The Smart Way to Start Cutting Costs in Ecommerce (Without Regrets)

Hey, I'm Kelley from LedgerGurus, and we help ecommerce sellers make profit driven decisions rooted in real data. In this video, you'll learn how to calculate what fulfillment is really costing you, when to cut marketing spend and when not to, where the hidden cost bloat is hiding in your business. And don't forget to download the cost cutting quick wins checklist so you can take action fast. The link is in the description below.

0:55 The margin squeeze

Now, the first part we're going to talk about is the margins. Costs are rising everywhere. Fulfillment, freight, packaging, tariffs. Consumer spending, it's flat at best. So yes, you're in a squeeze, but you can do something about it, because what you do right now is going to shape how strong your business is at the end of the year.

You'll either be one of the sellers who reacted early and protected profit, or the one trying to slash costs during your busiest season [unclear] tariff hits, and while you still have room to make smart changes.

1:34 A benchmark health check

So before you start swinging the cost-cutting axe, just take a minute. Here's a quick health check using some industry benchmarks.

Fulfillment should be 10 to 15% of your revenue. Marketing should be 10 to 20%, and lower if you're a reseller. COGS should be 20 to 30% for branded DTC products, but it can be up to 60% for resellers. Payroll should be 10 to 15%. Net operating income should be 10 to 20%, but right now 10 might be the new 20.

If you're outside of these ranges, that's your signal. So let's talk about what to do next.

2:03 Fulfillment costs

So where can you cut without hurting growth? Well, one of the biggest mistakes sellers often make is treating everything like it's fixed. That $3,000 a month software that you just need, could it be replaced with something leaner? That 3PL contract, you can negotiate, or at least price shop.

So let's start with one of the biggest hidden drags on profit, fulfillment. As I mentioned, the benchmark for your fulfillment costs is around 10 to 15% of revenue. If you're over that, it's time to dig in. Look at packaging, shipping zones, dimensional weights, return rates. It all adds up.

Use custom sized packaging, switch to lighter materials, or rework bundles to minimize dimensions. A few inches off your boxes could save you thousands in dimensional weight fees. Sometimes the fix really is as simple as reducing package sizing.

2:58 Marketing spend

Next up, marketing. Now this one's tricky. Your instinct might be to just slash spend, but before you do, calculate your marketing as a percent of revenue. A healthy range is 10 to 20% depending on your growth goals.

But if CAC is up and ROAS is down, don't just cut across the board. Ask yourself, is your ad spend still converting? Are you paying for brand awareness that isn't actually building sales? It's important, yes, but it's also easy to overspend. Now, do a full campaign audit, kill what's not converting, and double down on what is.

3:33

Okay, let's talk software. Do you know how many tools that you're paying for right now? Or worse, how many are doing the exact same thing?

We see it all the time. Tools signed up for during growth mode that nobody's touched in six months. Stack audits can turn up thousands in bloat. So start with usage. Are you logging in regularly? Do you really need that upgraded tier? Are there tools you can consolidate? Do this quarterly and look for duplicates, overlaps, and [unclear] tools.

4:00 Renegotiating and non-sales expenses

Here's a high impact move, renegotiate. Your 3PL and suppliers want to keep your business. If your volumes have grown, or if you've considered moving, ask for better terms. Even a 5% decrease in unit costs can add huge margins back. This isn't pushy, it's smart business.

Now, another thing you can consider is non-sales expenses. This includes payroll, rent, and subscriptions. Start by trimming discretionary spend. Yes, that includes the team lunches and retreats. Would your team rather have a paycheck or a perk?

Remember, these aren't panic cuts. They're precision cuts. Because the goal isn't to run lean, it's to run smart. And if your team costs are bloated, don't ignore it. High payroll isn't a badge of honor. It's a margin killer. But you don't have to lay people off tomorrow. Start with role clarity. What's essential and what can be streamlined.

4:55 Two fast wins and what smart cutting means

The next thing we're going to talk about is those two fast wins that I told you about.

One, raise your free shipping threshold. If you're eating shipping costs on low margin orders, it's time to shift that bar. Most customers won't blink if you move it up by $10. So if you're offering free shipping on orders over $35, bump it to $45. That small nudge encourages larger carts and gives you more room to absorb shipping costs.

Two, now for one of the most overlooked plays, product redesign. Can you reduce materials? Can you make it easier to assemble or ship? Even small tweaks like a collapsible lid or a different bottle shape can lower costs. And bonus, you can often mark it as a sustainability improvement.

5:38

Smart cost cutting isn't about being cheap. It's about being strategic. Cut where it won't hurt. Invest where it moves the needle.

If this video gave you a few ideas, check out the cost cutting quick wins checklist in the description. And don't miss our upcoming webinar, A Smart Approach to Cutting Costs. We're going even deeper there with real examples and margin math that makes sense. The link to register is in the description. And if you're watching this after it was live, don't worry, the link will just take you straight to the replay.

So comment with what's costing you the most right now, and subscribe so you don't miss what's next. Thanks for watching. Stay sharp, stay profitable, and remember, cutting costs is just one lever, but it might be the one that keeps your business alive through this storm.