6 Reasons Ecommerce Businesses Fail To Scale
In many ways, it’s easier now than ever before in history to start up and scale a successful business online.
More people live at least a portion of their lives online. And easy-to-use tools have brought technical barriers to operation down to the point where you can build an online empire without writing a single line of code.
Running an ecommerce business is, at least theoretically, a low-cost and nimble business model that allows you to target consumers where they already spend a significant portion of their time.
Despite all this, however, the vast majority of ecommerce startups fail to find significant success. Why is that?
Unfortunately, the answer isn’t particularly clean-cut: like any business, there are a wide variety of different factors that can influence a company’s success or failure.
Ecommerce introduces a fair number of exciting benefits that can make success easier in some regards. But this business model also introduces unique roadblocks that can stump even the most hardworking of business owners.
As ecommerce continues to grow at an astronomical rate, attracting your client’s attention becomes a challenge that only gets more difficult as competitors join your space.
So what can you do to ensure that your ecommerce business is one of the ones that actually succeeds?
A lot, actually. We’ve compiled a list of six key failures that hold ecommerce leaders back across three categories. The categories are business strategy, business operations, and marketing.
If you follow this list and vigilantly avoid the common reasons ecommerce businesses fail, you’ll be ensuring that you’re putting your best foot forward when launching and promoting your company.
Part One: Strategy
Like with any business, problems with the strategy behind your ecommerce business can crop up early, be hard to spot, and cause major problems down the line. Being as thorough as possible when constructing the strategy behind your business model and key product offerings can save you thousands of dollars and hundreds of hours down the line.
Product Offering: What Do You Sell, and What Makes It Special?
This might seem like a pretty basic part of a business model, but we see problems with this stage of business strategy more often than you might think.
We’re long past the point in the development of ecommerce where simply existing as a business online is enough for you to start picking up customers.
In order to succeed, your product or service has to be not only simple for your consumers to understand, but also uniquely valuable. Ideally, your product or service will be specific enough to be memorable, but widely applicable enough that you can sensibly add more products or services to your list of offerings should you need or want to.
If consumers have a hard time instantly understanding what you make and why what you make is something they might be interested in purchasing, especially in an ecommerce setting, you won’t stay in front of their eyeballs for long enough to be memorable or make a sale.
Know your market, and confidently own your place in it.
Competitor Analysis: Who Are You Competing With, And Why Are You Better?
Speaking of knowing your place in the market, it’s extremely unlikely that you are the only person competing in the industry which your ecommerce company is aiming to enter.
Who are your main competitors, and how are they handling their own approach to the marketplace? What is the logic that led to their approach? And what can you learn about their strengths and weaknesses to improve your business?
As someone who’s worked with many early stage startup founders for years, I was always flabbergasted to see would-be entrepreneurs trying to leap directly into the launch of their company without performing even a cursory Google search about who they might be competing with.
Often times, other companies were offering everything these new founders were planning to, and were already starting to add additional value.
Had these founders pursued their original business models without doing competitor research, they would have undoubtedly wasted thousands of their own dollars and hundreds of hours just trying to catch up to where their competitors already were when they got started.
Part Two: Operations
Once you’ve developed a competent strategy that leverages a keen understanding of your company’s place in the marketplace and its relationship with consumers and competitors, it’s time to put all that theory into action.
When designing your website, the top priority should be making it easy and persuasive for users to purchase.
Website Design: Being Simultaneously Efficient and Informative
When optimizing your website design for ecommerce, you should hold two priorities higher than absolutely everything else.
The first is educating consumers on your product in a captivating and efficient manner. And the second is enabling the purchasing process to be as easy as possible—which is why simple website design converts best.
Making your site’s function look easy takes a ton of hard work and careful, minute revision. You’ll need:
- extremely high quality product photos
- instantly understandable navigation
- a flexible and fast payment and order fulfillment system
- a creative method of informing users about what your products are and why they want them
Effective, persuasive web design is a pretty big undertaking that can feel like a minefield of potential missteps and errors. This is especially challenging for users with limited technical or design skill.
Fortunately, there are plenty of examples of successful firms with outstanding websites to learn from and iterate on top of.
One of my favorite ecommerce site designs comes from Casper. Their use of simple animations and little surprises livens up an otherwise simple, straightforward, easy-to-understand site layout. Awwwards has aggregated dozens of other similarly exciting examples as well.
Supply Chain: It’s Amazon’s World, You’re Just Living In It
Once you’ve built a highly persuasive website and you’re ready to launch your product or service, you’ve only really started the puzzle that is business logistics.
Engineering a supply chain that not only gets products to users efficiently and ensures stock is readily available but also makes the entire ordering process seem clear and understandable is a major challenge.
Today’s consumers have no shortage of ecommerce providers who have whittled this down into a science. Companies like Amazon have conditioned people to not just to expect rapid, free shipping, but regular updates on where their product is on its way to them.
Even if you have the most compelling product and amazing website in the world, if you can’t keep it stocked effectively and shipped out quickly, you’re not going to achieve your growth potential and might even alienate some of your userbase.
Many ecommerce services offer tools to help with the tracking process once a user places an order. But the path to solving this problem involves a lot of clever strategy with your supply chain.
Having your logistics process in mind when designing your product offering and having rough roadmaps ready to go when it comes time to scale can help prevent many headaches in the future. Or at the very least, ensure you’re prepared when it comes time to make adjustments to the plan.
Part Three: Marketing
Even the most meticulously crafted product offering won’t sell very much if no one knows about why it’s useful. When developing your marketing plan, how you communicate is often just as important as what you’re communicating to begin with.
Getting Noticed: Play to Win in the Attention Economy
Every day, individuals see content from everywhere they look. Thousands of discrete media creators, news sources, entertainment channels, retailers, advertisers, and social media celebrities are all fighting ravenously for their limited attention spans.
For many ecommerce companies, breaking through the constant distraction and reaching an audience can be the greatest challenge.
Fortunately, for those with a keen understanding of social media marketing, opportunities to break through can be found. The Internet is full of highly-engaged and participatory niche communities that present a great opportunity to business leaders.
By identifying niches of already-organized potential brand advocates, and including them in the process of growing your brand in a way that’s transparent and authentic, you can develop a tight-knit and motivated community of fans that can help expand your message even further.
Alternatively, creating marketing content that provides unique value to your audience, instead of shamefully sells yourself, is another way to reach an audience effectively.
Staying Consistent: Growing And Changing Without Ever Really Changing
For any company to survive in the long-term, it needs to grow and adapt depending on market forces. This is often problematic in an era where millennial audiences find interest in brands and personalities that evoke authenticity and consistency more than anything else.
As your company makes changes — and even mistakes — over the months and years of its life, ensuring that your communication stays true to your brand’s personality and values is paramount.
After all, if consumers can’t trust you by your actions, why would they trust you with their hard-earned money?
By developing a rigorous, detailed code of company ethics and deeply documenting your brand’s personality, you can work to ensure that even in moments of crisis, consumers can still rely on your brand to behave in a way they respect.
Ultimately, ecommerce businesses face myriad potential threats as they work to reach an audience and achieve scale. Even this list is only scratching the surface of potential barriers that ecommerce leaders might face.
That’s why ecommerce is often as much of a risk as it is an opportunity.
But by understanding the fundamentals of strong business leadership as effectively as you understand the wants and needs of your target audience, you’ll be able to efficiently iterate your product offerings and business model until you finally make all the right moves.
Then one day you’ll achieve the success you’ve worked so hard to obtain.
