That so many e-commerce business startups fail (80% or more) should not come as a surprise since most business startups fail regardless of their type. However, e-commerce business failures happen because of reasons specific to the online world in addition to fundamental business oversights. The online business landscape has matured since the wild west days of the late 1990s and early 2000s. A great idea and a website with some traffic may have worked back then, but probably isn’t enough for success in today’s competitive online landscape. Here are five reasons why so many e-commerce businesses fail today:
A Low Barrier to Entry
Setting up an e-commerce store and filling it with products is simple to do. There are plenty of free open source content management systems with e-commerce themes that are easy to set up. Drop shippers can be used to ship products directly to customers after a purchase which means the e-commerce store owner doesn’t have to invest in a product inventory. Because setting up shop involves minimal investment, a lot of people are inclined to give it a try and then learn the hard way that they didn’t think their business idea all the way through.
Failure to Invest in a Staff
An e-commerce business must compete with successful online stores that are companies with specialized staff that do its many operations. These might include content writers, marketing people, SEO specialists, social media experts, and so forth. Of course, small businesses with limited resources do succeed but the lone entrepreneur is at a severe disadvantage. He or she would be hard pressed to do all the required activities at the same level as the competition.
Poor Inventory Management
Poor inventory management can weigh down and make a business unprofitable. Maintaining the right inventory levels is a balancing act between having too much and too little. Too much inventory means that a lot of the money invested in it isn’t doing anything to grow your business. You cannot use the money to pay your staff or invest in other products. There is no guaranty that the excess inventory will sell in the future if they are seasonal. Some inventory can become obsolete or go out of style.
Too little inventory means fewer sales are made which reduces cash flow. In addition, customer satisfaction is important because you want them to come back and do repeat business. This won’t happen if you are out of stock. Most people won’t wait while you place the items on order because it’s easier for them to buy from the competition.
Poor User Experience
An online store should try to emulate the offline store experience as much as possible. Let the customer see what your products look like with quality images. If the customer can’t get a good sense of a product with a single image, display the product from another angle with a second image. When a customer has a question in an offline store, she asks one of the sales staff. Likewise, include a frequently asked questions page and include a means of contact with yourself or your customer service.
Make your products easy to find with clear and simple navigation as well as a search bar. People who know exactly what they want typically use the search bar, while those who want to explore and browse use the navigation menus. Purchasing your products should be seamless and convenient. Give your customers multiple payment options and keep the purchasing process as simple as possible. The more steps required, the greater your shopping cart abandonment.
Trust and Credibility Problems
Use a secure socket layer (SSL) on your e-commerce site. This encrypts the information exchanged between your visitors and your site. Use a well-known SSL provider and prominently display their seal. Your e-commerce site should look professional and therefore should have no coding errors or missing images and be well designed. Include an about us page with photos of real people and always include ways for people to contact you or your staff. Social proof is another way of increasing trust. When you get flattering emails from customers, ask if they would like to write a testimonial about their experiences with your e-commerce store.
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