Increasing the profitability of a Wildberries store by increasing marginality

Modern businesses use various platforms to sell their products. These can be classic offline representative offices, online stores, social networks, message boards, and many others. Marketplaces are also in consistently high demand. Almost every business has a representative office here today. But, as with any other platform, sales on marketplaces need to be optimized and scaled in order to increase profits. But there is another way that will allow you to increase the profitability of the store, in particular on the marketplace Wildberries. We are talking about improving the marginality indicators. The convenient thing is that good results in this case can be obtained practically without additional material investments.

As part of today's review, we will dwell in more detail on what margin and marginality are, how it differs from markup. We will suggest proven ways to increase marginality and, as a result, the profitability of the store. Here are some additional recommendations that will help you optimize your work with Wildberries and increase your income.

Getting to know the basic concepts

If you are just starting to work with the marketplace, launching sales of goods, then it is very important to understand all the nuances of the upcoming work, including the terms and concepts that you will have to deal with in practice. In particular, one of the key indicators of financial stability, competitiveness and efficiency of business development on the Wildberries platform will be margin and marginality. And your task will be to perform correct calculations and implement a number of measures aimed at increasing this indicator.

But it is also very important to understand the differences in the key parameters that you will encounter in practice. We are talking about such characteristics as:

1. Margin.
2. Marginality.
3. Markup.

Let's consider all these indicators in more detail and tell you how to calculate them.

What is margin

Margin, that is, marginal income - this is the difference between the price at which you sell the goods and its cost. It is measured in monetary units and directly indicates what profit the seller will receive when selling a certain product item. Let's assume that you sold a women's bag on Wildberries for 2,500 rubles, and its cost was 1,500 rubles. Accordingly, the margin is 2,500 - 1,500 = 1,000 rubles. Please note that the cost price should include not only the direct cost of production of the product, but also all additional costs for the purchase, in particular:

1. Cost of the supplier or materials required for production.
2. Transportation and additional costs, including those required to deliver the product to the entrepreneur's warehouse.
3. Packaging, storage costs and logistics.

It is important to understand that based on all these factors, the cost price of the same product may differ. This is largely due to the costs of delivery, packaging, and payment of the site commission. Let's assume that you initially purchased a batch of 500 units of products and paid 300,000 rubles for it. (The cost of one unit in this case is 600 rubles). We add here the costs of transportation and storage of 40,000 rubles. As a result, we get that the cost price of this product will be (300,000 + 40,000) / 500 = 680 rubles.

Now let's look at a slightly different situation. You buy 300 units of products and pay 180,000 rubles for them, but transportation and storage costs you 35,000 rubles. The fact is that for smaller volumes, marketplaces set higher rates for delivery, and the cost of renting a warehouse does not change. Now the cost of the purchased batch is 180,000 + 35,000 = 215,000 rubles. If we recalculate this figure for one unit of product, we get that its cost is now approximately 716 rubles.

In this example, we clearly showed that the cost of the same product can differ depending on external factors. At the same time, if you do not change the retail price, then when buying a smaller batch of products, the sales margin will decrease, which is extremely undesirable for business. That is, selling a product for 1,000 rubles. in the first case, the margin will be 1000-680=320 rubles, and in the second - 1000-716=284 rubles.

What is marginality

Since the terms margin and marginality are quite similar, they are often confused, taking them for the same thing. But there are still fundamental differences. In particular, marginality is an indicator of how effectively the seller manages their expenses and generally runs a business on Wildberries. If the margin is measured in monetary units, then marginality is already in percentages. It must be calculated in order to understand what part of the revenue remains with the seller after he makes all the necessary payments.

To find out the corresponding parameter, you need to divide the margin by the price at which you sell your product and multiply the resulting figures by 100%. Let's return to our previous example, in particular to a product priced at 1,000 rubles with a cost price of 680 rubles. Accordingly, the marginality indicator in our case will be ((1000-680)/1000)x100% = 32%.

It is easy to identify a pattern between margin and marginality: if the margin decreases, then the marginality indicator will also become smaller. In the event that the cost price of our product is not 680 rubles, but 714 rubles (from our example), then the marginality will be equal to ((1000-716)/1000)x100% = 28.4%. And this will already indicate that the efficiency of your store on the marketplace turned out to be lower, that is, you have become worse at managing costs and pricing in your store.

