5 Reasons e-Commerce businesses fail

E-Commerce has growing rapidly in recent years, not least in the UK. But that does not mean every firm that enters this sphere is bound to succeed.

Like start-ups in general, the majority of firms will fail, usually in the first year. Some of the reasons for failure are common to retail firms and companies of any description, but others are more specific to this field.

The following are five of the most common shortcomings:

The lack of a large enough market

Before starting out, every firm needs to do its research. It should identify a target market and the characteristics of the kind of people who will buy the goods and services on offer. This will create a 'buyer persona' on whom marketing efforts should be focused.

The aim of your brand should always be to position yourself as the provider of the solution to the needs of the persona. But what happens when far too few people have these needs?  Even with great marketing and attractive pricing, there just won’t be enough demand to generate the level of sales you need.

This is why you need to carry out good market research before you even start.

Pricing and cost issues

When starting an E-Commerce firm, you need plenty of capital and patience to start off with, but you also need to make sure you bring in enough income to ensure your costs are met.

•          The surest way of failing in this regard is not having enough cash to start with, meaning if you don’t get off to a flying start you might quickly run out. The reality is that for most firms it takes a year or two to start becoming profitable.

•          To ensure you remain solvent you do need to keep your costs under control.

•          It may seem logical to price your products or services high to bring in more cash, but that can make you uncompetitive.

Therefore, it is crucial to understand what constitutes a fair and reasonable price for your customers to pay, as well as studying what your competitors are charging. Indeed, failure to carry out competitive analysis can leave you at a disadvantage at any time.

Retail giant dominance

A common cause of failure is trying to succeed in a market where retail giants dominate. Don’t forget that the big high street stores now also have well-developed online services.

For this reason, the wisest e-commerce firms are those that do not try to take on the biggest traders who sell particular products in large quantities; but look for areas where they can offer something the big boys don’t.

Poor customer service

This is something that lets down any kind of retail firm but is especially bad for e-commerce. Because you don’t have face-to-face contact, the only link you have with customers most of the time is transactional. Late or missed delivery is likely to be your biggest problem.

Once an issue is raised, however, you do need to communicate well with your customer. There are various thing you can do about the situation:

•          Reply swiftly to emails

•          Take prompt action to solve a problem

•          Making amends through steps such as a discount on future purchases

•          Show a clear interest in solving the customer’s issue

• These will not just help you retain the custom of the individual who has a problem; it will enhance your reputation in their eyes.

Naturally, failure to do this will have the reverse effect, losing you that customer and potentially generating bad publicity for you.

Lack of good online marketing 

Finally, but perhaps most importantly, the need for good digital marketing cannot be overstated. This is increasingly true for most firms trading in goods and services, but when your whole operation is online, it becomes critical. After all, you don’t have a physical store people can see just by walking down the high street.

A good online marketing campaign may include any combination of the following elements: