5 Reasons why ecommerce businesses fail
By Amirul Mokhtar · 21st March, 2017
It is not a surprise that many ecommerce business startups fail, especially in this Ecommerce Golden Age. We see these online businesses pop up all over the internet and we ask ourselves…Why can’t we have a piece of the pie? It seems so easy! Well it is, you just have put in a lot of effort and be patient. Many people don’t do that and they end up quitting and their businesses fail. I’m not saying this to discourage you from running an ecommerce business. In this post I will discuss the different mistakes that businesses make and how you can prevent it.
Not putting enough effort in getting traffic
Running an ecommerce business is more than just setting up a social media profile or having a website for your products and hoping that people will find it and that it will magically appear on every search result. You actually have to put a lot of effort to get people to your business. No flow of traffic means no sales. No sales means no business. I recommend investing in paid advertising channels such as Facebook adverts to get traffic in the short term and to provide the momentum when starting out. During that time, you can start building organic traffic through SEO, content marketing, and social media which is a long term thing. But paid advertising can burn your money quick if you don’t understand it so make sure you understand it first.
Not marketing any USP
USP stands for unique selling proposition or unique selling point. Ecommerce has a lower barrier to entry which means more competition. A potential buyer has dozens of other sellers they could choose from instead of you. Your USP should answer the question “Why should I buy from you instead of others?” and that answer is what makes you stand out from the rest. There’s got to be something about what you do that helps you stand out from the rest, otherwise, how are you ever going to stay in business? Part of determining your unique selling proposition is understanding the value that your product brings to the market. And no, free shipping is not a USP. It is just a booster. Here are some examples:
- Product is made from a special material
- A personal story that adds value to the product
- Unique designs
- Your vision and mission statement
Only using a single channel
In other words, putting all your eggs in one basket. Don’t get me wrong, it’s great to focus on a specific platform but once you get the hang of one platform, you should look into other channels as well. I started out selling on Instagram, and social media platforms have strict terms. When I thought I was doing really well, my profile suddenly got flagged. Who knows what will happen when you are on a platform that you don’t completely have control over. You can reduce the risk of losing business through multi-channel selling. Instead of just selling on Facebook, why not start your own online store or list your products in online marketplaces. That way if something were to happen on one platform, you still have other platforms to fall to. And by selling through multiple channels, your products will be exposed to more people.
Run out of cash
Managing cash flow is important to any business and not just ecommerce. Cash is what pays the bills for your business. When cash runs out, your business doesn’t operate. Unless of course you get a big amount of investment. But that will only save you time to figure things out. Eventually, cash will still run out. This is where the advantage of selling online comes in. It’s much easier to start out and have positive cash flow when doing ecommerce compared to the traditional brick-and-mortar business. When selling online, you can reduce the risk of going cash negative by sourcing products through dropshipping or pre-order model. This is where you don’t carry inventory and your supplier handles the fulfillment and shipping. Related: How to start a professional online business without spending much money
Don’t have a proper system
The system I’m referring to here is the proper procedure or process of running business operations and also system in terms of information technology. Without the proper standard operations, small businesses will make more errors and mistakes, will use up a lot more resources than necessary and end up not having enough energy and focus. If you keep this going, you will eventually give up on your business. Standard Operations are a way of ensuring consistency. They should be viewed as the foundation upon which any improvement can be developed. Once you have that in place, you can use technology to simplify your business processes even more so you have more time to focus on actually growing your business. That’s exactly what happened when I started implementing online store system to my business. Read the story here. These are five reasons why ecommerce businesses fail. There are many other factors but choosing the wrong products is not one of them. Don’t spend too much time on doing product or market research when you are starting out. Just choose a product, start selling, and avoid the 5 reasons mentioned in this post. You will definitely not fail.
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