Experts predict worldwide ecommerce sales will surpass $6 trillion in 2023.
That’s great news for DTC brands looking to grow their revenue. But it also means they’ve got some fierce competition.
With all this competition, how can you ensure your DTC brand thrives?
Fortunately, there are plenty of best practices to maximize your ecommerce revenue. Not to mention there are plenty of ways to improve your profit margins.
But what exactly is ecommerce revenue optimization? Which ecommerce sales opportunities are you missing out on? And most importantly, how do you increase ecommerce revenue?
We’ve done the legwork to help you find these answers and more.
Ecommerce revenue optimization fixes inefficiencies within your direct-to-consumer (DTC) acquisition, retention, expansion, and pricing strategies. That way, you can increase top-line revenue while lifting your bottom line.
For example, a brand might improve customer service by adding a live chat feature on its website. This alone immediately elevates the overall customer experience, increasing customer loyalty and lifetime value (LTV) over the long run.
If discounts are more your jam, maybe you offer promotions during seasonal lulls to raise revenue and sell off aging inventory. Or perhaps you introduce product bundles to increase your average order value (AOV).
In other words, ecommerce revenue optimization is a wide umbrella covering almost all of your business processes. Meaning, you can examine every business decision under this microscope to maximize your long-term revenue.
🔥 Tip: Use bundles to increase demand. Then, use Cogsy to ensure you have enough inventory to fulfill that demand. Learn more.
Before we talk about how to increase ecommerce revenue, let’s dive into what’s potentially holding back your brand in the first place.
Let’s start by looking at some common culprits behind slow sales and low revenue.
The first rule for a successful ecommerce brand is selling products people want.
So, if you’re getting plenty of website visitors — but only a fraction convert to customers — you might have less-than-desirable merchandise.
That could point to poor product quality, the wrong product colors, or a simple lack of demand.
Regardless of why the product falls short, this impacts your ability to move merchandise — leading to low sales volume and little revenue.
How do you figure out if this is the problem?
You can check engagement rates on your site with the product in question to see where folks fall off or even conduct a root-cause analysis.
Alternatively, you could always just ask your target audience if they’re interested in the product (why or why not) via a customer survey.
Besides selling the right products, you need to get those products in front of the right people.
So, if you’re spending a big chunk of change on Facebook ads but aren’t getting more sales, you might be targeting the wrong market.
If you think this is a problem your brand faces, set aside time to do some research.
Start by digging into your own data to better understand your target market. Are your paid ads visible to specific audiences that want to buy your products? (AKA, are they driving conversions?)
If not, go through the steps to find your ideal customer with a target market analysis and recalibrate your paid ads accordingly. (If those ads still aren’t performing, you might be using the wrong messaging.)
Getting more people in front of your products increases the odds that you’ll have more interested buyers.
But with low or no website traffic, it’s like dangling worms over an empty lake. That’s because no one is there (or at least not enough people) to take the bait.
When customers aren’t happy with their experience with your brand, they likely abandon their cart (and they probably won’t come back to purchase again). That means lots of lost revenue opportunities moving forward.
In fact, 13% of shoppers who abandoned their carts said it was due to a poor experience, like website issues. And almost two-thirds (65%) said they’ve switched to other brands after a bad customer experience.
But the opposite is also true, too: Happy customers come back for more.
A whopping 68% of shoppers said they’d pay more to brands that offer a great customer experience. And another 89% said a positive customer service experience makes them more likely to buy from a brand again.
Almost every decision your brand makes impacts your sales and revenue. But no pressure.
There are some tried-and-tested strategies to ensure you’re on the right track. Here are 21 of those methods:
(Psst – we featured a few from every department to help maximize your sales and revenue.)
When your business operates efficiently, you hit what’s called operational excellence. This happens when your brand runs as effectively as possible, and those benefits trickle down and eventually lift your bottom line.
But how can you achieve operational excellence?
