ecommerce business fail 2

6 Reasons Successful Ecommerce Businesses Fail

ecommerce business fail 2

Change is fast and change is unexpected. One day you’re on top of the world and the next you’re in the gutter.

Business history is full of cautionary tales of thriving companies who made a critical mistake and couldn’t manage to stay on top. One of my favorite examples is how Kodak invented the digital camera in 1975. Rather than capitalize on the technology, they buried it, worried that the invention would eventually cannibalize their profits. Well, they were right, but all the burial attempt did was allow other companies to advance the technology further.

This isn’t meant to scare you, but to provide a harsh reality of ecommerce failures. No matter how sleek and study your business is, you’re always one iceberg away from being the Titanic.

What Causes the Collapse of Success Ecommerce Companies?

Why do ecommerce businesses fail? What are the most common critical mistakes business owners make? More importantly, how can these ecommerce failures be avoided?

Poor/No Marketing

Customer acquisition is a vital part of keeping an ecommerce business successful. You’ll always need a fresh wave of eyes landing on your products. That’s why I’m shocked at how many people I see online complaining about their slowing sales while admitting they haven’t invested much time or money in marketing. From social media marketing to creating helpful content your audience will love, marketing drives traffic to your site. Traffic is the top of your sales funnel, so without solid marketing, you’re unlikely to ever make enough of a profit to continue to cover your expenses. Not only will your business fail, it’ll be a very expensive failure.

Average Order Value vs. Sales Volume

As your business begins to grow, there are two metrics you’re going to want to monitor in tandem: sales volume and average order value. You could spend resources attempting everything under the sun to raise both metrics, but that’s just like throwing crap at the wall to see what sticks. Consider how these two metrics work with one another.

For example, if you’re selling in a big money niche, like camping equipment, focus on optimizing your site for conversions and selling kits. Sales volume isn’t as important here as having a high order value. If you’re selling less expensive products, like cell phone chargers, spend as much as possible on traffic-increasing initiatives like pay-per-click advertising. The low profit margins indicate you’ll need tons of sales to make a profit.

Related: Raising sales volume means selling on multiple marketplaces. Find out how to automate and streamline a profitable multichannel strategy with ecomdash.

Overinvesting

It’s important to run your business lean. Don’t spend more money than you have to. Here are three simple ways to cut down on your business expenses.

  • Optimize and refine your marketing to make sure you’re spending money on the best keywords and targets.
  • Use an ecommerce reporting tool to learn which of your products sell best and which ones aren’t worth the listing and storage fees they cost you.
  • Give dropshipping a try. Dropshipping requires a lot less initial investment on the part of the seller. Try to avoid dropshippers who demand monthly fees or minimum order quantities.

No Product Diversity

Speaking of dropshipping, it’s a great way to add product diversity to your store. If you’re selling hand-crafted guitars, you might think dropshipping is beneath you, but once you hop off that high horse you might find yourself landing in a big pile of money. You could use dropshipping to offer guitar picks, strings, tuners, cases, and other related products. Product diversity is good for a business because it drives up average order value, gives you extra goodies to make attractive kits and bundles, and adds additional sales volume that can supplement your main offering.

Related: Kitting is a pro-level strategy to increase your profits and delight your customers. Learn how you can create kits that’ll have shoppers smashing the buy button.

Ignoring the Backend

Trying to run a business without a strong backend is like trying to run a marathon with your shoes untied. You’ll fall flat on your face. Fulfillment. Product sourcing. Order routing. These are not the sexiest parts of running an ecommerce business. Everyone wants to have great products, sleek websites, and a catchy brand name, but those elements can’t sustain your entire business unless they’re built on a reliable, scalable backend. Eventually, you’ll outgrow your ability to function and your corner cutting will catch up to you. That’s right: the backend will bite you in your backend. Keep all your ecommerce tools consolidated, be sure your shipping is optimized, and you’ll be prepared to scale.

Complacency

Complacency is a killer for one reason: it’s easy to rest on your laurels. When you hit your first streak of sales, you might falsely believe that your days of hard work are over. There is no time to coast in ecommerce. It’s easier to sell online than ever before. New sellers are likely popping up in your niche on a daily basis. Continue to innovate and refine your strategy at every level. Look for emerging marketplaces, technologies, and marketing methods so you’re always one step ahead of the competition.

Conclusion

No one wants to end up as the next great “what could’ve been” story of the business world. If you want to avoid that fate, you have to ask yourself if you’re truly satisfied to stop growing. There are always more sales to find, new customers to woo, and better products to sell. Put in the effort to keep yourself on the cutting edge and your success story will never turn into a cautionary tale.

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