5 Reasons Why Your E-Commerce Business is Tanking How to craft long-term success when your e-commerce businesses is struggling.
By Michael Fenech •
Opinions expressed by Entrepreneur contributors are their own.
No matter where you play online in terms of e-commerce, there are fundamentals you need to get right to have success. Now, you could play in the Shopify space and have your own online store, or you could be selling on Amazon.com. E-commerce doesn't discriminate, it will beat you down and spit you out if you don't get things right across every part of the business. I have extensive experience in both Shopify and selling on Amazon and I've seen literally thousands of products that are selling online.
I understand what works, but most importantly, I know the reasons why your e-commerce business is tanking.
Related: 3 Mistakes to Avoid With Your First E-Commerce Store
Your unit price is too high
This one is obvious, but you would be surprised how many times I see people get this wrong. Your e-commerce business could be tanking because you have no profit left over after costs. It's simple, if you have a high unit price from your supplier this will impact your profit. The reason unit price is so important is that we are bound by the market and what we can sell our products for. So, we need to ensure that we have a unit price that will allow us to factor in other costs such as packaging, shipping, tariffs, ad spend and more. The aim is to make a profit for every single unit we sell online after all the hidden costs are factored in. Margin solves all problems, so negotiate a good unit price.
Your niche is too small
What keeps e-commerce stores afloat is product sales, and to make sales you need to be selling in a niche that has demand. If you're selling in a niche that has low demand, your sales will reflect this. It's as simple as that. So, one problem you may encounter is selling in a low demand niche. And to be honest, there's not much you can do about it. The only thing you can do is to launch more products in niches with high demand. The product in a low demand niche could be utilized as an upsell on your e-commerce store to increase your average order value. The key lesson here is to always launch products backed by data. You need to always confirm that there is a large addressable market who you can sell to.
Related: What I Wish I Knew Before Starting My E-Commerce Business
Your ad costs are high
Remember the hidden costs that I mentioned above? Well, ad spend is a key component that you need to factor in to ensure profitability. This is where the difference is exposed between selling your products on Amazon via the FBA (Fulfilled by Amazon) or FBM (Fulfilled by Merchant) program or having your own online store. When selling on Amazon, you already have traffic and most importantly, it's traffic with buying intent. This is the holy grail for e-commerce businesses. If you have your own e-commerce store, you need to generate traffic and you guessed it, traffic costs money. So, to give yourself the best chance of winning, it all comes back to your margin. If you have an insane profit margin, you can absorb high ad spend and still make a profit.
ROAS (return on ad spend) is a metric you need to understand to assess any given ad campaign's performance. If your ROAS is poor, you need to kill the ad. Successful online sellers have campaigns with multiple ad groups that are targeting the same or similar targeted interests. On top of this, each ad in the ad group has a different creative and it's all about testing. The ROAS is always being monitored and ads with a good ROAS are being fed more ad spend. Ads with poor ROAS are being turned off. If your ROAS is too high across the board, you are only making the platform you're advertising on more wealthy. Monitor the data and try not to persevere with poor ads. Fast decisions are needed in this situation.
Poor product quality
You've done all the hard work; you've advertised your products online and you've made a sale. You would think that you can rest easy now. I've got news for you, you're wrong. Because now the ultimate test comes when the customer receives your goods. They instantly assess the quality of the product and value for money. If your product is poor, you are possibly going to get a return, a poor review, a negative comment on your ad post or all three! Ensuring you're selling a good quality product is super important to avoid the above scenarios.
The best way to make sure you're selling a good quality product is to get the product in your hands and make your own assessments. Or, engage a QC (quality control) inspection company to do the inspection on your behalf. I've seen e-commerce businesses sell items that were poor and it was a nightmare. Especially when they have 5,000 units sitting in their garage or warehouse. So be diligent with this part of the e-commerce business and make sure the quality is perfect before pulling the launch trigger.
Product imagery is poor
Online, consumers shop with their eyes. I'll say it again, buyers shop with their eyes. So your hero image and supporting product images need to be high quality. Think about it. If you're buying something online and the images are blurry or look fake, will that instill enough confidence in you to purchase that product? No!
With product images, you need to invest money. You need to hire an awesome photographer or 3D renderer to create stunning, crystal-clear images. Also, you need to plan your sequence of images like you're telling a story. The hero image is the star of the show. But, the other images and infographics are the supporting actors trying to convince people to buy your goods. In conclusion, having an e-commerce store is tough, but it can be very lucrative, fun, enjoyable and rewarding if you eliminate the above mistakes.
Related: 3 Ways Entrepreneurs Can Tailor Their Ecommerce Strategy for Maximum Growth
