As we cross the 30-day milestone in our ecommerce journey, we’ve experienced a flurry of activity, learnings, and progress.
To date, we’ve made a total of R11,462 in our first month (to be expected for a start)
Not bad considering we spent just over R5,000 on ads, and that we’re starting from absolute scratch.
No email list.
No pixel data.
No social proof, which is the biggest one of them all.
However, we still ran at a loss – obviously.
Given our experience, this is 100% expected.
We’re probably not going to make a profit for a while, but that’s okay.
We’re not here for short-term profit.
It’s about the bigger picture.
Below we unpack what route we’ve taken in terms of a paid strategy we also take a deeper dive into the financials to see how far we still need to go to start breaking even.
Our Free Shipping Strategy
One of the core aspects of running a successful ecommerce business is understanding and controlling your costs.
(Which is the one thing many business owners don’t know how to do)
This often involves estimating costs upfront, determining pricing strategies, and then continuously reassessing and adjusting based on actual data and performance.
Considering our lack of data, our initial projections pegged the cost per purchase at around R250, assuming it would be hard to bring it lower in the early days.
With our average product margin sitting at 60%, this meant that a customer would need to spend over R500 with us for us to break even on the sale after shipping.
This brought up the crucial question of pricing.
Our average product costs ranged between R399 to R499.
To encourage a healthy average order value (AOV), which could help offset the high cost per purchase, we needed a strategy that incentivized customers to spend more.
Enter free shipping – a perk that countless studies have shown to be the number one thing customers want.
So, we offered free shipping on orders of R500 or more.
Most companies don’t want to, or can’t afford to do this, but in the early stages of chasing customers, you might not have a choice.
Since our average product price was within R399 to R499, this strategy nudged customers to buy more than one item, effectively boosting our AOV as seen below.
This approach was not just about increasing profitability, but about creating a sustainable model where we could absorb costs while still providing value to customers.
By aligning our cost per purchase, product margin, and pricing strategy, we could work towards a more financially viable business model down the line.
Unboxing Our Digital Marketing Strategy
Jumping into the deep end of digital marketing, we decided to put R5,000 towards paid ads.
We stuck with conversion ads, because, let’s face it, we want sales, right?
The trick is not messing up our pixel by forgetting to set up tracking and events correctly.
It’s like trying to build a house on sand if you get that part wrong.
Because we don’t have a lot of data, and because we didn’t have a huge budget, we ran only one campaign focussing on the top of funnel.
We tested 4 different interest targeting audiences as we can see below.
The result?
Really good CTR on ads, above 4.48% this indicated the ads we’re resonating with our audiences.
We also had an extremely healthy “Add to Cart Rate” of 16.6%.
We consider anything around 10% to be good, as this indicates, people clicking on the ad, are also interested in what your selling, otherwise they would have bounced off without taking an action on the page.
Not to mention that an “Add to Cart” is the first step expressing you’re actually interested in buying something.
The result after 15 days?
Slow…
Only 3 sales translating in R1,506, regardless of all the interest.
Not to mention a conversion rate of 0.17% – ARGH!
Horrible LOL!
However, because we’ve worked with over 200+ eCommerce brands now, we know, this is 100% normal.
Interest, doesn’t always translate into sales.
In fact, you will see in the image above we had a 95 add to carts in total and only 3 sales.
That’s a 3% Add to Cart to Sale Rate (ATC – SR)
Now, on average a store should have a 10-20% (ATC – SR).
This indicated that their was a barrier between the intend of the sale and the actual transaction.
We had our abandoned cart sequences in place, so when we saw our ATC – SR, we were stumped.
What was going wrong?
After diving deeper into the problem, the lightbulb moment hit.
Our product images!
We had been using supplier images and hadn’t put much thought into personalizing them.
Think about it.
The ads stirred up some excitement, driving folks to our site, and they even added items to their carts.
But then something put them off.