Brands with a strong online presence can connect with customers before and beyond their initial purchase. This can improve customer loyalty, so buyers come back again and again.
But why are loyal customers so important?
Because acquiring a new customer can cost five times more than retaining your current customers. And when you combine those savings with an increased LTV, you end up more profitable in the long run (AKA, generating more revenue).
To spread the word about your DTC brand, explore tactics like search engine optimized (SEO) content marketing and setting up a loyalty program that rewards customers for referrals.
When you know your target customers inside and out, you can more accurately market to them and drive sales. And this approach starts with creating comprehensive buyer personas.
A buyer persona is a detailed description of your ideal customer. It lists every characteristic, from age and sex to educational background and interests.
Personas allow your marketing team to hone in on exactly who you’re selling to. That way, you hit the right “notes” and turn more browsers into buyers.
For example, the buyer persona for the DTC underwear brand Parade is much different than the persona for Soma intimates.
Parade knows its sweet spot is marketing to a younger generation (namely, Zoomers) who appreciate model inclusivity.
In contrast, Soma targets an older age group (Millenials and above) who value quality and fit over everything else.
🤿 Dive deeper: How to build buyer personas (with examples).
There is more competition than ever between ecommerce companies. To stand out, use a unique selling position (USP) to differentiate yourself from the pack.
A clear, thoughtful USP helps buyers decide if a brand is right for them.
For instance, when bra brand Third Love hit the market, they established themselves with the tagline, “We have the right fit.”
This short, to-the-point USP told customers how their brand differed in seconds. And they made good on their USP with features like a fit quiz and offering bras in half sizes, which helped customers find a product that truly fits.
A strong USP will help your business establish a strong brand identity as the go-to “for whatever you do best.”
In turn, the stronger your brand is, the stronger the relationships you’ll build with your customers (since they know your values align with theirs).
But if you’re looking for something more measurable, a stronger brand also increases customer loyalty, boosts LTV, and maximizes long-term revenue.
Customers who feel heard and supported are much more likely to repeat purchases with your brand. In fact, prioritizing customer service has helped brands grow 4-8% above their market.
So, here are just a few ways you can improve your customer experience:
Partnerships are a great way to tackle rising acquisition costs since you can leverage someone else’s audience to find new customers.
For instance, a partnership might look like:
That said, you shouldn’t partner with just anyone. Ideally, you want to work with a brand that shares at least a segment of your audience.
In the same spirit, you can also collaborate with another retailer to create a limited-edition product or campaign.
The “Madewell x Backdrop” campaign — dubbed “Studio Hours” — comes to mind.
Here, DTC clothing brand Madewell teamed up with climate-conscious paint brand Backdrop to sell products in a limited edition color. This included a cozy hoodie with the campaign’s name written across the chest and matching wall paint.
Thanks to this collaboration, both brands tapped into new and relevant audiences. As a result, both brands were able to grow their marketing reach and win more customers.
But remember: This type of partnership generally requires more investment (especially if you change up your physical product or packaging).
🔥 Tip: Forecasting demand for a new product feels like a shot in the dark. But with Cogsy’s new product planning, you can predict how products will perform with pinpoint accuracy (even when you have no historical data to lean on). Learn more.
Here’s the bottom line regarding marketing: When brands get their products in front of more of the right people, they generate more demand, close more sales, and earn more revenue.
But this is easier said than done. So, here are a few proven ways to get in front of the right people more often:
Your website is like the display window of any brick-and-mortar store. It needs to be enticing and engaging — not to mention actually work.
So, you’ll want hands constantly working to strengthen your website’s functionality.
So, when in doubt, start at the end of the user experience and work backward. Improving your checkout page alone can boost your conversion rate by 35.26%.
(If you don’t have a developer available, you can alternatively start by A/B testing new messaging or playing with search optimization.)
