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Why ecommerce business fail

Here we discuss about an eCommerce business failure case study, why most of the ecommerce business fails and how! More than 80% of ecommerce business fail in very first year, why they can’t survive? Especially in countries like India, we often heard people say ecommerce does work, and they give some explanation from their ecommerce business experience.

First accept the fact is true that "eCommerce Business Fails", but at the same time we must examine the reason behind it.

Now a day’s almost everyone talk about eCommerce and think of starting their own ecommerce business, and many of them finally start ... And unfortunately most of them fail.

but have you ever thought! why ecommerce business failure rate is so high!

Common reasons of ecommerce failure

Here is an example of ecommerce failure story!

People are highly fascinated by ecommerce news around the social media, you may hear never ending discussion in tea stall, office canteen, while travelling public transport ... specially the funding news and the money talk of billion million dollar story... they just love the talk and participate in discussion, as a result many of them gets up next day morning and start looking for cofounder and investor... needless to say that they are fully charged up for starting their ecommerce business

Then they start!

First, they think of putting up a web platform, if they are not tech professional they start looking for cheapest technology solution available in market, (some of them even look for solution within 5000/- INR / month), and they put up the web platform and get their visiting card printed, start spreading the news across the whatsApp group, Facebook, LinkedIn, tweeter.

Then one guy becomes co-founder CEO and the other one co-founder MD... Story starts with right spirit.

Now they start looking for vendor or if they have their own products, start putting up all products details with pictures on web platform. web platform looks good … super excited! Very good

After three four months they realize nothing is getting sold, and it’s not moving … start crying "eCommerce does not work"!

If you ask that person how much money has been spent so far for setting up and promoting the platform? Answer would be 1 lakh to 1.5 lakh INR max, many of them might have spent below 1 lakh INR

Compare ecommerce with traditional business

Now let's consider a traditional business scenario of selling jewelry, I am taking an example of Mumbai (known as business capital in India), where spending capabilities average is higher than any other city.

Let’s say someone wants to put up a small jewelry shop in Mira Bhayandar road (Mumbai Western Suburb), Here are the minimum requirements!

  • Rent of a 250 square fit shop – around 20,000 to 30,000 INR/- month
  • To set up the shop, interiors will cost /- 1.5 lakh to 2 lakh INR (considering lower side)
  • Electricity – 3000 / month
  • Cleaner – 1000/- month
  • One shop keeper / Helper salary 15000 to 20,000 INR/- month
  • Some local advertisement / banner etc. – 1 lakh INR

These are some very minimum expenses one has to spend to start a local shop (we have not yet considered the cost of displaying jewelry, risk factors and other costs) , that means after four months, the total cost would be 4 lakh to 4.5lakh

And no business owner will shut the business within four months time (even though there are very few or no sales); they know very well that any business will take at least one year time to become familiar to buyers in local area and start getting some business from them!

Now, let's consider the target audience, after spending so much money the local shop owner will have visitors from local area only (within 1 km range), not even from whole Mira Bhayandar area.

But in case of eCommerce, if someone ask about target audience, the same business owner is not even happy with visitor of whole Mira Bhayender, not even visitor of western suburb or whole Mumbai, they expect visitor from whole India and also from USA, UK, Dubai and the whole world! How ridiculous!!

Then you say ecommerce business does not work!!

They are okay with paying 30,000/- shop rent per month, but in eCommerce if someone ask for 25,000/- per month for tech support, maintenance and social media promotion, they are not willing to pay, then start looking for solution within 3000 INR/ month … Finally start saying that eCommerce business does not work .

Note: Here I am considering people who have some traditional business knowledge, and now think what would be the response of a person without even any business knowledge!
So here are some checklists
There is no magic

Reading million billion dollar stories is great to get inspired, but you as a business owner must learn the stepping stones.

Keep reading and learning from small ecommerce, there many master tips you learn that big story can never teach you

You must have some budget, plan and timeframe
Successful eCommerce Business Strategy

Here are some checklists that can assure that you make your ecommerce successful

  • Find your ecommerce niche correctly! (most important factor in online business)
  • Be practical about your business plan, don't get influenced by funding news, rather focus your business plan.
  • Don’t look for cheap solution, look for something that will solve your regular query with quality.
  • You must have consistency & patience. (things will take time, even if you do everything correctly.)
  • Don't try to sell to everyone, Set your realistic target audience.
  • Product photography matters a lot, take professional help.
  • Keep your web presentation simple and meaningful, you don’t need all high end tech features like big companies.
  • You must have clarity about what you are doing, without clarity you won’t be able to move next, confidence has no meaning.
  • It’s okay to grow slow, you need not to compete with anyone, focus on small customer success and deliver goods as you mentioned on web site.
  • There is no formula, just do what keep you steady and help you to grow, look at what and how all big ecommerce are doing, but implement only what your business need.
  • Focus on best SEO strategy possible for your ecommerce platform.

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