Practice shows that business representatives should focus on a marginality indicator of 35% and above. In this case, it is important to correctly calculate this characteristic in relation to the total batch of goods, including taking into account the costs of purchasing or production, storage, transportation and related costs associated with the sale. In order to survive in the conditions of fairly tough competition, which is observed today on the Wildberries marketplace, many sellers, on the contrary, deliberately reduce marginality, thereby trying to stimulate sales. Here they are guided by the idea that they can get the same profit by increasing the number of goods sold. In principle, there is some truth in this, since gross revenue will provide profit in any case. But in order to maintain your profitability indicators at a sufficiently high level with a marginality below 30%, you need to sell goods in huge quantities. But it is almost impossible to implement this in reality.

If you still bet on low-margin goods, then you will have to develop a detailed sales plan and try your best to implement it, otherwise you will simply not reach the planned indicators. If you have doubts from the very beginning, if you doubt that you will be able to establish such mass sales, then it is better to abandon this idea: the profitability will be too low.

What is a markup

Many business representatives are sure that the indicator of business profitability is the markup on goods. But this opinion is obviously wrong. Above, we have already said that it is the marginality that will indicate the profitability of the business. The markup is just a percentage of the original cost of the product, which the seller takes into account when forming the retail price. And in most cases, the markup can have absolutely any value, including exceeding 100%. But the marginality a priori cannot be more than 100%.

When calculating the markup, the seller first of all takes into account the actions of his competitors, and also takes into account the associated costs associated with the sale of goods and the profit that he would like to receive. To make the difference between the markup and the marginality more understandable, let's go back to our calculations. So, above we calculated that the margin of our goods will be 320 rubles. Here, in monetary terms, the markup and margin will be the same, that is, 320 rubles. (The markup is the difference between the retail price and the cost price, in our case it is 1000-680 = 320 rubles.) But the indicators of marginality and markup in percentage terms will already be completely different:

Marginality is calculated using the formula: margin, divide by the retail price and multiply by 100%. That is, in our case it is (320/1000) x 100% = 32%.

The markup is calculated using a different formula: the margin must be divided by the cost of production and multiplied by 100%. In our case, we get the following markup: (320/680) x 100% = 47%.

As you can see, in the end we got completely different figures: marginality - 32%, markup - 47%. We hope that now you understand that these parameters are completely different and that you should focus directly on marginality if you want to receive the most accurate information about the development of your business on the Wildberries marketplace.

Now let's move directly to what methods and technologies can be used to increase the margin and, as a result, the profitability of your business on the marketplace.

Perhaps you also want to learn in detail about what the FBO model when working with Wildberries is.

TOP ways to increase marginality on the Wildberries marketplace

In order to ensure the stable development of your business on the marketplace, in order to increase the percentage of marginality, you can use different solutions. Now we will present the options that will be the easiest to implement and will give a good result.

Studying the work of your closest competitors

In principle, you can judge how successful or unprofitable a business is for a particular company not only by its own indicators, but also in comparison with its closest competitors. This is especially true for marketplaces, because they are a closely interconnected and closed ecosystem. Therefore, it is important for you to select those stores that sell the same products as you and find out what methods and solutions allowed them to achieve good sales figures at the moment. Specialized analytics services are used to analyze competitors. Most of them allow you to see not only the corresponding prices, markups, but also order indicators, the number of items in warehouses and even sales graphs.

This information will be useful for identifying growth points. You will be able to understand whether it is possible to increase the price so as not to reduce delivery indicators, see how correctly the distribution of products across warehouses is implemented. Also, most services allow you to go directly to product cards to see how they are designed and how “pumped up”. This applies to infographics, SEO optimization, adding photos and video content to the description. It is also important to understand what advertising tools are used for promotion. This is the information that will allow you to make adjustments to the work of your store, which will ultimately have a positive effect on marginality.

Competitor analysis is one of the mandatory stages in the development of any business. Moreover, large suppliers conduct much more extensive research, called “competitive intelligence”. In this case, leading suppliers are selected in terms of turnover, revenue, and goods. Key characteristics are checked, those points are identified due to which competitors managed to achieve high sales figures. As a result, a successful strategy is applied in individual practice.

