why do ecommerce businesses fail

Why eCommerce Businesses Fail & How to Resolve Them

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23 min read

Do you know eCommerce businesses have a failure rate of about 80%-90%?

Many of us think it’s very simple to set up and maintain an eCommerce store. All you need to do is sell great products and ship them to people in a timely manner. Well, it’s true that technology makes it easier to a certain level. But you have to face many challenges to establish your ground in this competitive space.

You’re not only competing with local and regional brands, but you also have to deal with international giants such as Amazon and Walmart.

When competition is so high, it’s extremely important that you take every step after careful consideration. Even a simple mistake can ruin your all efforts, despite having a very good production and management system.

In this article, we’ll show you why eCommerce businesses fail and how you can avoid being part of the 90% of businesses that fail. Let’s have a quick look at the points we are going to discuss-

  1. Not Doing Proper Research Before Starting
  2. Ignoring User Experience and Branding
  3. Using Pop-ups & Other Advertisements Wrongly
  4. Having Fewer Options for Direct Communication
  5. Ignoring Bad Reviews of eCommerce Products
  6. Having No SEO Strategy or Unplanned Optimization Process
  7. Not Doing Any Experiment or A/B Testing

Also, we have added a real-life case study of a USA-based successful business that has fallen down for some common mistakes.

Mistake #1: Not Doing Proper Research Before Starting

Do proper research before starting online business

Since the eCommerce business is in trend for the last few years, more and more eCommerce stores have been built every day. But the problem is most people come into this business after hearing about the profit hike or success stories. A big percentage of these startups fall down just because they don’t have a proper understanding of the industry and business process.

Jumping into the sea without knowing how to swim is not a good idea. Similarly, when you’re investing your good effort, money, and valuable time to do something, it should reward you with desired results.

Many online retailers fail at this point since they start without the proper roadmap to proceed.

Expert Tip: Proceed with The Right Ecommerce Business Blueprint

Evidently, you need to do proper analysis and dig deep before starting anything. Learning from your competitors’ mistakes prevents you from going down the same path. Try to find out the most effective ways among hundreds of options.

These are the steps you should go through while planning for your eCommerce store:

  • Select the type of product you want to sell
  • Analyze your market size & type, competitors
  • Prepare an effective eCommerce business plan
  • Register your eCommerce business & brand name
  • Design your brand identity in a unique way
  • Choose the right platform to build your store
  • Select your sales channels to reach your audience

You should also consider other influential things that can impact your business growth, such as the global economy, environmental impacts, changing people’s needs, etc. This may not mitigate all the obstacles but it will certainly reduce some!

Mistake #2: Ignoring User Experience and Branding

Work with eCommerce user experience & branding

New startups usually focus more on improving their products but unconsciously they ignore the user experience. And this could be a reason to add your business to the list of failed eCommerce businesses. You should remember that 95% of new products launched each year in the U.S. fail not because of the quality of the product but because of a lack of perceived credibility.

Luckily, better UX helps you establish your brand as credible and trustworthy to the customers.

On the other hand, many entrepreneurs blindly follow other successful brands. But they can’t compete because big brands already have their loyal customer base. And as a newcomer, it’s also difficult to beat your competitors with initial investments. In that case, getting customers by giving the same products/services could be a reason to fail.

Expert Tip: Create A Concrete Brand Strategy to Enhance User Experience

Online retailers should put their best efforts to enhance the customer experience in their stores. So, buyers can easily navigate the store, find their desired products, complete the purchase, and move on. Keeping the entire process simpler creates a loyal and repeated customer base. Therefore, you have to make sure your eCommerce shop offers the best UX possible.

Proper branding is also important for improving the user experience. You have to fix the way how people will perceive and talk about your brand. Most importantly, establish a brand that relates to your persona.

As an example, if you’re targeting businesswomen to sell your products online you should avoid girlie color and images for promotion. To build a successful brand you need-

  • Solid brand strategy
  • Unique brand identity
  • Strong brand marketing

Besides taking care of your eCommerce logo, brand name, and catchy tagline, you should take care of the other promotions. Bring excitement to your packaging, arrange some contest or grand program on the launching date, or offer some extra facilities that competitors are not doing. So, buyers can recognize and identify your products or services with the right values.

Mistake #3. Using Pop-ups & Other Advertisements Wrongly

As we know, well-designed pop-ups are useful to attract potential customers, increase conversions, promote special offers, collect subscribers, retarget users, and many more. But without knowing how to design an optimized pop-up and where to place them on your eCommerce you might ruin your user experience.

Displaying popups without letting your visitors know about your store can’t be a good idea at all. Rather it can ruin the user experience. Many store owners do it by-

  • Using poorly constructed popups
  • Including poor copies or design
  • Adding too much information
  • Showing popups in the wrong place

Timing is also very crucial to get better results from eCommerce popups. Sometimes, site owners overshadow the main content with too many pop-ups at the entry point. It can be annoying and often overwhelm the user into quitting the website without even checking the products.

Expert Tip: Design Optimized Popups with Important Information & Proper Timing

Design pop-ups

Ecommerce sites usually use pop-ups to get quick users’ attention and introduce their products. It would be beneficial for your business if you can place them in right place with proper timing. In fact, the top 10% of the best-performing pop-ups had a conversion rate of 9.3%. But it can also backfire horribly if you can’t execute the plan accordingly.

Smartly utilized pop-ups have the ability to increase conversion rates by 6.39% & generate leads up to 2000 monthly.

However, designing and using popups correctly can be difficult for new eCommerce owners. Make sure your pop-ups are showing only the information that is essential for the users. Some other effective tips could be-

  • Design your popups with eye-popping color combos
  • Get an engaging copy for your eCommerce popup
  • Include powerful words to highlight special offers/benefits
  • Display personalized popup based on user segmentation
  • Show exit-intent popup or wait for at least 5 seconds
  • Use numbers & CTA buttons for quick response

Your popups should be well-optimized for search engines as well. There is a possibility to get a penalty from Google if they degrade your visitors’ experience. To avoid this situation, we recommend you design popups that don’t make your website’s content less accessible and are easy to close.

Mistake #4. Having Fewer Options for Direct Communication

Ensure direct communication for eCommerce customers

Technology reduces human tasks in many aspects. Ecommerce stores now have automated AI chatbots or auto messaging systems to respond quickly to their customers. But still, people are more comfortable hearing from a real human being before spending their money. A verbal assurance from an experienced sales associate has a great impact on customers’ final decisions.

About 70% of consumers surveyed about their customer service preferences reported they would rather speak to a human customer service representative than engage with a digital customer service rep or chatbot.

We’re not denying the usefulness of AI chatbots or voice assistance. These features are also important to ensure a seamless shopping experience for your customers. But you should consider that a large number of buyers are not comfortable with the notion of talking to a robot. Or instead of these advancements, they prefer a human touch while shopping online.

Considering your customer’s preference you should include the way of human interactions in your online shop. Otherwise, you may lose a large number of potential buyers.

Related Read20+ eCommerce Growth Strategies That You Should Apply in 2022.

Expert Tip: Enhance Customer Experience with Direct Human Interactions

why ecommerce businesses fail

In a brick-and-mortar retail shop, you have the chance to talk with the sales assistant before buying any product. A verbal assurance from the associate probably impacts a lot on your final decision. In online shopping, many customers miss this human sales interaction.

A smart implementation of AI or bots into your eCommerce shop may save you lots of time and effort. It’s able to handle more clients than humans with great efficiency. But still, there are many unpredictable loopholes and demands of buyers that only humans can understand.

Ensure human interaction via live chat, support tickets, phone calls, or emails on your online store. Always keep an easy way so your prospective buyers can easily contact you.

Mistake #5. Ignoring Bad Reviews of eCommerce Products

Use customer feedback to update company strategies

Now all online shops have a system for collecting customer feedback or reviews. It’s a very effective way to tell people about your products from real buyers. And when you have thousands of users, all experiences would not be pleasant. Having negative reviews is not a bad thing but ignoring them can be a huge mistake.

As business owners, you may tend to fear negative online reviews. Because you think they can influence potential customers to leave the shop immediately. That’s why you hide the comments if it bears any unpleasant experience. Or don’t upgrade your products considering one (or few) feedback can be overlooked. You may have to pay for this mistake in the long run.

Being overconfident many entrepreneurs ignore negative feedback from users and regret it later. Also, having all positive reviews can create a question mark on your brand authenticity.

Expert Tip: Smartly Handle Online Negative Reviews & Bring Updates

You may launch your products after long days of research and use the best machines to produce. But still, it can fail to satisfy users’ demands. Also, with changing times people’s needs also change.

Include a review and comment option on your online store. So, users can share their real-life experiences or problems with your products/services. Join different social platforms as well to communicate directly with your customers.

Never overlook a single negative review of your product. A simple mistake can come around in big trouble.

Also, keep your eyes on your competitors. Observe how they improvise their products and measure customer reaction towards the changes. It helps you identify how you should proceed with your further product design and promotions.

Also Read: 12 Essential Things to Consider When Building an eCommerce Website.

Mistake #6. Having No SEO Strategy or Unplanned Optimization Process

Despite the fact that Search Engine Optimization (SEO) has one of the highest returns of Investment (ROI) of any eCommerce marketing campaign, many retailers pay less attention to this. You’re producing amazing products and adding excellent content to your site. But if it’s not visible to your audience, then it’s all useless.

It’s extremely important to rank higher on search engines outpacing your competitors.

