Come 2030, the global e-commerce market will reach a value of $8,016 billion. If that happens, the market will have grown at a CAGR of 8.05% during 2022-2030. These are some exciting numbers and enough to get people to invest in this market. Of course, not everything in the e-commerce sector is as good as it seems.
In the United States, two out of ten businesses fail within their first year of operation. E-commerce startups have a failure rate of 80-90%. Thus, these businesses are profitable but also risky.
However, why do e-commerce businesses fail so often? Let’s find out.
Lack of Planning
If there’s one thing that all successful e-commerce businesses have in common, it’s a strong foundation for planning. Without a plan to guide them, most businesses won’t survive long enough to become established.
To create an effective plan, you must first set goals and objectives and then determine how best to achieve these goals and objectives. You need to understand your customers better than they understand themselves. Otherwise, you won’t be able to identify their needs or concerns.
You also need to know your competitors’ strengths and weaknesses so that you can find ways of overcoming any disadvantages they may have over you. Finally, all employees must be on the same page about their roles within the company. Else, communication will suffer greatly, and productivity will soon follow.
Not Enough Capital
A lack of capital is a common reason for e-commerce business failure. Having enough financial resources to start and grow your business is key. However, how much capital you need depends on the type of product you sell and your company’s operations.
Managing your funds and capital is also vital. Failure to do that can lead to losses. Eventually, this issue will run you out of business at one point.
No or Poor Technology
One of the biggest reasons why e-commerce businesses fail is because they are not using the right technology. You need to make sure that your website, payment systems, and logistics have all been built to suit your needs and that they’re working for you.
There are many things to consider when choosing technology for an e-commerce business. You should choose a system that scales well with your growth but also meets security requirements as it scales. It should also be reliable and compatible with other systems (like inventory management).
Not Using Third-Party Logistics
Third-party logistics (3PL) is one of the most important components of any e-commerce business. It’s a service that helps companies manage their supply chain, deal with inventory and shipping, and ensure that goods arrive on time at their destination. 3PLs can provide services like picking, packing, transporting, and distributing products. This means they’re involved in every step of the process, from product development to delivery.
Using 3PL fulfillment services allows you to ensure fast and efficient delivery of your products. It also ensures your product’s safety and guarantees customer satisfaction. On top of that, using a 3PL service will allow you to save money. Unless you use such services, it’ll become hard for you to manage all of these things and will make success difficult to achieve for your e-commerce platform.
Poor Supply Chain Management
Poor supply chain management is a common reason for failure. In fact, it’s one of the biggest issues in e-commerce businesses.
The importance of supply chain management is often underestimated by small businesses and start-ups because they don’t understand that it’s a crucial part of their success. It’s not just about receiving goods and sending them out. It’s also about making sure your customers have a positive experience when they buy from you. If there are any problems with delivery or quality control, this will reflect badly on you as an online store owner and could lead to customer dissatisfaction and loss of sales.
Poor Decision Making
This is one of the most common reasons for e-commerce business failures, and it can have many different causes.
Poor decisions may occur because you don’t have enough information or input from the right people or because there is no plan or process in place to ensure sound decision-making. This can happen when your company grows rapidly without having a clear organizational structure for managing growth and/or developing new products and services.
As the boss, you must exercise control, but you must listen to experts in your organization. Of course, you have the right to cross-check their suggestions and then act on them.
The key takeaway here is that if you want to be successful in e-commerce, you need to do your research and understand what it takes. Many entrepreneurs are starting out with no idea of how hard running an online store can be. Thus, you must know what’s involved before jumping into the deep end.
The U.S. e-commerce market value is set to cross the $1 trillion mark by the end of 2022. This stat alone is enough to get people interested in investing in the market. Many might even want to start their own eCommerce platforms. However, before you do that, know what lies ahead, and more importantly, know why these businesses so often fail. Doing so will help you avoid these failures and eventually lead your business to success.