Running an ecommerce brand is not like running a lemonade stand—there’s a lot less lemonade involved, for one thing. Not only do you have to manufacture your product, you have to spend time and resources to distribute it, advertise it, sell it, and ship it. All those costs can add up quickly, until pretty soon, you’re saying goodbye to a good chunk of your profits because of marketplace complexity and logistics.
The goal is to be profitable long-term, and to that end, it’s good to take a look at the areas where you’re spending the most and see where there are opportunities to save.
Where do ecommerce costs come from?
There are a few big culprits that can suck away most of your spending if you don’t have a good strategy or partner. They are:
- Advertising
- Agency costs
- Distribution and logistics
- Personnel
- International hires
- Distributor margins
Advertising
Advertising is crucial for the growth and profitability of your brand. We don’t need to tell you this. What we also don’t need to tell you is that setting an advertising budget can be overwhelming. You have to consider your industry, your competition, your profit margins, and a myriad of other factors to determine the right amount to spend and when to spend it.
You can either attempt to do that on your own, or you can hire an outside agency or two and end up coughing up a few thousand dollars every month. Either way, without a good strategy and support, advertising can get spendy very quickly—especially when relying on outside agencies who are incentivized to have you increase ad spend.
Agency costs
Most brands, lacking the time, resources, and expertise to do everything on their own, will hire an agency to manage their brand instead (i.e. a design agency, marketing agency, ad agency). This is a very common strategy, one that makes sense for a lot of brands, but the reality is that it’s inefficient and cost prohibitive.
Paying for even just one agency can cost you several thousand dollars a month, and with most agencies, you’re looking at a contractual agreement of several months to several years. Add one or two or three more agencies into the mix, and overtime, you’re spending a generous chunk of change on somebody else’s business, who’s more incentivized to spend your money than to help you save.
Not only that, but managing one agency, let alone multiple, can quickly turn your ecommerce team of experts into a team of project managers and taskmasters without enough hours in the day to execute on their own jobs.
Distribution, logistics, & personnel
Where are you shipping your product from? Do you have the infrastructure and tools to manage everything? Do you have the means to get your products from Point A to Point B? How about staff? How many do you need to hire to handle, package, and ship your product? How many can you afford? These are all things you have to think about when assessing costs, and all of them add up.
International hires/agencies
Once you expand your business out of the domestic sphere and focus on growing internationally, you can expect—you guessed it—even greater costs. You’re having to pay for international agencies with boots on the ground, advertising, and platform fees just to start in addition to the agencies and resources you’re already paying for at home.
Margins
Without control of your brand online, your prices can and probably will be eroded by unauthorized sellers. This can damage the margins of your brick and mortar distributors as well as your online distributors so they’re unable to sell your products at a cost that’s worth it to them.
As a result, you’ll either need to take the hit and lower the wholesale cost of your products so distributors can afford to sell them, or those distributors may stop purchasing your product altogether. It’s bad for your brand and it’s bad for your wallet, and you’ll need to devote time and resources towards maintaining control of your brand in addition to everything else to avoid it.
How Pattern cuts your costs
Ultimately, doing business the same old way you always have, outsourcing your brand management to too many third-party players, and trying to do it all yourself are good ways to miss out on big growth opportunities and lose money. A solution to all of that is Pattern.
Pattern operates differently than any single agency your brand has worked with before. That’s because its model is radically different. At Pattern, we consolidate every resource you need, including data analysis, advertising and marketing, international expertise, control, and distribution, so you can cut out all those middle men, save time, and save money.
Profitability-minded, aligned incentives
Only 11% of Pattern’s revenue goes toward running our business. That means you’ll have far less costs with a Pattern partnership than you will with any one agency. Agencies and the brands they work with frequently have misaligned incentives. An agency might be incentivized to spend more because they’re being paid on commission, for example, or cut corners to spend your ad dollars on cheaper keywords that don’t drive incremental sales whatsoever.
At Pattern, your incentives are our incentives. Every brand manager you’ll work with is incentivized not to spend your money, but help you hit your goals and growth targets so you’re making money long-term. We also give you more flexibility than agencies do—most Pattern contracts only require a 60-day commitment.
Expertise at no added cost
Removing spendy middle men isn’t the only way Pattern helps you cut costs. We tackle your data analysis, marketing, SEO, brand control, packaging, and shipping, which means you don’t have to pay additional hires to cover every corner of your business, and you don’t need to worry that your profits are quietly being eaten away online. Then when you’re ready to take your brand international, we’ve got teams on the ground in every major market in the world to make the transition as seamless and cost-effective as possible.
In a Pattern partnership, we take care of the logistics. All you need to do is pay for advertising, and even then, we’ve got that boiled down to a science with rules-based software that helps you bring your ad spend down and make it as effective as possible so your conversion rates go up.
For more information on how Pattern can help you save, contact us using the form below.
