.

For most sellers it's the hardest one to move and the slowest one to pay off.

Let's talk about the other four.

Cost of goods sold

What you pay for the product before any of the rest of it.

A small improvement here, through supplier negotiation or order quantity adjustments, can be worth as much as a large revenue increase.

Twenty cents of margin per unit, multiplied across an entire SKU's annual volume, often beats a 10% revenue lift you have to spend money to acquire.

Platform and selling fees

The biggest hidden lever for most sellers.

For an Amazon-primary business the all-in fees average about 31% of every revenue dollar.

For a Shopify-primary business they run closer to 12%.

Moving toward a multichannel structure unlocks margin that no amount of selling more can unlock, because the fees come out before you ever see the revenue.

Advertising spend

Specifically, where you're spending it.

Ad dollars on a SKU that nets you 8% are dollars that could be lifting a SKU that nets you 40%.

Cutting ad spend on the products that don't earn their keep frees cash for the ones that do.

Operating expenses

Subscriptions you forgot about. Tools you don't use. Services you signed up for during a busier season and never canceled.

Trimming these doesn't grow the business, but it puts cash directly back in your pocket without selling a single additional unit.

Here's what we found in our Special Report where we analyzed 37 ecommerce businesses.

The ones we categorized as Thriving weren't the ones with the highest revenue.

They were the ones pulling multiple levers at once.

They had lower platform fees, more debt, and higher advertising capacity.

They had built a structure where every lever was doing some of the work.

The ones stuck in the Struggling category were almost always pulling only the revenue lever and wondering why it wasn't enough.

If you're trying to grow profit and the only plan you've got is "sell more," you're working the hardest and probably growing the slowest, if at all.

Here's what I want you to do instead.

Look at the other four levers and pick the one with the most room to move.

Work on that lever for a quarter.

If you'd like help figuring out which lever has the most room in your business, take our Ecommerce Business Performance Assessment to see what needs improvement.

Then reply "Triple Threat" to this email and I'll send you the Special Report that has all the info you need to categorize your business and see how you can grow from there.

Cyndi