Running an E-commerce Store: What Are the Hidden Costs and How to Mitigate Them?

Uncover the hidden costs of running an e-commerce store. Learn to mitigate expenses related to tech, inventory, and marketing to protect your profit margins.

There is much appeal to starting an e-commerce store, and with a global market and low overheads, many take the plunge. They soon realise that what sounds like a profitable dream come true comes with a few unexpected costs that leech profit margins.

The freedom that running an online store presents often entices people to jump in without understanding the expenses that come with the territory, which can lead to financial strain early on.

Today, we will talk you through some of the expenses you may not have accounted for so that you can prepare and strategize for the reality of running an e-commerce store successfully.

Tech & Platform Expenses

You might think the stock itself is the first expense, but before making a single sale, you have to consider the expenses attached to the technological side of your store.

Many e-commerce businesses make good use of sales platforms like Shopify or WooCommerce because they simplify a lot of the work that goes into launching. However, the costs associated can soon mount, especially if you want to expand. Lets discuss.

Subscriptions, Add-Ons, & Payment Processing Fees

The popular e-commerce platforms all offer a basic plan, but there are elements of running a store that are considered more complex, which will cost you more.

You might think a basic subscription will suffice, but sooner or later, you will find that the paid plugins or apps might appeal to you.

To expand your outreach and engage with email marketing, SEO, and reviews are all important, and all of these extra bells and whistles come with an additional price tag.

There are also payment processing fees to consider. Services such as Stripe or PayPal can take around 2.9% + 30¢ per transaction. While it isn´t a lot, it soon mounts up if you scale your business up. So, when calculating your expenses and profit margins, it must be factored into the equation.

How to Mitigate It: The best mitigation tip is to find a platform that scales alongside you. One that allows your e-commerce venture to grow as and when it is ready.

Make sure you review the plug-ins available and try to stick to platforms with plenty of built-in features. That way, you won’t be forking out third-party tools on top of subscriptions.

Investigate payment processing with transactional volume rates where possible.

Inventory & Fulfillment Fees

Managing your inventory and order fulfillment is central to running your store, but it requires great planning to keep stock and shipment running smoothly.

The best way to keep on top of this management, especially at scale, is through the use of optimization tools. This is yet another cost you may not have considered.

Stock & Shipping-Related Costs

When it comes to storage options, you have two main options: either source a warehouse, which incurs rental costs, or rely on a third-party logistics provider (3PL).

Either way, the storage fees rack up. Without the right inventory for demand, things can get pricy quick when items don’t sell.

On top of that, there are shipping fees to account for, which can fluctuate.

Then, there is the topic of returns; many customers have come to expect free returns as standard.

Ideally, your products are going to be satisfactory, and your returns will be low, but even so, these are all costs that need to be considered.

How to Mitigate It: If you are opting for 3PL, always negotiate and shop around before committing to a service provider.

Inventory forecasting tools can help you to stock according to trends and demands to prevent overstocking and dead stock.

Make sure your return policies are clear and fair and don’t incur unnecessary costs.

You can also make sure your packaging is economical to help offset the surcharges by reducing dimensional weight.

Marketing & Lead Fees

Growing your brand and acquiring customers requires skilled marketing strategies. Effective marketing requires investment, and that is most often one of the biggest expenses that e-commerce businesses underestimate.

Customers are often curious but hesitant. Many window-shop and compare the market, and there are lots of options available online, so it may take several interactions before they commit to a purchase.

With that being the case, your cost-per-acquisition (CPA) can be tricky to judge accurately, and it can be more expensive than initially anticipated.

Advertising, Visibility & Collaboration

The most popular channels for advertising are Facebook and Google Ads. Each drives passing trade, but they are competitively set. The result is that your cost-per-click may be higher than your ideal budget.

SEO investment is better for long-term value, but if you don’t have the skills, then it can be another big expense in terms of add-on tools or even hiring third parties to manage it for you.

Another option with great results is influencer marketing, which involves collaborating with influencers relative to your goods and services, but again, the cost is tough to calculate because it varies.

There is also no guarantee; you need the right collaborator, or you run the risk of just spending out with lower conversion rates than expected or, worse, zero return.

