Marketing as salvation of e-shops? Yes, but first save on operating costs

Compared to the record Covid years, sales of e-shops are now falling. Many small and medium-sized e-shops are trying to stand out from the crowd and attract new customers in a highly competitive environment. Investments in marketing can be one way. Performance ads, content and the spread of brand awareness help with the growth of, for example, the Ovečkárna e-shop. However, it is often the case that in order for an e-shop to have money for marketing, it must first save elsewhere.

This year, according to data from the Electronic Commerce Association, sales of e-shops decreased by 12%, which is the first year-on-year decline in the history of the industry. When demand grew during the Covid years, e-shops invested in work force, warehouse capacity and inventory. However, now sales are decreasing and costs are increasing, due to inflation, pressure to increase employee wages or the reopening of brick-and-mortar stores.

Thanks to marketing, Ovečkárna grows even during crisis

In addition, the Czech Republic has the highest number of e-shops per inhabitant in Europe, and in such a competitive environment, it is easy to blend in with the crowd. Therefore, investing in marketing is one of the ways to prevent customer churn. An example of an e-shop that grew despite the market downturn thanks to marketing is Ovečkárna, which offers products made from sheep's wool.

"Marketing is our driving force and in 2022 we experienced a lot of firsts. We tried our first cooperation with influencers, TV advertising or sending catalogs abroad," says the founder of Ovečkárna, Martin Bernátek. Their year-on-year investment in marketing increased by 96% and sales by 48%. They had great success, for example, with their newsletters, of which they delivered over 29 million. They accounted for 7.4% of the sales, which in their case is over 20 million crowns.

Many companies are trying performance ads, but in the long term, according to experts, they should bet on influencer marketing, video content, brand strengthening or improving customer service, for example. "We are trying to raise awareness of our brand (through sponsorship, advertising stickers) and inform where clients can find our products, whether through social networks or radio advertising," describes the AMERICAN DRINKS strategy Dominik Mony, the company's Operations Director.

Where to get money for marketing?

However, at the same time, e-shops are dealing with the question of where to get money for marketing when their sales have fallen. According to Jakub Karlíček, Business Director of the e-shop bikero.cz, it is necessary to look at marketing as an investment, not as an expense, but e-shops first of all have to earn these funds somewhere.

According to a survey of our clients, money can be saved by reducing operating costs, for example by:

• energy savings,
• more favorable contracts with suppliers,
• smaller offices,
• simplification of processes and introduction of tools for digitization and automation
• or, hybrid work models.

However, when reducing operating costs, care must be taken to ensure that this does not lead to a deterioration in the quality of services.

First priority is usually logistics

Logistics is the ideal area to reduce operating costs in e-commerce. Thanks to suitable tools for digitization and automation, e-shops can relatively easily increase the speed and performance of warehouse processes and, as a result, reduce costs, improve customer service, and the money saved can then be invested in marketing.

A popular tool is the WMS warehouse system, which reduces costs for e-shops by:

• speeding up the handling of orders – after being connected to the WMS, the reader guides the storekeepers in the fastest way around the warehouse and allows them to pick more orders at once, so the same amount of work can be handled faster and with fewer people,
• minimizing errors and returns – after reading the code, the reader confirms to warehouse workers that they are reaching for the right piece, so the number of exchanges and returns and the administrative burden associated with them are reduced,
• allowing better use of warehouse capacity – with the help of WMS, goods can be stored using different strategies (for example, using managed chaos), which maximizes the potential of warehouse spaces and allows more goods to be stored in the same space.

With WMS, the e-shop can also cover seasonal peaks much more easily without having to hire part-timers and deal with their training and initial inefficiencies. A potential new employee is fully trained within 30 minutes and then works almost as efficiently as a permanent employee.

WMS-type solutions are also available for small and medium-sized companies, thanks to their scalability they can also adapt to their eventual growth.

If you also want to reduce warehouse operating costs and improve warehouse performance, please contact us. We will consult the situation with you free of charge and recommend a suitable solution.