Under the Hood of Ecommerce Success Stories

Why Are There So Few Ecommerce Success Stories?

Ecommerce Success Stories
Ecommerce Success Stories. Donald Iain Smith / Blend Images / Getty Images

The way things are going, there is a good chance that in the time you take to read this article, a dozen ecommerce businesses would have been launched. But the more interesting fact is that, quite likely, another dozen would have come crashing down. On the one hand this upheaval has become commonplace. On the other, it has become imperative that as an industry ecommerce introspects. To be taken seriously, any industry needs to mature; it needs to come of age.

Though there are several serious players in ecommerce, there still exists a great need to have a greater number of ecommerce success stories. And that will happen only when players get the basics right.

The Factors that Led to the High Failure Rate in the Ecommerce Sector

To address this issue, I am going to need more virtual paper and ink than I have at my disposal at present. All the same, since I have worked with dozens of ecommerce businesses, my attempt here is to catch the few basic factors that lead to virtually inevitable ecommerce failure.

  • Investor Money

    I think that the huge wave, if not bubble, of private equity investment (by whatever name: venture capital, seed money, angel funding,...) that is finding its way to the ecommerce sector has done more of a disservice to the ecommerce industry. Look at it this way, some of biggest challenges that any business faces tend to be in the space or turning and remaining profitable. With the flood of investor money coming in, I find that some entrepreneurs are losing their ability to see the difference between revenues and investor's money. In this insane quest for higher valuations on the back of higher losses, no one will emerge the winner -- certainly not the private equity investor.
  • No Strategy

    Setting up an ecommerce website is not a strategy in itself. Having great images, or setting up an ecommerce blog can at best be instruments in your ecommerce strategy. In many industries businesses fail because their strategy does not work. In the case of ecommerce, I fear that it is not the failure but the absence of strategy that is the culprit. If you, the ecommerce entrepreneur, cannot be bothered to think of a strategy, it is only fair that your business ends up as just a carcass in the mass graveyard of ecommerce businesses.
  • No Differentiator

    Whenever someone tells me that they have an idea for an ecommerce business, I attack them with my question, "What is your differentiator?" I say "attack," because I actually refuse to talk further if they cannot give me an answer to this question. Note that I am not talking about giving me a good answer. "Good" is subjective. I am talking about merely giving me an answer. I still continue to be surprised by the fact that most entrepreneurs are merely trying to jump onto the ecommerce gravy train, with the hope that some of that gravy will accidentally splatter in their direction.
  • Ease of Deployment

    I know, I know, I make ecommerce entrepreneurs sound like morons. Surely I need to give them more credit. So what ends up causing all these pedestrian mistakes? Why is strategy an after thought? Why are ecommerce professionals not spending enough time creating a differentiator? The answer lies in the fact that setting up an ecommerce website is just too easy. So in a fit of inspiration you set up an ecommerce websites. You follow up it up with dollars spent on acquiring customers using PPC advertising. And voila! You are an ecommerce business -- just an ecommerce business, not a successful ecommerce business.
  • Tech Disconnect

    And the final nail in the coffin comes from the fact that most ecommerce entrepreneurs are coming from the technology stable and not from the retail background. The ability to create a website, host it, set up a payment gateway, establish some security, and perform other technical tasks is some seen as the clear path to ecommerce entrepreneurship.

Conclusion

If ecommerce businesses do not follow the first principles of business they are not going to succeed.