Focus on the most popular products

Decide which products from your assortment can be considered flagships. They sell best, as they are in consistently high demand. It will be more profitable for you to supply customers with exactly these products, albeit in smaller quantities, than to expand your assortment too much by adding low-demand products to it. This is what will allow you to ensure a higher margin in practice. Ideally, you need to divide your entire assortment into separate product items, calculate the margin for each of them, as we gave at the beginning of our review, and select those where this indicator is the highest. It is on the promotion of such products that you should focus in the future.

We would like to draw your attention once again to the fact that when calculating the cost price, you need to take into account not only the initial price of the product, but also all associated commissions, taxes, logistics costs for returns, storage, advertising, fines, etc. There are special services for performing such work, so you should not have problems with these calculations.

Do not neglect such a recommendation, as this is one of the easiest ways to optimize your expenses on product promotion. You do not need to spray on the entire range, because the effectiveness of such work will ultimately be quite low. In order not to calculate the margin of each individual item, you can initially sort your assortment, selecting popular products according to the following criteria:

• there is a gradual increase in demand;
• corresponds to seasonality;
• fits into current trend trends;
• it is possible to constantly update the assortment;
• is constantly available in the warehouses of the marketplace.

One of the most difficult tasks at this stage is to determine the growth in demand for the product. Such information is not provided in the supplier's personal account. The dynamics of demand are determined through the relevant analytics services. Here it is advisable to create a graph for each product item, choosing an annual time interval. This way you can get the most comprehensive and visual picture. But you should also take into account that in some cases, demand can increase in parallel with an increase in supply. Therefore, do not jump to conclusions, but first compare the number of products on sale and the number without orders. If you see that the former are increasing, while the latter remain unchanged, this will indicate an increase in demand in parallel with an increase in supply. This means that there is no point in promoting such a product, since real demand is not increasing.

You can also independently influence the competitiveness of your products by adjusting them to user requests. As an option, in summer collections, focus on light-colored tracksuits, while in the off-season/winter, it is better to offer customers dark tracksuits.

Next, you just need to calculate the margin and marginality to make sure that you have selected truly suitable options. But even at this stage, ABC analysis can be of significant help. Here, the share of each product item is supposed to be calculated based on four key indicators: sales level, revenue, number of orders, and direct profit. In category “A” add products that bring your store over 80% of profit, to category "B" - those that provide 15% of profit, and to category "C" - about 5% of profit. Accordingly, the bet is on group "A".

If you see that one of your product positions has lost demand, if it is already morally obsolete, then you can safely remove it from promotion, and from sales in general. That is, focus exclusively on relevant and in-demand products. This will be the key to high marginality. Such studies should be conducted at least once a year, and for seasonal products - every season. The selected products should be worked on very professionally, in particular, create an SEO-optimized product card, develop a content strategy for it, launch advertising.

Correctly distribute products across warehouses

Wildberries algorithms, including product card ranking factors, necessarily take into account the speed of product delivery. Therefore, the marketplace necessarily requires the appropriate distribution of products across warehouses. Moreover, the delivery speed here has a much greater impact on the search results of the site than the seller's rating and customer reviews. And this is quite reasonable and natural, since in this way Wildberries simply minimizes its own risks and expenses.

If the warehouse is located far from the buyer, the delivery time and costs increase. That is, there is a risk that the person will not place an order at all. Therefore, it is very important for you, as a seller, not only to monitor the timely replenishment of the product range, but also to think through its distribution in warehouses within the geography of your activities to the smallest detail. As a result, you will be able to increase your sales turnover by up to 50%. In parallel with the minimization of associated costs, the marginality of goods will also increase.

Determining the number of goods that should be in warehouses

Constant availability of goods in the Wildberries warehouse is one of the mandatory conditions for cooperation with this marketplace. It is also a guarantee of timely and fast delivery of products to the buyer. To avoid any delays at this stage, it is important for you to follow one simple rule: the amount of your goods in warehouses should be such that it is enough for 1-2 months in standard operating mode and at least 2 weeks in case of large-scale sales. If the product turnover is low, this will negatively affect the overall development of the business. In this case, the money that you could invest in new purchases will simply be frozen. That is, there is no point in purchasing and placing too many products in the marketplace warehouses. Moreover, you will have to pay for their storage, which is not at all advisable.

