18 Proven Strategies To Grow eCommerce Profit Margin (For 2024)

eCommerce is a super crowded space and when you’re trying to improve profit margins, it can be tough. 

Since the market is complex, generic advice on increasing your profit margin doesn’t help—it doesn’t account for the changing market scenarios. 

So, in this post, we’ll be exploring 18 strategies that can boost your eCommerce profit margins, just as they have for some of our clients:

1. Reduce operating costs

2. Bring down customer acquisition cost

3. Audit waste along the supply chain

4. Reduce shipping costs

5. Use free shipping only when AOV is very high

6. Find your most/least profitable products

7. Make your bestsellers prominent (around the year)

8. Focus on increasing the “basket size”

9. Prioritize a bundling strategy

10. Feature a great returns/ exchange policy

11. Take “brand perception” seriously

12. Create a “sticky” loyalty program

13. Improve trust across your site

14. Develop a cart abandonment strategy

15. Offer only “smart” discounts

16. Optimize the customer journey

17. Optimize the *most important* elements on your store

18. Be consistent with customer support

What is eCommerce profit margin?

In simple terms, eCommerce profit margin is the money a business is able to make after deducting associated costs. However, there are three different ways to calculate this: 

Gross Profit Margin:

This metric helps you calculate profits after subtracting cost of goods sold (COGS), which indicates any amount you spend to actually fulfill the order—what it doesn’t include is other key business expenses like warehousing, shipping or even utilities. 

Typically, if you have a GPM between 42% and 60%, it’s considered desirable—the average, however, ranges between 30% and 40%. 

Gross Profit Margin = (Revenue - COGS) / Revenue x 100

where,

COGS - Cost of Goods Sold

Why calculate Gross Profit Margin: 

To understand resource allocation better—are you using an expensive shipping service that’s eating away at your margins? Or, working with a supplier that’s charging too much?

Net Profit Margin:

This metric helps you calculate profits after you’ve deducted all possible expenses associated with running your eCommerce business: materials, labor, rentals and other operational costs. 

The average eCommerce net profit margin is just a little over 7%—to view a fuller list from an NYU Stem study, check this. 

Net Profit Margin = NI x 100 / Revenue

where, 

NI = Net income (R - COGS - OE - O - I - T)

R = Revenue

OE = Operating Expenses

O = Other Expenses

I = Interest

T = Taxes

Why calculate Net Profit Margin: 

Since net profit margin offers a fuller view of costs, calculating it can help you plan future expenses—this includes paying off debts, scaling the existing business etc. 

Also read: 31 eCommerce Metrics and KPIs that Actually Matter‍

How to turn your eCommerce store into a high profit-margin business

1. Reduce operating costs

Given that the average cost of fulfilling an eCommerce order is 70% of the value of that order, businesses have to optimize operating costs. 

Here are a few areas where costs can tip to the heavier side, when unchecked:

→ Packaging: Cost intensive packaging sizes and materials spread over many shipments can deal a bog blow to your eCommerce profit margins

→ Labor: Multiple routine tasks being handled by in-house and vendor teams can again make eCommerce overheads shoot up

→ Inventory: Businesses that run without a dropshipping model have to safeguard the stocks they receive for manufacturers—and in case of overstock, it can mean significant negative impact to eCommerce margins 

What you can do instead is:

✅ Pay for product dimensions—instead of paying for box dimensions, which is actually paying for more packaging material than you need

✅ Automate repeated / daily tasks—this can span across order processing, email marketing and customer service to reduce errors and labor charges

✅ Start dropshipping—it reduces how much capital you need upfront for inventory and allows you to automate orders while forwarding the order fulfillment responsibility to the manufacturer

2. Bring down customer acquisition cost

The average customer acquisition cost in eCommerce stands at about $70, and can be reduced with a set of strategies to target profit margins. 

Here are a few methods you can put to practice right away:

✅ Improve the way you nurture post purchase—be it about keeping customers updated about order tracking or incentivizing them for sharing feedback

✅ Tie up with customers to market your brand—why choose expensive influencers when you can pick micro-influencers from amongst loyal customers who’re also likely to have a following that resonates with your brand?

✅ Choose a marketing channel with high ROI—walk the email way since it’ll give you 42x ROI, especially when you strategize & segment well 

For more ideas, read: 22 (Really Specific) Ways to Reduce Customer Acquisition Cost in eCommerce

3. Audit waste along the supply chain

Like any other industry, in eCommerce too, boosting profit margins relies heavily on reducing waste. 

