10 Major Reasons Behind an Unsuccessful e-Commerce Business

successful e-commerce business

e-commerce businessE-Commerce business is an exhilarating venture for most entrepreneurs due to its high potential for creating healthy profits and loyal customers. Achieving success, however, becomes a challenge as most people perceive starting an e-Commerce store as a simple venture. Truth is, running a successful e-Commerce business requires investment, dedication, specialized digital marketing know-how, and perseverance. Many entrepreneurs also fail to secure their businesses with e-Commerce insurance. These policies cover these ventures against risks that are highly relevant to e-Commerce such as data breach, fraud, and defective products.

In this post, we talk about the 10 major reasons why some e-commerce businesses fail.

1. Poor website traffic

E-Commerce businesses need good traffic that drives potential customers to their online stores. In general, the more traffic your site gets, the higher your sales, although a poorly designed website or poor user experience might fail to convert visitors to sales (see the next section).

You can have the best stock, website, cash-flow plan and even the best checkout processes but if nobody visits your store, you won’t make sales.

Thus, it’s paramount for an e-Commerce business to invest in platforms and SEO services that drive traffic. In today’s world, that means creating valuable content on a consistent basis and engaging with your audience on social platforms.

2. Unattractive websites

An unattractive website discourages visitors from browsing your content, which reduces profits.

Your website should speak the language of the audience you are targeting to drive sales. In developing websites, the overarching concern is usability, but having appealing images, snackable content separated by white space, menus and links that help visitors find the right content, and great user experience regardless of what device the visitor uses encourages visitors to stay awhile.

Your website requires security to protect both you and your visitors from malicious actors A website that’s well thought out, easy to use, and appears trustworthy to your target audience also encourages exploration.

Using platforms and applications such as WordPress and Shopify to enhance the overall shopping experience users get on your website is key to generating revenue as it appeals to shoppers. A poorly designed site also affects the bounce rate (the rate at which people leave your website without browsing anything), which negatively impacts your site’s search engine rankings, thus reducing traffic to your site.

3. Poor cash flow

Most e-Commerce stores start with very limited budgets that hinder healthy growth. As your business grows, you’ll have new expenses for additional employees, better web hosting, marketing, and even physical facilities, such as warehouses. More businesses fail due to poor cash flow than an inherent lack of profits.

However, poor cash flow shouldn’t prevent your business success if properly managed. For instance, don’t invest too much in stock and think about ways to reduce expenses like renting rather than buying and using freelancers rather than hiring employees. To avoid having a store with goods but no buyers, budget around actual sales instead of projected sales. This will help you maintain a healthy cash-flow.

4. Underestimating the competition

To be successful in e-Commerce, you need to find a niche and a market strategy that sets your business apart from the e-Commerce business giants. Going head-to-head with an established business is a recipe for failure. Instead, ensure you offer a competitive advantage valued by consumers.

As you plan to start your e-Commerce business, always size up your competition and find the right niche to venture into.

5. Undefined niche

Small e-Commerce businesses have a high likelihood of succeeding if they identify a niche to build their business around. Avoid venturing into market niches that are already crowded as this hinders your chances of succeeding in the niche as you will be competing with already established brands. Start by targeting smaller markets in niches that are not crowded, remember most successful e-Commerce stores started in smaller markets, like Amazon that started by selling books.

6. Undermining the need for e-commerce insurance

Data breach, fraud, and defective products are some of the risks faced by most e-commerce ventures. These can lead to a business legal liability associated with faulty products or other issues. For instance, your business practices and products can be linked to illnesses caused by the products you sell. Therefore, not having insurance can bankrupt your business due to hefty cash compensations if sued by customers or clients.

7. Lacking proper cybersecurity

Even when you have e-Commerce insurance, you should invest in effective cybersecurity measures. That’s because this business is vulnerable to risks like:

  • Website hacking
  • Loss of income due to the website being down
  • Credit card breach
  •  Theft of customer sensitive information

With cybersecurity insurance, your business is shielded from network security breach and disclosure of private information which gives your store more authority and trust. Encryption offers another layer of protection.

8. Lack of patience

It takes time and patience to grow a small e-Commerce store into a successful thriving business. Most online stores fail because they lack patience, experience, and financing in growing businesses.

As an online entrepreneur, you need to build your e-Commerce store reputation, build authority around it, improve its search engine rankings and heavily invest in marketing. All these things take time, so get ready for a long ride to success.

9. Standard Business Risk

Every e-Commerce store faces certain risks that can lead to the collapse of the business.

Examples of such risks include:  

  • Stakeholders can sue management for failure to uphold fiduciary duties
  • Employees suing for employment practice violations
  • Lawsuits by competitors against unfair trade practices, defamation or intellectual property infringement

As such, it’s important to have standard business risk coverage for your venture.

10. Poor pricing

Successful e-Commerce businesses must offer the best value to customers or they’ll lose business to the competition. Your pricing is very important to success, even more than in brick and mortar businesses, as the next store is only a click away.

Pricing is complex and requires an understanding of not just costs and the prices charged by the competition, but understanding your market and the nature of demand.

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