Maximising Your Profits and Understanding Order Margins
Terms like “analysis” and “reporting” may feel incredibly daunting at times, however focusing on profit, cash, and growth is essential for any eCommerce business. This blog post addresses the crucial question: “What margin am I making, and why is it important?”
Why Order Margin Analysis Matters
Gross margin, the difference between the cost of goods sold (COGS) and the selling price, is a vital metric. There are notable reasons why understanding your actual margins is critical for building a successful business:
- Maximising Profits: By analysing order profitability, you can optimise your product mix, pricing strategy, and marketing efforts to focus on higher-margin products.
- Refining Pricing: In a dynamic market, data-driven pricing strategies maintain competitiveness and profitability.
- Controlling Costs: Understanding all cost components allows for confident negotiations with suppliers and efficient operations.
- Managing Inventory: Accurate inventory management prevents overstocking or stock shortages, ensuring optimal financial health.
- Measuring Performance: Tracking key metrics and data helps identify market trends and investment opportunities.
- Securing Advantage: Detailed margin analysis enables unique product bundles, allowing you to upsell effectively.
- Planning for the Future: Historical margin data helps anticipate growth opportunities and potential challenges.
Achieving Detailed Margin Analysis
Knowing your overall margin is important, but detailed order-level analysis is crucial for uncovering losses. While many companies struggle with end-of-month data collation, Volo offers a more efficient solution.
Volo’s Approach to Margin Analysis
We provide automated, configurable reports through Volo Vision, a comprehensive reporting and analysis suite. Here’s how Volo customers typically use Vision:
- Margin Breakdown Report: Offers sales net of tax, margin after order/fulfilment costs, and margin percentage across various channels, suppliers, countries, and products for any specified period.
- Margin Performance Report: Tracks margin trends over time, monitoring various fees to keep daily insights up-to-date.
- Order Margin Detail: Highlights specific order costs line-by-line, identifying occasional negative margin orders.
- Net Margin Report: Includes operational non-fulfilment costs like overheads and utilities to determine true net profit before tax.
The effectiveness of Vision is evident as its biggest users are Volo’s most successful customers.
Understanding and analysing your margins down to each order is not just beneficial—it’s essential. If margin analysis is not your core competence, consider finding an expert to handle it. Your business’s financial health, your team and your stakeholders will benefit.
Get in touch to see how our solutions can help optimise your order margin analysis.