And waste can occur anywhere along the supply chain:

✅ Audit supplies and supplier relationships—check where you might be getting overcharged or where ove-rordering is occurring 

✅ Audit delays & wait times—check if miscommunication or misinformation is happening and customers are going without confirmations 

✅ Audit defects—this can reduce the rate of returns and exchanges considerably

✅ Audit resource allocation & under-utilization—are you using more labor than necessary? What more of your tasks could be automated?

4. Reduce shipping costs 

As a brand strategizing how to improve profitability in eCommerce, you’ll have to look at shipping as a reason behind increasing costs. 

This is also especially because most shoppers are looking for free shipping to feel convinced—here’s what you can do to keep eCommerce shipping costs in check:

✅ Leverage prepaid shipping—and do away with COD as this can make shipping charges go up (prepaid shipping usually comes at a 20% reduced price)

✅ Buy packaging materials in bulk—and then spread this over across order fulfillment across months

✅ Use discounted packaging provided by the carrier—while this isn’t exactly ideal for established brands, smaller ones needing a head start can fall back on this strategy

We recommend you to read further: 25 Proven Ways To Reduce eCommerce Shipping Costs

5. Use free shipping only when AOV is very high

The stats are revealing: 76% of shoppers are more likely to go ahead with a purchase if they find out free shipping exists in a store. 

So when you’re figuring out how to improve profitability in eCommerce, bring free shipping into your strategy mix:

✅ Promote 2 or 3 day free shipping (this is often good to counter the Amazons of the world because most shoppers don’t mind waiting a bit!)

✅ Feature a free shipping threshold at crucial junctures (read: right beneath the CTA on product pages and at the top within the mini cart as a progress bar)

✅ Offer limited time free shipping nudges (declare it on an entire category for a day or say something like “get free shipping when you order within x hours y minutes” with a countdown timer

We recommend you read: Free Shipping: Still a Conversion Driver in 2024? (+ Brands Nailing It)

6. Find your most/least profitable products

To improve your eCommerce net profit margin, figuring out which of your products are doing well and which ones aren’t is crucial. 

Here are a few things you’ll need to do to get this right:

✅ Check for which keywords your TG is searching—your paid ads and your search box functions are good places to start

✅ Use data to find out the most visited product pages—use heatmaps and session recordings to understand where they’re spending maximum time, what they’re clicking on etc. to develop an optimization strategy

✅ Check out which products have the least reviews—this can tell you what shoppers may be buying but are quite indifferent too, giving you an opportunity to push them out as part of fixed bundles or flash sales applicable on specific categories 

7. Make your bestsellers prominent (around the year)

For any eCommerce store, 20% of products drive 80% of sales. 

And this is what you need to leverage while improving the average profit margin for eCommerce. 

But how do you do this without seeming to be pushy or desperate? Here are a few things we’ve tried for clients:

✅ Bring up the products with the maximum reviews & star ratings (the social proof creates an “aspirational” sense around such products)

✅ Display products with the most awards & certificates (and ensure you label the recommendation images accordingly)

✅ Feature bestsellers by “concern” (for example, if you run a skincare brand, you could do a round-up of your most common customer challenges and recommend bestsellers around those)

✅ Use “shopping guides” and link your bestsellers (this works especially during peak season when shoppers are super rushed and would like brands to recommend & save time)

Skincare brand Ilia boosts eCommerce profitability by bringing their most awarded products upfront:

8. Focus on increasing the “basket size”

Naturally, this will impact your AOV, and by doing so repeatedly, can create a healthy difference to your eCommerce profit margins. 

Here are a few ways in which we’ve helped customers boost profit margins through a basket size strategy:

✅ Feature a funnel quiz (and when you recommend, show products they can buy together and build into a “routine”)

✅ Feature tiny upgrades for more products (for example, if you sell jewelry, charge more for engravings and even apply seasonal quantity discounts if this picks up)

✅ Show quantity discount nudges in the mini cart (this “bulk” strategy can be even more effective if you have a sitewide sale going on—announce it as an “additional discount”)

✅ Promote “view the look” and “complete the regimen” nudges (best done on your product pages where shoppers are most likely to be firming up their purchase decisions)

You might like reading: 26 Proven Ways to Boost Average Order Value (+ Examples)

9. Prioritize a bundling strategy

While bestsellers save the day, eCommerce brands have to figure out what to do with deadstock. 

And when it comes to eCommerce profit margins, they can weigh heavy unless you go the bundling route. 

However the best instances of bundling are those where a business’ strategy matches shopper intent:

✅ Bring up bundles as a separate category (if your main navigation features this, it can ease shopper discovery)

✅ Feature “build your bundle” CTAs across high intent pages (by that we mean the homepage, category pages and product pages—even a last minute prompt within the mini cart can make shoppers pay attention!)