With no testimonials yet and little social proof, we figured our brand just didn’t feel trustworthy enough.
So we gave our product images a makeover.
We wanted them to be more personalized, more authentic.
Something to give folks that extra nudge of trust after they’ve hit ‘add to cart’.
And, guess what?
It seemed to work.
Over the next two weeks, our ATC – SR went from a measly 3% to a whopping 11.9%.
And our conversion rate?
It hiked up from 0.17% to 0.72%.
That’s what we call a win!
We did R9,956’s worth of revenue in two weeks compared to the 2 weeks prior.
That’s over a 6X increase in revenue!
With the revamp of our product images, our Facebook paid ad campaigns went through a radical transformation.
Our Return on Ad Spend (ROAS) went from a depressing 0.16X to an impressive 2.73X.
What’s more, our cost per purchase took a nosedive, dropping from a hefty R2,247 to just R258 a purchase.
That’s right in the ballpark of what we initially expected.
By the end of the month, we found ourselves sitting at R11,462.40.
Not too shabby for our first month in, right?
So, what’s up next?
Well, we’re not resting on our laurels.
We’ll be continuously tweaking and improving our website’s functionality and working on bolstering those trust factors.
We’re also gonna hunt down some customer testimonials.
But that’s not all.
We’re planning a giveaway to further boost our social proof and grow our email list.
Gross Margins: The First Month’s Financial Health Check
Alright, time for some number crunching.
Our first month saw us rake in R11.4k in revenue.
With the cost of goods sold (COGS) clocking in at R4,763, we were left with a gross margin of 58%.
Let me just say, that’s a pretty sweet place to be!
Most ecommerce stores aim for a gross margin around 40%.
Landing at 58% right out of the gate?
That’s a healthy sign we’re on the right track.
Operating Margins: The Not-So-Glamorous Side of Starting Up
Okay, let’s talk operating margins.
Not the most thrilling topic, but bear with me—it’s super important.
Our biggest expenditure?
Meta Ads.
They set us back just over R6,000, VAT included.
Our operating expenses are pretty lean at the moment since we’re pulling from our own resources.
All in all, our total operating expenses totaled R9,184.
Subtract our COGS and we land at a loss of -R2,485.
But hey, don’t sweat it.
It’s pretty standard for new businesses to run at a loss to start with.
Even though many newbies to the ecommerce game might not realize this, it’s a normal part of the process.
So, for the number nerds out there, our operating margin sits at -21.6%.
Looking ahead, we’re aiming for something around 10%.
Gross Margins and Growth Partners: The Lifeline of a New Business
Look, if it wasn’t for our robust gross margins, we’d be seeing much heftier losses.
Consider this, a 40% margin would’ve landed us with a R4,000 loss.
With a 30% margin? That’s a sobering R6,000 loss.
And that’s with our operating expenses being super lean, thanks to us using our own resources.
Picture this – most brands need to factor in staff salaries, warehouse costs, and possibly an agency fee.
It can add up real quick.
That’s why it’s so crucial to get the right growth partner on board.
You need someone who’s got your back, who’s in your corner, strategizing and navigating these early-stage challenges with you.
It’s not just about growth, it’s about sustainable, profitable growth.
So yeah, healthy gross margins and solid partnerships aren’t just nice-to-haves, they’re lifelines for any new business.
Biggest Takeaway From Month 1
Taking a step back, let’s talk about why product images are such a big deal.
You might think, “It’s just a picture, right?”
Wrong.
It’s so much more than that.
See, customers want the full scoop.
They want to see the product, sure, but they also want to know how it works, what benefits it can offer them, and they really love to see real people using it.
Why?
Because it builds trust.
It adds credibility.
It takes your product from being just another item on a webpage to something tangible, relatable, and trustworthy.
Don’t just slap any old picture on there and call it a day.
Put some thought into it, make it personal, and show your customers what they’re really getting.
It’s a small thing that can make a world of difference.