Many online shoppers overlook the importance of SEO. They only agree to spend some money on paid campaigns or advertisements. But these ads also should be optimized to get potential buyers. Also, you need stable organic traffic to run a successful online business. According to SEMRush, almost 38% of traffic is generated from organic search. Overlooking the importance of SEO can make your business fail.

Expert Tip: Elevate Your Organic Traffic with Right Ecommerce SEO Guideline

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Image Source: Canz Marketing

If you’re including a few keywords and popular search phrases on the website and thinking this is enough to improve your ranking on Google, then you are completely wrong. SEO is more than that. From picking the right keyword to optimizing all the content, there is a lot to do in SEO. You need to make sure your keywords are in the right places. So, Google can precisely understand what your page is about.

Here are some proven eCommerce SEO tips to get your desired traffic:

  • Go deeper with keyword research
  • Do on-page SEO for optimizing site content
  • Add long-tail keywords to your content
  • Identify the technical issues & solve them
  • Take care of your site speed, security, and overall site performance

In order to reach the right audience, you must have the proper guideline to follow.

Mistake #7. Not Doing Any Experiment or A/B Testing

Do A/B testing for your eCommerce growth

Technology is changing every day, and so do people’s demands. The tactic is working best for you today, maybe outdated after 6 months. Some online retailers can’t understand the need for upgrading or are afraid to take any risk. In turn, they gradually even lose clients who were satisfied with their service previously.

Sometimes store owners get less response after introducing any new products/features/other elements. It builds a belief inside them that lets everything go on as it is. They fail to measure customers’ changing preferences with time. It keeps them unaware of what strategy is working and what is not.

Constructive experiments let you implement different theories and get customer feedback. Considering those feedback you can upgrade your online shop to the next level. But most of the owners fail to recognize it.

Expert Tip: Entice Customer with Optimized Experimentation

In eCommerce, you have to pay attention to business cycles and visitor behaviors. Controlled experimentation helps marketers perform and research fast, leading to a data-driven decision.

A/B testing and experimentation open up many amazing competitive advantages. You can prepare different versions for your web pages/campaigns/products. Then identify which one is better performing than the other. So, you can proceed with the option that gets maximum positive responses from your customers. And update other attributes accordingly.

If incorporated in the right manner, controlled testing can set a solid base for the data-driven marketing strategy. This will improve overall customer acquisition, boost conversions, increase sales, and lead generation results.

Let’s go through a case study and try to learn why Zulily- an online clothing store gets shut down after having funding of around $194.6M.

Case Study: How A Successful eCommerce Brand Like Zulily Failed & Shut Down for Bad Marketing

Zulily failed due to its bad marketing

Zulily was a USA-based online store selling products for moms and kids. In the early days, this site got a huge response from audiences for offering huge discounts. Most products belonged to little-known brands. They included prenatal care products, baby gear, travel accessories, bedding and bath, children’s clothing, toys, DVDs, and educational materials. The site also claimed to be eco-friendly that would plant a tree for each new purchase on the site in the name of the customer’s child.

Despite their unique idea and huge popularity, they fail due to poor marketing and user-attention strategies. New visitors must give their email addresses before accessing the search engine and databases of Zulily’s shopping items. Many of the visitors find this process very annoying. This violated some basic marketing principles as well. In the beginning, Zulily’s subscriber list started to grow very faster. But gradually the sales decreased remarkably.

Reasons behind the failure of Zulily:
1. Annoying people by asking for email addresses every time
2. Violating basic online marketing principles
3. Applying wrong customer engaging methods
4. Paying less attention to improving user experience
5. Overlooking customers’ feedback & their dissatisfaction reasons

Some people gave their mail aiming to peek at the site and all registered users would not be considered loyal or even willing customers. Due to Zulily’s inadequate marketing strategy, they lost thousands of potential new customers who were highly disappointed by the front-page email requests. Their existing customers also felt overwhelmed by the number of merchandise and flash sales invitations. As a result, Zubily failed to build a sustained customer base and get diminished within a few days.

Rather than focusing on quick success, if Zulily preferred better customer experience and followed up on their feedback then probably it can be one of the leading eCommerce brands in the USA.

Setup & Manage Your eCommerce Store in a Right Way

It takes a lot of effort and time to build a successful eCommerce site. A simple mistake can cost you great suffering. However, it is not possible to make zero mistakes and run a successful business. But knowing about possible mistakes helps you minimize the loss. You must be ready to learn from your surroundings and take essential initiatives for desired goals.

We have picked the most common and repeated mistakes of online retailers. You have to be more careful about overall site performance, customer experiences, and other impactful elements as well. Such as effective CTA, powerful product description, site security, smooth shipping, multiple payment options, etc.

Do you want to add any other points to our list of why eCommerce businesses fail? Share your views with us in the comment section below.

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