So how do you determine how much product should be in a particular warehouse? There are 2 possible ways:

1. Performing detailed analytics for each warehouse. This method gives the most accurate and correct results, but it will take time and effort to implement. In this case, you need to conduct a comprehensive study of each product category and find out what ratio of sales is observed here in each of the regions of your activity. In most cases, such work will require the involvement of third-party specialists, that is, those who are professional analysts. When performing such calculations, it is also imperative to take into account the seasonality of products and current trends.
2. We act on intuition. A similar option can be used in practice by sellers who have been working on the marketplace for a long time and know in which regions certain products sell better than others. But in this case, it is important to constantly keep your finger on the pulse, that is, monitor sales and instantly replenish more popular items. You should not wait until the assortment is completely exhausted. Determine the average number of units that are sold during the week and provide at least a two-week supply.

In principle, the second option can also be used by beginners, just paying more attention to control. A couple of months will be enough for you to learn to act intuitively. That is, you will see how to distribute goods more efficiently and where your target audience is located.

For a small-scale business on the marketplace, it is important to take into account the distance between warehouses. In some cases, it will be possible to reduce the total number of warehouses by consolidating them. It is optimal to choose a central warehouse in a particular region. But here it is also important to constantly monitor demand. As soon as it begins to increase in a certain region, it will be necessary to redirect the batch to the nearest warehouse.

Creating logistics that would ensure stable deliveries of goods in parallel with sales is a rather complex and labor-intensive process, but you can’t do without it. And the whole secret of success here is constant monitoring literally in real time and prompt response to any changes.

We constantly monitor the quality of goods

Product quality is one of the essential elements of successful business development. Modern buyers very often refuse to make purchases if they do not like something in the received product. At the same time, you, as a seller, will spend your own money both on delivery of the order and on its return. Therefore, it is in your interests to ensure that the products provided meet the buyer's expectations. This means that it is important to think through the product card to the smallest detail and describe in it all the characteristics and features of the product in as much detail as possible. It is worth supplementing the description with a detailed photo. Thanks to this, the potential buyer will have a correct idea of the product, which will minimize disappointment upon receipt.

It is also important to check the goods before shipping them, either to the buyer or to the marketplace warehouse. Even if you work with a trusted supplier, the possibility of defects cannot be ruled out. That is, it is in your interests to check everything and, if necessary, to reject it. Representatives of a larger business would be wise to use fulfillment services. In this case, the relevant warehouse workers will reject the products, repackage them and return the goods to a presentable presentation.

We sell goods in sets

It makes sense to sell many products in sets. We are talking about products that complement each other. For example, these could be sweatpants and a hoodie, a scarf, a hat and gloves, a skirt, a blouse and a blazer. There are a lot of options here and it will be beneficial both for you and for the buyers. You can sell not one, but several items at a time, and the person will get a stylish and perfectly combined image, spending a minimum of their own time and effort on it.

You can implement such an idea on Wildberries quite quickly and easily, since this marketplace has an additional block "See also". Here you can add the items that you would like to recommend for a particular product, or products presented in the same category. The number of recommendations can be unlimited, but the system will display only those that are currently available in warehouses. If you wish, you can also customize the order of display by dragging cards and arranging them in the desired sequence.

Optimizing the product card in accordance with SEO requirements

We have already mentioned more than once above that the product card that you plan to effectively promote on the Wildberries marketplace must be SEO-optimized. This is how it will be promoted in organic search results, since this is where most of the buyers come from. One of the mandatory steps here is adding keywords to the title, characteristics, and description of the card. To select the appropriate keywords, you can use:

1. Marketplace search bar. The platform itself will automatically prompt you with the phrases that potential buyers type most frequently.
2. Cards of your closest competitors. Analyze what phrases your competitors add, monitor the positions presented on the first pages of search results.
3. Analytics services. Here you can also quickly see what keywords companies operating in your niche are promoting. It is convenient that in this case you will also be shown the frequency of such phrases, which will allow you to select the most suitable solutions for yourself as quickly as possible.

It is also very important to fill in the block with characteristics, which will ultimately help expand the number of categories and, as a result, sales. In this case, categories are product division classes provided in the internal system of the platform. Quite often, they coincide with the catalog sections. The more detailed you fill in the characteristics of your product, the more chances you have to get into the marketplace results in different sections.

