How To Decrease COGs to Increase Margins?

Does this topic sound familiar to you? 

Is it something you’ve been breaking your head with lately?

We know it all too well… 

I’ve been personally jumping on calls with brands and almost every single one of them tell me that they’ve been struggling with the rising costs of advertising and manufacturing products. 

Almost every eCommerce brand could benefit from finding a couple ways to decrease cost of goods, resulting in increasing your margins. 

Lucky for you, our team pulled together a couple ways to help you with this. 

But before we get started, let’s explain what COGs are for an eCom brand. 

What are COGs (cost of goods) for an eCom brand

In short, COGs are the costs to produce any products or services that a business is selling. 

For example, COGs include buying the raw materials, shipping to your warehouse, assembling the products, the labor and manufacturing it takes to create or put together into the final product. 

Of course, there’s other costs to be mindful of as a business owner like marketing and distribution costs, but those don’t fall under COGs. 

And unfortunately, most of these costs have increased lately making your margins tighter. 

So, to help brands combat this economic turn our team put together some tips to try and reduce the cost. 

Plus, it never hurts to stretch your margin out more. 

Let’s go: 

Find lower cost materials:

We know, this is pretty obvious. And no, when we say find materials at a lower cost, it doesn’t necessarily mean to go for low quality materials. However, new sellers come up all the time or new tech that can provide the same raw material at a lower price. We highly recommend broadening your search to find cost effective materials because realistically this is probably our biggest cost and therefore, the first thing we need to look at to increase margins. 

Negotiate a discount or deal for the materials:

Let’s say the above didn’t work and you’re stuck with your current manufacturer. Discuss deals or negotiate some type of discount with the current provider. Maybe free shipping to the warehouse or a reduction in the price based on amount of material, etc..

Move the manufacturing elsewhere:

Depending on your location, it could be that the current cost of manufacturing the products is a lot higher than somewhere else. Consider moving the entire manufacturing process somewhere cheaper, where the laboring costs are lower.

Join or merge with larger organizations:

Large orders can at times cost less. If your a small company you might not be able to reap these benefits. But, if you can partner with another company, you can take advantage of this. 

Use technology and automate laboring where possible:

Labor can be a huge part of the COGs, and sometimes technology could help and replace that human factor, reducing the labor costs.

Of course, there’s tons more ways to lower your COGs, but we’ll leave it at that for now. 

As we see prices rise across virtually every sector, it’s important to consistently check where you can save, but also find ways to attain more sales. 

As eCom experts, our team understands inside and out how to grow a brand even in the most dire of times. 

With our online marketing services, we actively find ways to help brands keep their advertising costs low because as the competition thickens so does the cost. Just like your COGs.

If you are interested in learning more about this or if you’re interested in hearing how we keep our client’s advertising low, book a call below

Until next time 😉

Additional Resources

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