Email lists are a powerful tool for engaging customers. But they’re even more effective when you break customers down based on shared attributes (called “segmenting”).
Segmenting allows you to reach specific individuals based on their recent purchases, the sales channel they came from, or whether they’re members of your loyalty program).
Simply put, the more specific you can make each segment, the more tailored (and enticing) you can make the offer and try to avoid your email blacklisting.
You can also prune your lists periodically to remove disengaged customers (meaning., those who haven’t opened emails). This way, you’re only focusing on keeping the warmest leads, well, warm.
But is email worth the extra work? Sure it! Email is still the top marketing channel for online retailers.
Some reports estimate that email marketing earns $36 for every $1 spent. And this return on investment (ROI) ultimately translates to more revenue.
As of 2021, about a third (30%) of ecommerce companies were already selling their products on social media, and another 12% planned to start doing so within the year.
Those numbers will only continue to rise as more and more shoppers take advantage of social commerce.
(For reference, an estimated 96.1 million Americans used social commerce in 2022. That number is expected to surpass 101 million in 2023.)
So, if you’re not actively engaging online, you’re missing out on potential sales.
When brands interact, comment, and share on social platforms, they impact the algorithm that makes their posts pop up in the first place. Meaning, the more your brand engages, the more likely you’ll appear first in search results. However, quality is more important than quantity, and this is why you need to create a social media report to understand what works well and what needs to be improved.
But more visibility isn’t the only reason to try social commerce. Selling on social cuts down on friction that could drive buyers away.
As creator marketing firm #paid aptly summarized: “Taking your store into a social platform makes it easy for the customer to make a sale. They see something, click on it, and buy it. That’s it! The more friction a customer has on a website, the likelier it is they could abandon a cart or opt not to buy anything at all.”
There’s no magic bullet for getting people to hit “Buy now.” Still, you can A/B test which marketing strategies work best for your brand.
With that data, you can then refine your campaigns to produce even better results (AKA, more revenue).
Then, layer on a post-purchase survey tool like Fairing to understand how customers felt throughout their buying journey.
Once combined, you can use these metrics to focus your budget and efforts on your most lucrative marketing channels (or campaigns).
Plus, you can continue to test what works (and what doesn’t). That way, you can quickly pivot your strategies when the numbers aren’t working in your favor.
🔥 Tip: Don’t forget to factor marketing events into your demand planning when running a new campaign. That way, you can stock up to meet this incoming demand and reduce your risk of stockout. Learn more.
Your sales department is the most obvious route to revenue. But revenue optimization is not just about getting more customers or increasing AOV — it’s also about streamlining all facets of your sales processes to maximize revenue.
Product discounts, coupon codes, and flash sales are all great ways to increase both demand and revenue. After all, everyone loves a good bargain!
Perhaps the most famous (and successful) ecommerce promotion is Amazon’s Prime Day — where Prime members get exclusive deals on specific products for a limited time.
In the US alone, Prime Day sales reached an estimated $12 billion in 2022. And it was Amazon’s biggest sales event globally in history.
But to make promotions successful, you’ll need a deep understanding of your profit margins and how much wiggle room you have to cut prices.
Otherwise, you’ll discount too deeply and risk selling your products at (or below) your cost of goods sold (COGS).
🤿 Dive deeper: Everything you need to know about COGS.
Product bundling is a sales strategy where brands package and sell two or more products together. And typically, you sell the bundle for a lower price than if each item was sold separately.
This strategy entices customers to opt for perceived value by buying the bundle — so they spend more per transaction as a result.
But in addition to increasing AOV, product bundles reduce operational costs (since items are picked, packed, and shipped together).
🥷 Yours to steal: Caraway’s winning product bundle playbook.
You can have top-notch products and the most creative marketing campaigns — but if customers get frustrated checking out, they’ll likely leave before they make the purchase.
Remember, poor design and a complicated checkout are the top reasons shoppers abandon their shopping carts. So, every step you add to the checkout process translates to more shoppers leaving products behind.
To simplify the checkout process, consider offering a “guest checkout” option so customers can skip signing up for an account.
You should also consider offering multiple payment and shipping options (and free shipping, if possible). The ultimate goal here is to eliminate any other unnecessary steps in the checkout process. To do so, consider using an open-source eCommerce platform, especially one with headless architecture capabilities as it enables you to integrate various payment options and lets customers have seamless shopping experiences.
As we’ve mentioned above, customers have a variety of reasons to abandon carts — and you lose out on revenue in the process.
One option to lure back those hesitant buyers is abandoned cart emails. One Klaviyo study showed businesses that sent cart recovery emails win back 3-14% of those lost sales.
So, consider creating emails that automatically go out to shoppers who leave their carts behind. Make sure they align with your brand identity — and don’t be afraid to add a little humor or include a special promotion.
For instance, Alex Mill offers customers 15% off if they return to complete their abandoned purchase.
That said, your better bet is to get ahead of the issue. And that starts by understanding why shoppers dip out.
If you’re using an email sequence for cart abandonment, feel free to add an email that straight-up asks customers why they abandoned their cart.
Sometimes, it’s uncertainty about the item (which means you should improve the product description by adding testimonials or social proof). Other times it’s a lack of shipping options. But you won’t know (and you can’t fix it) unless you ask.
Customer acquisition costs (CAC) have increased by 60% for DTC brands in the past five years. So, for many, focusing on their most profitable customers is more lucrative than finding new ones.
In fact, some experts estimate that a 5% increase in retention can boost revenue by 25-95%.
But how can you better retain customers? Soda brand Olipop does this by surprising its loyal customers with unexpected experiences.
That said, you could also simply create a loyalty program where you reward your best customers. (This option is a bit more scalable.)
For instance, sunscreen brand Supergoop offers a reward program (dubbed “The SPF Squad”) that gives customers points for certain actions. This includes signing up, following their socials, and purchasing products.
Customers can then redeem these points for free products.
Selling your products beyond your online store — like on Instagram, with TikTok, or via an influencer — gets your brand in front of more customers. And it ensures you can strike when (and where) the iron is hot.
Not to mention that brands with a solid omnichannel strategy retain 89% of their customers on average. (By comparison, brands with weak omnichannel strategies retain only 33%.)
Meaning, only selling your products via one sales channel (like your ecommerce store) limits your ability to get more eyeballs on your products. This limits your sales as a result.
But when your brand expands its reach and sells elsewhere, you have more opportunities to increase your revenue.
Take Smile Direct Club, for example.
The DTC brand sells its at-home teeth aligners directly from the website, through online influencers who share their experience with followers, and even via brick-and-mortar stores where shoppers can get digital molds made in person.
Historically, you’d have to go to your orthodontist to get this done.
The most obvious way to increase your revenue is by changing your prices. But that doesn’t necessarily mean raising them. There are more effective ways to upgrade your pricing and payment methods.
Despite common belief, raising your prices isn’t typically the answer if you want to increase revenue.
Without a really good reason to raise prices, you’ll end up frustrating and losing customers. That said, you can use A/B testing to rethink your pricing strategy and maximize your revenue potential.
To conduct an A/B test, offer the same product at 2 different prices and test the results (maybe one month, you do a 10% markup, and the next month, you try a 15% markup). Or you can run this A/B test simultaneously with a tool like Intelligems.
Then, use the conversion data to find the sweet spot for your pricing.
Ideally, you should conduct price testing when new products hit the market and every 1-2 years for existing products since consumer spending habits have likely changed.
For instance, Intelligems co-founder Drew Marconi shared an unexpected pricing trend that’s working well for DTC brands: Lowering prices amid recession fears while everyone else is raising theirs to compensate for rising costs.
Why does it work? Because consumers are prioritizing value right now.
