Why Most e-Commerce Startups Fail

Why Most e-Commerce Startups Fail

If there’s one thing that’s true about the e-commerce business, it’s that it’s tough. But it wasn’t always this way. Back in the late 1990s, just as the Internet was really getting going, having an e-commerce startup business was a lot of fun. Investment money was pouring into practically every new project under the sun. And businesses were financed up to the max. Economists announced that we had entered a new era of economic growth where the old rules didn’t apply. You could never invest too much money in dot com companies, because the rewards in the future were going to be enormous.

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Of course, that bubble popped in March 2000. And we’ve been living in a more sober world ever since. At least when it comes to e-commerce.

Understanding why businesses failed back then is easy. They failed because the market wrongly believed that they would be able to generate enormous value in the future. But understanding why so many businesses are failing today is not so easy. Here we investigate what’s going wrong in today’s e-commerce sector and what spirited companies can do about it.

Not Enough Patience

Back in the 20th century it took years, if not decades to grow a successful business. And there were good reasons for this. Communicating over long distances was hard. And it was expensive to “set up shop” so to speak in new areas where your business wasn’t known.

But today the opposite is true. A good idea for an e-commerce business can traverse the globe in a matter of weeks, right? Well, not so fast. It is true that companies like Twitter appeared to come out of nowhere and go global in a matter of months. And there is an argument to be made that if you have had a great idea, it’s much easier to build a company. But the CEO of Twitter, Jack Dorsey, regularly gives interviews where he talks about how long he was developing the service before it hit the big time. It was five years, not five months.

Many e-commerce businesses expect instant success. But building an online business takes time. Heck, just climbing the Google ranking can take over twelve months. Patience is important in this game, just like it is in other areas of business.

Not Enough Web Traffic

Just like out on the high street, foot traffic is an important determinant of sales. After all, you can’t do very much business unless you have significant potential customers walking through the door. But getting traffic to websites is easier said than done. One way to do it is to pay for pay-per-click (PPC) advertising. Advertising platforms will promote your product to the people who they think are most likely to be interested in your product. It’s an expensive, but potentially useful way to generate traffic.

Another powerful way to drive traffic is to nail down your SEO. Don’t just go for a generic SEO service. Choose a company that actually has specific knowledge of your sector. If you’re setting up a legal firm for instance, use a firm that does specific SEO for lawyers.

Poor Photos

One of the big disadvantages of selling online is that customers can’t see the products. In fact, it’s probably half the reason we still have physical stores. What it means is that you have to pay particular attention to the quality of the photos that you post on your site. Low quality photos aren’t exactly going to create a desire to buy from your customers. In fact, it’ll probably put them off and make them think that you don’t run a professional outfit. Product photos need to be clear, focused and preferably zoomable. Review what other websites do and try to match the quality of their photos.

Low Levels of Investment

Many brick and mortar businesses want to move their companies online today. And they believe that going online promises to allow them to save on costs and make greater profits. But all too often companies shirk investing any real money into their online operations. Often, the amount that they spend is small because they believe that there isn’t any value in spending a lot.

Spending money in the digital space is more important today than it has ever been before. Investment is still required to make your website attractive and easy to use. And it’s still required to pay people to make your website show up on search engines and have fresh content. No, the magnitude of the investment might not be the same as it would be in a physical store, but that doesn’t mean that the platform won’t benefit from investment either.