Reducing associated costs

In order to optimize the costs of selling a product, it is necessary to correctly calculate the economics of each item. In particular, it is necessary to determine what profit can be obtained from a unit of sold products. This includes marginality, payback and a number of other indicators. In principle, there is a special method for calculating such economics, but the process itself is quite complex and is mostly performed by specialists.

To implement these works, you can use the built-in financial reports, which are presented in the personal account of the marketplace. But here, too, everything is quite problematic and requires a lot of time from the seller. Therefore, a simpler solution would be to use analytics services. Here, you will need only a couple of clicks to obtain the necessary information. We would like to draw your attention to the fact that you first need to evaluate the economic growth of each individual product item, since the final marginality depends on this.

Launching an automatic campaign

The term auto campaign on Wildberries means paid promotion of products. This is what can raise your product card to the top of the search results for those queries by which buyers find products. On this marketplace, auto companies can be displayed in the catalog and search results, in recommendations on the main page, as well as in the cards of other products. According to many experts, the best solution here would be to display the product card in the catalog and search results. Here, conversion rates will be higher, but the cost per click, on the contrary, will be lower.

Auto campaigns are set up directly in the supplier's personal account in just a few clicks. Just choose the product you would like to promote, set your desired budget and specify the CPM rate, that is, the cost that you are willing to pay for 1000 impressions.

Additional recommendations

Along with the main recommendations for increasing product marginality, we would also like to draw your attention to additional tips:

• Change the product or supplier. Alternatively, you can pay attention to goods from China. Despite higher logistics costs, production costs here are quite low. As a result, you will be able to significantly increase your income. Practice shows that in this case there is a chance to increase marginality by about 10%.
• Optimize delivery costs. Evaluate cargo rates. Focus on indicators of $2-$3 per 1 kg of cargo, while $4-$5 is too much. Do not rely on the first carrier you come across. Study this market more deeply. If you manage to reduce the cost of logistics, the marginality can increase by about 5%.
• Ask suppliers for additional discounts. If you constantly work with the same companies, you can count on additional bonuses from them. And even with new suppliers, you can always bargain, requesting the most favorable offers for yourself. Even a small discount will have a positive effect on the growth of marginality.
• Analyze your own fulfillment costs. Perhaps, using third-party services will turn out to be more profitable for you in practice than using Wildberries services. In this case, you can achieve an increase in marginality by about 3%. Follow a simple rule here: the larger your business, the wider range of fulfillment services you may need to speed up the processing and sending of orders.
• Optimize logistics costs. For large businesses, it makes sense to place their goods even in small warehouses, while small stores can only enter into contracts with large regional Wildberries centers. In any case, reducing the cost of delivery and increasing its efficiency will help improve marginality indicators.
• Try reducing taxes. Perhaps you will be able to re-register your business in regions where tax breaks are provided. Such a solution is completely legal and is ideal for those who work under a simplified taxation scheme. As a result, you will be able to increase your marginality by about 5%.
• Try raising the price. Do not take too drastic actions, and launch the price increase in test mode. This should be done with the most popular products. Remember that the price increase should be systematic. It is also important that it fits into the overall pricing scheme on the site.

Use these additional recommendations to increase the marginality of your products and, accordingly, increase profits when working with the Wildberries marketplace.

Let's sum it up

Increasing the marginality of products is a comprehensive financial strategy that, if implemented correctly, will allow you to significantly increase your own profits even in the face of fierce competition, which is currently observed on the Wildberries marketplace. But in any case, you need to constantly monitor the market situation, adapt your own work to changing trends, control the relevance and demand for products.

Many of the works that you will have to implement at this stage can be automated by using specialized services, and along with them mobile proxies from the MobileProxy.Space service. This is what will provide you with access to absolutely any programs and applications, help to bypass regional blocking and other restrictions from the system. With their help, you will also ensure high levels of privacy and security when working on the Internet. Detailed information, including current tariffs, available geolocations can be found at the link https://mobileproxy.space/en/user.html?buyproxy.

You will also have the opportunity to use free testing for 2 hours and see how convenient, simple and functional the product is at your disposal. If you have any additional questions and need expert advice, technical support specialists are available 24/7. You can learn more about what mobile proxies are and their areas of application in the «Articles» section.

Share this article: