8 Common Causes Why eCommerce Stores Fail

Even though nearly 20 percent of retail sales are from online stores, roughly 23% of eCommerce stores fail in their first 12 months. Small Business Administration (SBA), the government agency that supports small businesses and entrepreneurs, estimates that only about 78% of eCommerce stores survive their first year. However, by the fifth year, the failure level goes up to 50%. Yet, the fact that 50% remain by the fifth year makes eCommerce a viable business option.

But the question arises as to why eCommerce businesses fail at all. Research into failed eCommerce businesses indicates several reasons. Some of them are poor marketing, abysmal search engine visibility, and overpriced products. Established companies also lose steam by the 5th year because of poor planning, customer service, lack of cash flow, being outcompeted, and selling outdated products. 

Is eCommerce a good business at all?

The short answer is – Yes. eCommerce is growing year on year in double digits. It is a trillion-dollar industry. In developed countries such as the US, UK, and Australia, eCommerce is growing by more than 16%. These statistics indicate that eCommerce is the future of business. All businesses will eventually transition online using in-person brick-and-mortar stores, even with a hybrid presence.

The importance of eCommerce was cemented during the pandemic. Many businesses that operated physical stores had to shut down to comply with local regulations. People survived off eCommerce stores. They shopped online and got their groceries and household items delivered to their doorstep using contactless mechanisms. They did not have to go physically to any store and wait in queues. 

Currently, a large number of people are working from home. They rely on online services and eCommerce websites for their daily essentials. It has become part and parcel of their life. They choose clothes, merchandise, electronic items, and gadgets and purchase them online. Therefore, there is an exponential rise in eCommerce stores and services required to fulfill this demand.

What are the projected trends in eCommerce?

eCommerce will become a 10 trillion dollar industry by 2030. Ecommerce businesses will grow exponentially – up to 300% or more. eCommerce is also changing the dynamics of the retail market. From 12%, the retail market captured by eCommerce has moved to 17%. The trend will continue in the future. It won’t be a surprise if eCommerce captures a majority of the retail market. The future looks like everything will be sold online. 

Another trend in eCommerce is omnichannel shopping. Multiple channels will exist for customers to make their purchases. It will be a combination of online and offline paths. Despite the path taken, an entire customer journey will be mapped and recorded. It is so that even if the customer chooses an online or offline mode, their purchase and order status is with the retailer.

A customer journey can also span multiple countries. Throughout this journey, retailers provide a consistent experience to the customer. This aspect increases engagement, making customers feel more connected with eCommerce shopping. 

Social shopping is also increasing. Users of social media apps such as Facebook, Instagram, Pinterest, and Twitter can make purchases directly from their social media accounts. This is a type of experiential buying where a person can make a purchase decision based on information. It is also a way to engage with a person using content, increasing their purchase decision accuracy and relevance. 

Now with so much potential in eCommerce, why do eCommerce stores fail? Here’s looking into some of the reasons.

8 Common causes why eCommerce stores fail

Listed below are the top 8 common causes why eCommerce stores fail.

Lack of investment

Setting up an eCommerce store requires some upfront investment. There are costs associated with domain registration, web hosting, website design, permits, licenses, merchant account subscriptions, payment gateway transaction costs, initial inventory, renewal of inventory, customer communications, etc. The eCommerce store needs photography services for product photos, warehousing to stock inventory, and a team to manage all of this.

This is only a small subset of the costs associated with an eCommerce business. The dynamics of running such a business are varied. It depends on the type of business and the demographics of customers. eCommerce businesses could do well by hiring consultants to sail them through the initial phases and over the break-even phase. 

No or poor business plan

One of an eCommerce business’s initial activities is finding its niche. Their business model should be based on the selected niche. The business plan should factor in product categories, product offerings, and customer base. It is not easy for an eCommerce store to be a general eCommerce store because this would immediately pit the store against global giants such as Amazon, eBay, and Wal-Mart.

It is recommended for startup eCommerce stores to choose their respective niches. A good business plan should have outlined a good business structure, contingency plan, financial planning, inventory management, investment roadmap, and product roadmap. Importantly, the eCommerce store should solve customer problems.

Unattractive website design

Good user interface design is amongst the pillars of the success of an eCommerce business. Without a well-designed website, eCommerce is difficult to hold online shoppers’ attention. Blurred photographs, images with issues, bad color schemes, outdated typography, slow checkout process, long-winded navigation, and confusing user interface design are some potential customers’ turn-offs.

Nowadays, customers expect more than just good website design. They expect a personalized user experience. They want the website to preempt their motives, suggest products to buy, remind them about their uncompleted transactions, ask them to revisit their orders, request them to complete their pending information, and so on.

Poor product photographs and ambiguous product descriptions

Pictures do sell products. If an eCommerce store is not investing enough to get good product photographs and descriptions, then the chances of making purchases are purely on chance and not by design. Product photography and descriptions have to be excellent to ensure guaranteed results and customer action.

When product descriptions lack information and detail, customers are skeptical about purchasing the product. To solve this, eCommerce stores can partner with agencies to research and write product descriptions. The eCommerce store can also use a professional photography service to complete product photoshoots. This small change can greatly influence the outputs of the business.

No or low digital marketing

eCommerce businesses assume that purchases will start happening once an eCommerce store is set up. But in reality, this does not happen unless the eCommerce store invests in digital marketing. Only by doing this can the eCommerce store get the word out of its online eCommerce platform. Otherwise, their eCommerce store will be another website and mobile site amongst millions and billions of websites.

eCommerce stores can use SEO and freeware email marketing tools for this – these are inexpensive ways to start building an online presence. Click here to find a Mailchimp alternative. Pay-per-click and social media advertising are also potent ways to build the eCommerce store’s search engine rankings slowly. 

Bad customer service

As per a survey conducted by Microsoft State of Global Customer Service Report, most customers wanted good customer service in their chosen eCommerce store. Prompt customer service increased their trust in the eCommerce store. The global giants in eCommerce, such as Amazon, are known to have excellent customer service. 

The incidences of customers talking to robot or an automated response system to resolve critical issues is rare. Customers want to talk to human beings and ask them questions. If an eCommerce store can fulfill this need of customers, then it can compensate for many of its inadequacies. Because all customers want is a safe, secure, and trustworthy online store.

No site security

If an eCommerce store has cases where customer data was stolen or compromised, then its doomsday is near. Site security is a bare necessity when operating online businesses. Customers are already finicky about transacting online – especially on new-bee eCommerce stores. Due to this lack of trust, online shoppers go to the bigger e-tailers. This is one of the reasons why startup eCommerce businesses lose business.

When an eCommerce store has done its homework on on-site security and can assure customers of 100% transaction security, its growth is assured. There is no provision to make even a single mistake regarding site security.

Customers being ignored

After a purchase is made, the eCommerce store should not forget its customer. There should be a strategy to constantly check back with customers to understand how they are doing and what they want to purchase. eCommerce stores don’t do such customer engagement activities. Customers forget about this eCommerce store and move on to another one. In the online world, love doesn’t last, so constantly being in the heads of customers is important. 

Final Thoughts

eCommerce stores also need to rebrand them in a timely manner, especially when marketing dynamics change. The business might start selling different types of products altogether. Customers need to be informed. Not just by emails, but also through rebranding and re-imaging semantics. Click here to find out how to rebrand.