✅ Name some of your bundles by shopper concern (this way even fixed bundles with slow-moving products will get attention)

✅ Promote bundling by featuring complementary products (this is a less pushy way of improving your eCommerce margins, if you can bring your authority into the recommendations)

For example, health & nutrition brand Kaged features a “Team Kaged recommends” section on their product pages:

You might like reading: 15 Product Bundling Examples That Convert (& 9 Proven Ideas)

10. Feature a great returns / exchange policy

Customer acquisition costs can come down hard on eCommerce businesses, and this is bad news for any efforts you might be putting in to boost profit margins. 

In this light, refining or even redefining your returns / exchange policy is worth a serious thought—after all, 80% of shoppers won’t shop again with a brand if they’ve experienced poor CX. 

However, here are a few aspects you’ll have to ensure your returns / exchange policy features:

✅ Promote exchanges over returns (for example, make it easy to exchange with a different size, color or a similar product)

✅ Offer an incentive on exchanges (this will avoid mass returns, making a smaller dent in profits—offer free shipping, a surprise discount on the next purchase or even extra store credits!)

✅ Consider partial refunds for bundle items (this offers the flexibility of choice to shoppers while safeguarding your profit margins)

To make your returns/ exchange policy be accessible and useful, create an FAQ page that details out everything that a shopper can expect—exactly as Staples does: 

Also read: 14 Brilliant Examples of eCommerce Return Policy (+ Proven Tips)

11. Take “brand perception” seriously

Boosting eCommerce profit margins isn’t just about clever selling strategies—you’ll have to repeatedly make your brand perception count. 

By brand perception, we mean the feelings a shopper experiences when they hear your brand’s name or receive communication from you. 

To increase eCommerce profits through a sustained brand perception, make sure to:

✅ Feature a section that talks brand on the homepage (you can always link it to a separate ‘about us’ page for better impact

✅ Display quick icons on how your brand is different across the site (do you do ethical sourcing of materials? Or is it carbon offsetting?)

✅ Combine product recommendations with social proof (a snippet and the associated star rating offer instant conviction to shoppers)

✅ Show third party certifications & validations on the product page (above the fold, for better visibility)

eCommerce supplement brand Nature Made focuses on creating a strong brand perception despite being established:

Do check out: 20 Experts Share Proven eCommerce Growth Strategies (2024)

12. Create a “sticky” loyalty program

At least 12% to 18% of incremental revenue growth can be ascribed to members of an eCommerce loyalty program, compared to non-members. 

This makes it clear that to increase eCommerce profits, you’ll have to create & promote an attractive loyalty program:

✅ Tier the rewards (look at the level of customer spend and then put them into the right tier of rewards—this is a great way to inspire shoppers to spend more!)

✅ Highlight what’s exclusive (potential members need to exactly know why they’ll be better off if they sign up!)

✅ Make it easy and ideally cheap to become a member (for example, outdoor equipment brand REI creates a difference to their eCommerce margins by charging a one-time fee)

Here’s how skincare brand The Beauty Chef elaborates on how loyalty will be rewarded on their store:

You might like reading: 14 eCommerce Loyalty Programs Backed By Science (Examples)‍

13. Improve trust across your site

We spoke of brand perception before, but customer trust goes a step further. 

The better the trust signals are in your store, the better your turnaround—and naturally, this translates to improved eCommerce profit margins too:

✅ Delay showing discounts (sites that show sale pop-ups too without accounting for buying intent are screaming desperation!)

✅ Feature mixed reviews (and ensure they come from verified buyers—the most successful eCommerce stores use “verified buyer” as a trust label)

✅ Display payment methods clearly (make them a standard feature by featuring them in a location that’s easy to spot, like on the footer or header)

✅ Bring in the human element (could be a note from your founder or recommendations by specific team experts)

For example, PrettyLitter features a note by its CEO right on the homepage to increase eCommerce profits through increased trust:

You might like reading: 30 Ways to Build Trust FAST (On Your eCommerce Store)

14. Develop a cart abandonment strategy

When you’re strategizing how to boost eCommerce profitability, you’ll have to give cart abandoners a serious thought. 

After all, more than 70% shopping carts are abandoned—but to prevent that, you’ll have to ensure:

✅ Fully functional coupon fields in the cart (also tell them which codes go with the purchase they’re about to make)

✅ Make your exit intent pop-up a relevant discount (a message like “leaving so soon? Here’s a special X% discount for <enter what’s sitting in the cart> only for TODAY!” works well)

✅ Wishlisting nudges (as cliche as it sounds, wishlisting is a way for you to ask shoppers for their email & in exchange, you can send them subsequent offers)

AllBeauty.com makes some great cart abandonment emails that compel shoppers to complete their purchase (thanks to the customer support nudge as well as the edit cart option):

For more insights, read: 27 Powerful Ways To Reduce Shopping Cart Abandonment (w/ Examples)

15. Offer only “smart” discounts

Too many flash sales and discounts can seem like a good decision to enhance eCommerce margins,but they can in fact lessen the perceived value of your store. 