They’re less likely to opt for a competitor if they can get the same great product at a lower price. As a result, this strategy boosts brands’ sales volume, and that increased volume makes up for lost margins.
Accepting credit cards is the baseline requirement for ecommerce sites, but there are far more payment options than plastic.
Say you can offer multiple secure payment choices. Then, you can potentially increase sales by accommodating customers you might have missed.
Here are the most common payment options (besides credit and debit cards):
Inventory management is just as important to increasing revenue as generating more demand. When you streamline your logistics and operations, you avoid costly mistakes that undercut your revenue stream.
Let’s walk through a few strategies for streamlining your operations.
Today’s consumers expect fast, free shipping, and it’s a big indicator of whether a customer will complete their purchase.
If you can make the shipping faster and cheaper, you can convert more customers and increase ecommerce sales and revenue.
A few ways you can do this?
But if you can cut down on stockouts, you’ll meet customer demand at every opportunity and improve your bottom line.
The easiest way to prevent stockouts? Upgrade how you manage inventory – with a tool like Cogsy.
This end-to-end purchasing platform gives Shopify brands a birds-eye view of their inventory levels (holistically and by location, in your warehouses and incoming). And it does this in real-time.
Cogsy’ll then send you replenish alerts whenever you’re running low, letting you know it’s time to restock.
Even better, Cogsy’s purchase order feature offers data-backed restock recommendations and the power to bulk-add SKUs to your next PO.
That way, you can streamline your replenishment process by ordering the right amount of inventory at the right time to avoid stockouts.
Sold-out product pages are a dead end in the customer journey. That is unless you sell on backorder.
With backorders, your brand can continue to meet customer demand (and generate revenue) even when it technically doesn’t have the inventory on hand.
For example, Caraway sells on backorder with Cogsy.
The moment the DTC cookware brand sells out of a SKU, Cogsy updates the shipping information on the corresponding product listing to let people know when they’ll get the item if they buy it on backorder.
It also reflects this information in the customer’s cart and on their receipt.
For one, this allows Caraway to effortlessly sets expectations with customers that’ll take longer to get their products (leading to fewer canceled orders).
But it also empowers Caraway to continue generating revenue despite stocking out.
Even better, the cookware brand sees a negligible drop in sales when they sell on backorder compared to when they sell that same product in stock. Meaning, with backorders, stockouts don’t cost them.
But this strategy is a risky — and potentially costly — move for DTC brands.
Why? Because excess inventory sucks up cash like a sponge (especially if it becomes obsolete). And those expenses cut into profit margins, which shrinks revenue potential.
These warehousing expenses are called inventory holding costs, and they typically make up 20-30% of inventory’s value. But the longer that stock sits, the more it costs to keep.
The better alternative is to optimize your inventory — basically, only buy the stock you need to meet demand.
This strategy helps you avoid the costly mistake of buying too much merchandise.
But how do brands keep their stock levels in check? DTC companies can leverage real-time inventory data with a platform like Cogsy.
Cogsy’s actionable dashboard gives you a comprehensive overview of your brand’s operational health.
This includes an at-a-glance view of which SKUs are at risk of stockout, what needs to be restocked soon, and which products you’re properly stocked on – based on your growth plans.
Revenue will vary based on several factors, like the product niche, the location of the business, the target market, and more.But the average order value (AOV) for ecommerce stores worldwide was $102 as of November 2022. The highest AOV for the same month was in the luxury and jewelry category, which was $182.
There are a few common ecommerce business models:
Gross merchandise value (GMV) is the total amount grossed from one particular merchant. Revenue is the total profit after deducting the cost of goods sold (COGS) and all operating expenses. Your revenue is the true bottom line for your brand.
Ecommerce websites generate revenue by selling products at a higher margin than it costs to source and fulfill them. And the most sustainable brands optimize ecommerce revenue by proactively improving all parts of their business, including inventory, logistics, and branding.