How to Mitigate It: It is wise to start with content marketing and SEO. A customer referral plan can be a game-changer, as word of mouth is still incredibly powerful.

These organic strategies are best for newcomers. From there, you can scale your marketing towards paid ads incrementally, but only if they bring success. Test the waters with small campaigns and be sure to track your ROI.

Customer Relation Expenses

No business is successful without great customer service and support. It is something that needs to be considered an essential investment. One bad review can snowball. This can be very damning in the highly competitive world of e-commerce, where repeat business is key.

Support Staff, Tools, & Resolution

The importance of providing quality support should never be underestimated, and neither should the cost.

Whether it is through hiring or leveraging AI, you have expenses to weigh. Staff require training, and wages and tech tools mean software investment and maintenance fees.

The bottom line is that issues arising need quick resolutions that leave the customer satisfied. Today’s customers expect 24-hour support, and a global market demands multilingual assistance.

How to Mitigate It: The best advice is to follow a tiered support approach.

You can provide a clear FAQ and automate responses to common problems with chatbot support in multiple languages that runs around the clock. If an issue is complex, it can be assigned to a person.

Zendesk and Gorgias make for great centralized communication tools and ensure that a customer is responded to immediately. You can outsource support on an ad/hoc basis instead of having people permanently on the payroll.

Security & Data Protection Expenses

Sadly, Cyber criminals will often target e-commerce businesses because the financial data is too juicy to pass up.

One breach can be devastating, and the implications aren’t just financial; they can also hurt your brand irreparably. Customers expect their data to be safe, so cybersecurity can be another hidden expense.

Secure Hosting, Cybersecurity, & Compliance Fees

In addition to basic hosting in terms of web storage, you need secure socket layer (SSL) certificates to keep sensitive information being transmitted safely.

Hosting that provides firewalls and regular vulnerability scans is essential to ensure compliance with GDPR, CCPA, and PCI-DSS. These are all potentially hidden extras you may not initially anticipate when dreaming up your e-commerce store.

Cyberthreats also constantly evolve, becoming increasingly sophisticated, so training might also be an expense you hadn’t considered.

How to Mitigate it: Choose a secure hosting provider and make sure your software is always kept up to date with the latest security patches for protection.

Use secure networks and devices and train employees on best cyber security practices.

If you are logging in remotely to access e-commerce platforms, then tools like Windows, Mac, or Linux VPN can help with endpoint protection. This is especially important if you are using public WiFi.

Other Operational Costs

You might find that once you are up and running, there are other costs along the way, such as maintenance and additional administrative expenses, such as accounting.

You might find you face software loss or other unexpected things, such as damaged goods and logistical issues.

Sales Tax and Licensing

When you sell globally, you need to remember that sales tax rules differ from country to country. Depending on your goods, you may also encounter licensing or certification costs.

You need to be very aware of how to handle your tax collection accurately, or you risk incurring penalties and being audited.

How to Mitigate It: If you aren’t up to the mammoth task of handling your own accounting, then tax automation tools like Avalara or TaxJar are a great solution. They help ensure you are reporting things correctly and take away a lot of the headache when selling worldwide.

Keeping your records digitally simplifies the auditing procedure and prevents legal issues.

If you face unexpected returns or situations with damaged goods, then standardizing your return procedures and tracking the reasons for returns can help identify avoidable product issues. Budget for compliance-related costs annually to avoid surprises.

Conclusion

There is a tonne of potential when running an e-commerce store, but there are pitfalls to be avoided. Fortunately, by understanding some of the fees that come with the territory and the right preparation, you can have a more accurate budget from the get-go and won’t enter into things blindly.

Awareness is the best foundation. Hopefully, with some of the essentials clarified here, you will have a far more transparent idea of what expenses you are up against.

Tech fees, marketing, and security are essentials and, therefore, unavoidable. Inventory, shipping, and returns can bring unexpected costs to the table, but with the mitigation tips shared, you can make smarter decisions and keep your margins protected.

Ultimately, you need to source tools that are as flexible as they are functional and offer room to scale up proactively in the long term.

Successfully running an e-commerce store needs to be sustainable, but with the costs out in the open, you can put the right wheels in motion to avoid financial stress and grow.