And this means your discounting strategy needs to be both believable and convincing:

✅ Feature VIP or early access discounts more (since these are targeted towards a certain segment, conversions can be better than generic discounting)

✅ Launch a discounted pre order campaign (works especially well when you’re trying to maximize profit margins just before peak holiday buying season)

✅ Make it a mystery discount (the mystery element typically amplifies engagement when done for a segmented audience—just ensure you hint at the discount tiers applicable)

MAC Cosmetics, for example, features email-only limited time mystery offers like these:

Do check out: Labor Day Marketing: 15 Amazing Ideas and Examples (2024)

16. Optimize the customer journey

If you can ease a customer’s journey from discovery to conversion, you’ll be able to make a real difference to your eCommerce net profit margin. 

Here are a few non-negotiables:

✅ Ease product discovery (pay special attention to your website navigation and test various versions to see what converts the best)

✅ Use comparison charts (this is a way for you to help visitors compare options without necessarily leaving your site)

✅ Make social proof relatable (feature UGC that your target audience will immediately resonate with and also make it shoppable)

✅ Feature a variety of payment options (including BNPL options that take the stress away from immediate purchases)

You might like reading: The Founder's Guide to Customer Journey Map

17. Optimize the *most important* elements on your store

It’s easy to think average profit margins for eCommerce businesses rest with the buying intent of shoppers alone. 

But it could well be that certain critical elements on your store aren’t optimized for them to convert:

✅ The search bar (do you feature hint text? Can shoppers search extensively within a category? Do you show trending searches to first time visitors?)

✅ The CTAs (do they really trigger action? For example, if you only have “add to cart” through your site, it may be time to see where it’ll be better to use prompts like “quick buy”)

✅ The copy (is it product-led? Does it clearly elaborate benefits that can then inform a shopper’s purchase decisions?)

✅ The checkout flow (do you allow customers to use guest checkout? Do you have a way for them to apply social logins and buy?)

Do checkout: Top 15 eCommerce Conferences to Attend in 2025

18. Be consistent with customer support

86% of eCommerce shoppers admit that they’ll stop buying from a brand after two bad experiences. 

Under these circumstances, consistent customer support can help you boost your eCommerce margins. 

Here’s what we’ve found valuable:

✅ Make it easy to find self-help resources (do you prominently feature a FAQ section on product pages? Can shoppers go to the FAQ page from your live chat window?)

✅ Use the live chat feature across all high intent pages (and this includes the checkout page and the thank you page)

✅ Let shoppers know when human help is actually available (clear information can help them come back and pursue with questions)

✅ Pick up the conversation from where they left (if they abandoned cart on FB but are checking the product out on Instagram again, send them a prompt like “we noticed you’ve been exploring…have questions?” talking about the product)

Nutrition brand Huel uses prompts that help recent purchasers and those currently buying have a smoother experience—and boost eCommerce profit margins in the process:

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Frequently asked questions

What is a good eCommerce profit margin? 

A good profit margin is entirely dependent on your location and industry. 

If you’re in the retail industry, the average profit margin is anywhere around 45%. For a small business, 10% is a healthy margin. So you’d want to aim for margins higher than that. 

You can also compare your profit margin with the industry standard here.

How can I optimize my product pricing to maximize profit margins?

There are several ways you can use pricing to maximize eCommerce profit margins, and these include:

✔ Offer multiple quantity options (even if you don’t have subscriptions going on, this can help increase basket size while boosting profit margins)

✔ Declare a sale only on a certain product category for a certain segment (like have a special price for veterans on outdoor apparel just in time for Veterans’ Day)

✔ Feature a last-minute quantity discount (just when they’re abandoning the cart, a pop-up showing this can save the day!)

✔ Create a special pre-order price for a new product launch (and clearly mention this is “until stocks last!” creating urgency & instant appeal)

For more insights, read: eCommerce Pricing Strategies: 20 Smart Examples To Help You Sell More

Better UX, better eCommerce profit margins

98% of visitors who visit an eCommerce site—drop off without buying anything.

Why: user experience issues that cause friction for visitors.

And this is the problem Convertcart solves.

We've helped 500+ eCommerce stores (in the US) improve user experience—and 2X their conversions.

How we can help you:

Our conversion experts can audit your site—identify UX issues, and suggest changes to improve conversions.