When it comes to selling online, the competition can be fierce, margins are often tight, and it’s an ongoing struggle to avoid a race to the bottom with your product price.
So how can ecommerce sellers increase their profits? The answer is multi-unit sales.
Multi-Unit Sales Encourage Smart Shipping
Perhaps you’ve heard of a relatively new marketplace, called Jet.com. As someone in the order fulfillment industry, I was quite intrigued by Jet’s model, which is to basically reward consumers for smart shipping. Here’s how Jet works…
– A consumer on Jet.com will add a product to their shopping cart
– By doing so, that consumer then unlocks deals on other products
– The more products the consumer adds to their cart, the more deals they unlock
Jet offers incentives to consumers for multi-unit purchases, as it fully understands the economics of ecommerce order fulfillment and shipping. For example, when an order is picked and packed within a warehouse, there is an expense that the seller incurs. That expense consists of labor and the packaging materials. Now, when an order contains two or three units (as opposed to just one unit), the added expense to the seller is generally less than the added margin the seller will make on those additional units, meaning their overall profit increases.
It’s not just the pick and pack, either. When a seller ships one unit to their customer, the shipping cost may be $7.00 for that one unit. When a customer orders two units, the shipping cost may only be $8.00 for both units, which again means that the seller’s overall margin will increase as they only paid $1.00 more to ship the second unit to the customer, whereas they may have made $10.00 in additional margin on that second unit.
This is the logic behind Jet’s model. As you shop on Jet, it will ask for your zip code. Once it knows your location, it can then identify the offers that are most affordable, taking into account not only the product price, but also the shipping price.
How to Get More Multi-Unit Sales
For ecommerce sellers, the more multi-unit sales they’re able to get, the more profitable their businesses will be. That said, you may be thinking…sure, easier said than done.
While it is indeed true that getting your customers to buy more than one product isn’t always easy, there are ways to incentivize your customers to do so, just as Jet does. Here is a post I recently wrote on this topic for Practical Ecommerce….
4 Ways to Increase Multi-unit Sales
In the post, I provided a number of examples showing how the order fulfillment and shipping costs work in the favor of the seller when they’re able to generate a multi-unit sale. I also provided four examples of how to encourage multi-unit sales, including…
1. Free shipping with a minimum
2. Coupons with a minimum
3. Add-on products
4. Bundled products
For many online sellers, especially those with lower-margin items, their success is largely dependent on their ability to generate orders with more than one unit. After all, shipping one unit is not cheap, but shipping two units can be, which means that having more than one unit in the order is a way to offset the shipping and fulfillment expenses.
Most sellers want to avoid a race to the bottom. The problem is, they often have no choice. But by using smart incentives to encourage your customers to buy more than one product, you will have just effectively lowered what your “bottom” can be.