Why many E commerce companies fail??

During these tough times, many business have moved online. One of the most sought business is E commerce also known as electronic commerce or internet commerce, refers to the buying and selling of goods or services using the internet

Many E commerce companies are emotional. They are inexperienced and don’t have the risk-taking ability. They get excited seeing that someone else is making money online so they should too. And then they start their own store without testing or even doing a feasibility study. When in the first few months, they don’t get profits, they realize the whole business idea isn’t for them. So, they drop it and move to something else complaining that E commerce doesn’t work for anyone, generalizing their own assumptions.

E commerce Success Rate

Unfortunately, there are no official figures available that could determine the overall success rate of the E commerce industry. E commerce is considered as a medium-risk business. Most of the money in this business model is spent on advertisements because E commerce rely on paid marketing efforts to sell their products.

Successful E commerce companies estimates that the E commerce business with highest success rate is around 10 percent during the first year of operations. This is because most of the E commerce dive into the business without properly understanding the risk factors involved. Take the story of this E commerce companies who didn’t keep in mind that refunds can also become a hurdle.

After the E commerce store is established, the store manager should focus on vertical integration and getting suppliers onboard. Only then he will be able to scale further. As a beginner of E commerce, one needs to understand the reasons behind most common E commerce failures.

Reasons of E commerce Failures:

1)  Selecting the Wrong Niche : The first reason for the failures is because of the wrong niche selection. A friend of mine wanted to target US traffic with one of his stores. He chose a niche clothing line and started promoting the products in the USA. Too bad, he didn’t even receive a single order.

He was depressed but not ready to quit. So, he started targeting the same product in Ukraine and received more than a 100 orders in a single day.

Point to note here: Targeting a wrong country with a particular niche can destroy your business. The best strategy to cope out of it is to test, test, and test.

2)   Lack of Patience & Persistence: Many companies just don’t have the patience to start a store. So, if you aren’t patient enough then my advice is to start forex trading instead because that’s where you can earn instant money (or even lose it). Patience and persistence are not only required in E commerce but for any business. And, if you are just starting out with E commerce then it is a prerequisite.       

3)   Lack of Investment/Resources: Though E commerce doesn’t require a lot of investment if you are just starting out for the first time then you need to keep a budget in mind. Let’s say you have just started your first store, so you need to keep at least $500-$1000 for advertisements. If you lack even this amount of investment then it is better not to go into E commerce until you have saved enough.

4)  Selection of Wrong Platform: One reason most E commerce companies fail is that they are using the wrong platform to market their stores and products. Some of the most prominent channels to market your products are Facebook Ads, Google Adwords, and Bing Ads. If E commerce have found products that are already selling in high volumes on other shopping stores then you only have to market them. If you are still failing, then it can be because you are not using the right platform. The best solution to this problem is to use multiple platforms to market the product and the one that provides the most ROI, use it further on.

5)  High Prices of Products: Most of the visitors of your store will search for the same product at another store just to compare the prices. This is because customers are now aware that most stores are selling the same products so they can easily get better deals elsewhere. If they think they can get the same product at a low price somewhere else, then they will leave the store. So, it is better to keep a lower price of the product that you are selling on your store while still staying profitable. You will have to learn to balance the both.

6)  Delayed Shipping: In America, especially after Amazon started prime delivery, people now prefer ordering products from it because they can get theirs in just a single day. However, the E commerce /dropshipping is usually from China, so the minimum shipping time is at least 20 days. People can’t wait this long to get their products. Another reason most E commerce/ dropshipping fail is that they don’t order products through ePacket. This means the buyer won’t get a tracking number, decreasing his trust in the store.

7)  Bad Customer Support: Another reason why most E commerce companies fail is that they are not good managers of the E commerce stores. E commerce customer service process doesn’t end when the customer’s product is dispatched. You will still have to reply to their queries and stay connected with them until they are satisfied with their products.

8)   Inconsistency in Managing Business: Most E commerce store owners are just wantrepreneurs. They are only interested in starting a business and not in keeping it alive. In short, they are inconsistent. Same happens with dropshipping. In fact, business magazine Forbes says that every 8/10 businesses fail in less than a year. And, one major reason for the failure is inconsistency or a lack of planning.

9)  Unattractive Website Design: Here is an analogy to understand why E commerce failures occur due to a bad UI (User Inter phase).

Eg: There are two stores: one is air-conditioned and has automated sliding doors for the visitors. Inside, a gorgeous looking hostess welcomes everyone, while escorting them to the products they want to buy. The second one doesn’t have an air conditioner and the visitors are not greeted at all. Moreover, they have to search for the products themselves and no supporting staff is available to answer customer queries, just a cashier at the cash counter.

Which store will you go to? Probably the first one.

E commerce stores are no different from a brick and mortar store. They need to feel good and look exceptional. Otherwise, visitors just won’t trust them. This makes it one more reason why most E commerce stores fail. They have bad looking websites and no one wants to buy from them.

10) Add Value to Your Business: The main reason that 90% of E commerce businesses fail is that they don’t focus on adding as much value as possible for the customer. If all you’re doing is accepting orders from customers then forwarding the order onto a supplier for them to fulfill, then you’re not going to create any sort of loyalty with the customer. This was a mistake I made early on. Now I focus on adding value by providing excellent customer service – if the customer has an issue, I’ll email them back immediately, and I’ll even speak on the phone with them if they want. This is where I can add value, and how I’ve managed to succeed with E commerce. It takes a lot of work and there’s a huge learning curve

How can we reduce the risk of failure for an E commerce store?

1. Find a product with high search volume, but low competition. These are commonly known as niche products. But the reasoning here is that you want a product that has a lot of potential buyers. But you don’t want a product that is so popular that you’re competing against Walmart or Home Depot for first page rankings. Finding this mythical niche product is going to take a lot of time. It could take weeks or months until one is discovered. And that’s because there are so many experienced internet marketers that know this game all too well. But there are still plenty of these products to be discovered. Google’s Keyword Planner is a great, free resource to find low competition products. And there are many other sources available as well. So definitely take your time to discover one of these products. It will make your online marketing efforts much easier in the long run.

2. Find a Supplier for Your Product. This is important for obvious reasons. But knowing who your supplier is for your niche product will make the development and marketing efforts so much faster. You don’t want to go through the time or money to hire someone to design a nice logo for your store. Nor do you want to go through the trouble of having a store built, only to realize that you don’t have any suppliers for your product. Finding a supplier can be difficult, or it can be easy. Some companies list on their website that they will drop ship. While others will require a phone call or email to get to find out.

3. Regardless of how you find one, knowing that you have one available is critical before doing all this other legwork. Because if you pursue the other legwork (site building, social media pages, logo’s & artwork, etc) without a supplier, you could end up wasting a lot of time if you can’t find a supplier.

Final Words!

All beginners of E commerce/dropshippers need to understand that it is not just another ‘easy money making scheme’ it is a full-time business that requires dedication, consistency, hard work and a lot of patience. Only then they will be able to thrive in this business.

“learn from your failures.” So, when they fail (and most will) they need to learn from that and start again if they are really serious about it.