Setting up an E-commerce business is a dream shared by a lot of people. Many are already into it and many are hoping to have an online shop that will allow them to leave their jobs or bring in a steady income post retirement. Is setting up an online store that one can be proud of, as easy as it sounds? Well, the answer is ‘Yes’ and ‘No’.
It is pretty simple to start an E-store these days with most webhosts providing free one-click install E-commerce software scripts. Customizing the website is easy with many templates and free customization options available on the web. Even someone who is unfamiliar with the intricacies of getting a website up and running can do so with very little technical help. Hosted stores are also available which take care of all the hosting and software.
Setting up an E-commerce website is indeed easy, but that is the easiest part. Setting up a successful E-store that brings in real business and profits needs plenty of time, initial capital, hard work and investments on an ongoing basis. People who setup E-commerce sites without understanding these issues end up winding up their stores within months of starting them. Let us take a look at the challenges and the requirements that come in the way of E-commerce success. I recently started and E-commerce site selling towable ski tubes and found many companies simply refused me based on archaic views that E-commerce simply do not work , Canadian companies like Kimpex,and Land ‘N’ Sea Distributing, Inc . Getting distributors to supply you could be one the hardest parts of setting up and E-comerce site, my suggestion is setup account with suppliers BEFORE you do anything!
1. Knowledge and experience is required:
Like all businesses, an E-commerce business also needs knowledge and relevant experience. Many people running successful E-commerce businesses have had experience working with successful E-commerce or retail outlets or have a partner, guide or consultant who has the knowledge and experience in this field. This way, they have less unforeseen problems and don’t get surprised by the issues that come up while setting up and running the business. Their energy, money and time is not wasted in experimentation. They are able to react to unexpected problems and work around hurdles with minimal delay or damage. People who don’t have the necessary knowledge and experience will need to go over a steep and expensive learning curve.
2. Getting attention, traffic and business is not easy:
A website without visitors will not generate any business. There are thousands of websites out there on the internet competing for the attention of visitors. Even if we just consider E-commerce sites there are thousands of them selling very similar products. It takes a lot of skill or investment in internet and offline marketing campaigns to get sufficient traffic and this is an ongoing process.
Many people underestimate the competition. It is great to have a website with lots of visitors, but winning their trust and making them buy is another task. This is where the website in question must be able to stand apart from the crowd. This is where the product mix, the pricing, the special offers, reviews and customer service will come into play.
3. Capital is required:
This is one area where many people go terribly wrong. They underestimate the amount of capital required. Most people think that starting an E-commerce business is just setting up a website, getting traffic through PPC campaigns and tying up with a drop-shipper.
A careful look at the functioning of successful E-commerce businesses in any product range will reveal that most of them stock the products they sell and don’t just depend on drop-shippers. Buying products in bulk and processing the order themselves allows them to keep the prices competitive and gives them control over the logistics which is essential for excellent customer service.
A decision to stock products changes the equation. Now there is a requirement for capital investment and risks such as obsolescence, damage, theft, loss, etc. to contend with. The number of employees required will also go up further pushing up the costs.
4. Sourcing and logistical issues:
Unless the business is also the manufacturer of the products that are being sold, they have to be sourced from somebody else. As discussed before, drop-shipping has its limitations when it comes to control and pricing, though this is the route most people take while starting up. Whether a business uses drop-shippers or stocks and delivers the products, it is important to get reliable suppliers and delivery companies, otherwise customer service is likely to suffer due to product availability and delivery problems. Sometimes the distributors will simply not look at you if you are an E-commerce store , many will only deal with you if you if you have an actual store.
5. Achieving reasonable returns on investment takes time:
Even with everything else going right, owners have to give the business enough time to flourish and make steady profits that justify the investment, time and the effort put into it. It takes time to get sufficient traffic, increase sales and then expand the business by introducing newer product lines and delivery zones to reach a volume of sales that makes the business profitable in this highly competitive arena.
As discussed before, prices have to be kept low in order to have an edge over the competition and this could mean operating at wafer thin margins which pushes up the volumes needed to break even or make a profit. To get an idea about the volumes needed to become profitable it is best to look at some of the existing E-commerce stores that are already running a successful business. Their pricing and volumes will give an idea about their margins and business model.
6. Maintaining the competitive edge, vision, leadership and planning:
This part may not make sense to someone trying to establish a new E-commerce business, but this is what keeps the successful businesses on top. Successful businesses keep observing the ever changing market and make sure they continually adapt to maintain their competitive edge. This includes keeping an eye on the competition, managing online reputation, phasing out product lines, bringing in new ones and having a vision for the future. On the internet things are rapidly and constantly evolving which means all online businesses irrespective of how well established they may be, must change with the times or die a slow death.
Establishing an E-commerce business may look like an easy project with very little investment, but if one looks carefully, there is a lot more in it than setting up a website and tying up with payment gateways and drop-shippers. It involves expertise, money, time, planning, marketing and leadership skills. Depending upon the scale of operations that one is looking at, some of these issues may be less important than others, but they are all needed to a great degree to setup and run a flourishing E-commerce business.