Are you starting a new business in the virtual environment? Then we have to talk about commercial add-ons for online stores. However, when you start a virtual store, you have to set up both the design and the brand book, as well as the positioning of the company. Then you have to think about promoting it. But, above all, you have to set up the financial part. The part that often makes the difference between a successful business and a problematic one.

Let's not forget that pricing policy changes online quite a bit. Namely: some costs of storage and display of goods are reduced. But, at the same time, expenses on the digital promotion and distribution side are increasing. You also have to invest in competitor and target audience research online. We recommend that the digital marketing budget be established in advance. This is because it can seriously influence the profit margin of a business, especially in the first year of activity.

Since we already know that the cost structure in the virtual environment differs from offline, this article will help you establish some basic KPIs for your virtual store. Namely: the right trade markup, profit margin, and net profit to aim for.

So, when we talk about online hunting, you have to know from the start that you will have to cover all your expenses from the established commercial allowance. It's about marketing, operations, personnel, and all taxes. Don't forget to plan for some profit, right from the start.

Commercial allowance calculations for online stores

The commercial allowance therefore represents the difference between the price at which you sell a product and its purchase cost. The more you add, the easier it will be for you to grow your business. Plus, do well financially.

The profit margin shows us in percentages how profitable the total activity of a company is. It is calculated as the net selling price minus the direct costs of making and delivering to the customer.

Net profit is calculated from total sales minus all costs, including duties, interest, and taxes. It is calculated annually to have the clearest possible picture of the well-being of the business, after paying all taxes and debts.

Net profit = Pre-tax profit − tax

If we consider giving a discount, it must be less than the profit margin and not the trade markup. Incorrect setting of discounts is one of the most common mistakes made by entrepreneurs at the beginning of the journey. They can thus end up working in the red. Not realizing it until too late.

How do you increase the profitability of your online store?

To increase profitability online, you have to think about whether you can offer a different range of products online. That is: can you modify or expand your products so that you have a different offer online? Then you have to add value to the products, through additional content or additional services. As the digital environment is faster, more dynamic, and more competitive, you need to make your products more interactive and attractive, day by day.

Good luck in business, and we wish you the highest possible net profit!