Let me be clear - this article isn't about Shopify. I believe that Shopify is the no-brainer eCommerce solution for any small or medium business. This article is about YOU or YOUR BUSINESS.
I'm a Shopify Expert that is focused on small and medium-sized businesses. As such, I talk to a lot of owners of eCommerce (or prospective eCommerce) businesses. Through those many conversations and interactions, I've been able to see what things lead to a successful store and business and those that don't. So I thought it would be useful to discuss those things that I've seen that tend to lead to failure.
My hope with this blog post is not to dissuade you from creating your own online business. My goal is to warn you about common pitfalls that eCommerce stores experience so that you can avoid them. This article assumes you are new, small store that is run by one to three people. So here are the common pitfalls in no particular order:
In today's industrialized world, it is very easy to make a commodity product, say a t-shirt. And there are massive company's out there that operate on efficiencies of scale that can make a t-shirt cheaper and more reliably than a small company can.
So, a small company's t-shirt must be different. Maybe it has a unique design. Or its made of highly sustainable bamboo fabric. Or something else unique. Think of successful brands on Shopify. One thing they have in common - product differentiation.
To over-simplify, there are four areas an eCommerce business' efforts fall into:
- Product development - identifying product/market fit and creating a unique product.
- Infrastructure - website, payment processing, design, etc.
- Operations - fulfillment, accounting, inventory, etc.
- Marketing - customer acquisition, social, direct, advertising, etc.
Of these things, the infrastructure is actually the easiest. There's a whole army of Shopify Experts out there that can build just about anything for your store. All too often, I see store owners that are way too focused on building more functionality into their stores when I believe that they should instead be building customer acquisition channels.
Let me illustrate with some math. Let's say a store has a conversion rate of 2% (which I consider to be a good rate) and 100 sales per month. My recommendation to that store is to focus on doubling the traffic to the store (which should double sales to 200/month). But some stores instead spend that effort on increasing the conversion rate, which if they get to a great conversion rate (over 3%) will result in 1 extra sale per month.
One oversimplification of the world says that there are two types of people - problem finders and problem solvers. To be a successful store, you are going to need to be a problem solver. With little or zero staff besides yourself, you are going to need to find solutions to a wide, wide variety of things. From defining the brand to determining pricing to paying business taxes. There's always something that needs a solution. Successful store owners are able to cross things off of their to-do list.
The hardest part of building a new e-commerce business is acquiring customers. Having a great product and building an engaging website do nothing to bring people to it. Customer acquisition is a never-ending process of trial and error across a wide range of sources like advertising, organic search, social, influencers, press, etc.
To be successful, an online store needs to execute well on driving traffic to the store. Hence the need for marketing.
It is possible to have a successful online store without paying for advertising, but those stores are very rare exceptions.
I've worked with many stores that have a small flow of customers from non-advertising sources. They even have decent conversion rates. But to grow their business, they need paid advertising.
Many stores hesitate with advertising because their pricing model doesn't support it. An ad campaign is going to cost 25-33% of the revenue it brings in (that's if it is executed well). So the product margins need to support that level of spending.
This book (which is a great book BTW) was written in 2007, which at the time that I'm writing this article is 11 years ago. And that 11 years is the point. The internet and more specifically eCommerce has changed drastically since then. In 2007, setting up a website that could collect payments was much harder than it is today. In 2007, reselling products (alternatively known as dropshipping) was much harder than it is today. Today, you can create a fully functioning store with a product catalog of 1,000s of items that looks professional in less than a day.
So, if your business model is going to be to sell thousands of widgets from Alibaba in your generic Shopify store, you will not succeed. Hopefully reading this full article will explain why I believe that.
Again, the store that runs itself concept from 2007 has faded. Today's successful store owners are constantly:
Your business is going to need constant care and feeding.
For a new, small online business, the old adage that 'people buy from people' is very true. One of the ways that your store will differentiate itself from Amazon, Walmart, and the Chinese manufacturers is that it is not a global corporation. Instead, it is run by real people with real names. You MUST leverage this advantage over the bigger players. Your About Us page should detail the PEOPLE at the company, not the product or mission. You will need to be confident, willing to talk about yourself and post your photo.
Many people say they are too shy or too humble to do this. My response is that they are then too shy or too humble to succeed. Remember 'fortune favors the bold.'
The best way to get more comfortable in front of a camera or by talking about yourself is to just do it. If you look at videos of a stand-up comedian over their career, you'll see their comfort on stage grow over time. Same is true for bands in their music videos. Or any other field. Most people aren't naturals in this role. But most people can learn to appear natural in this role.
Again, 'people buy from people'. Your customers will want to connect with you at a personal or emotional level. If you don't respect your customers, it will come through. Your customer service will be poor, you won't understand your customer's buying process, or some other aspect of your relationship with your customers will falter.
This lack of respect can come from a couple of different angles. In the first, you just don't agree with your customers. Say you hate the color red but open a store where everything is red. (Purposely using a stupid example to avoid the very polarizing example of republican/democrat.)
Another way I've seen this play out is if the store owner that believes they are the prototypical customer for their product and build it just to satisfy themselves. They don't listen to their customers needs and the business falls short.
It's a numbers game. If I could only have one metric for a new store, that metric would be Conversion Rate. All effort should be focused on improving the conversion rate. And if you're not looking at the numbers, then you don't really know what is working and what is not.
For my clients, I create weekly scorecards in Google Analytics (GA) and have them mailed to the team every Monday morning. I also create reports from GA data that show the important metrics in a daily timeline and add that report directly into their Shopify store. The reason for this is that one way to help a team become data-driven is to push the data on regular basis and make it as easy as possible to access the data.
Signs you are not data-driven include:
There are many ways that consumers make purchase decisions. Some look at the price. Some want to see reviews. Some want scientific research. Some want to see the product in action. Some want to know who they are buying from. There's not just one way to sell your product. You will need to give different customers different information to lead them down the conversion funnel.
As such, you will need to create different types of content in order to satisfy the different needs. You'll need to be able to produce product description, general copy, product and lifestyle photography, user manuals, videos, illustrations and more.
A simple product photo and a price won't be enough to sell your product (unless you are selling $100 bills for $10).
Successful store owners think nothing of creating a new landing page for a new ad campaign and optimizing the copy and photography on that page for the intended audience.
Building an online business is very hard. And it takes a ton of effort. It is a never-ending to-do listing. If your efforts are part-time, you'll not be able to keep pace with the competition.
Let's assume that you already have product/market fit figured out. The bulk of the work remaining to make the store successful is execution. That takes someone that is heads-down, focused, meticulous and gets things done.
Let me put it another way. Let's say a certain store owner is a 'genius' at brand image. They go out to the press and razzle and dazzle them. They generate a bunch of hype and create demand that then turns into orders. Well now, those orders must be delivered or all of that brand building will be for not.
As your business grows, you are going to need to delegate tasks to others. Either to free up your time to focus on activities with high return. Or because your business needs a level of expertise that you do not have.
Reid Hoffman (the man who sold LinkedIn to Microsoft for 30 billion) says "If you are not embarrassed by the first version of your product, you've launched too late."
And I agree. One will learn much more from how consumers interact with the site and products than they will by hypothesizing how the consumers may interact. I'm a big proponent of shipping website changes quickly to see the consumer response.
In other words, the speed of e-commerce doesn't allow you to everything perfectly. You must be comfortable with good enough. To understand more, read about Minimal Viable Products or MVPs.
There are some product ideas that sound crazy, but in the end are just brilliant. For example, if you told someone in 1970 that bottled water would be a $7 billion business in 2018, they would have laughed at you. And they would have been wrong. (The plastic used in water bottles was invented in 1973 which changed the game.)
But then there are other product ideas that sound crazy, and in the end, are crazy (or at least just not a good business).
It is important that you are selling a product at enough of a margin that enough people want to create your desired revenue stream. I'm amazed at some of the just plain bad ideas I see.
You've probably noticed that some of the things I've said above directly conflict with other things I've said. And if you ask 5 'experts' about your business, you'll probably get 5 sets of differing advice. A successful store owner is going to know their space better than anyone. They are going to able to look at the data, listen to their customers, watch the industry and competitors, listen to advice, and from all of that information make the best choices for their business. In other words, you need to be the decision maker for your business. And to do that, you'll need good business sense.
For every one of the 'rules' above, you can find an exception. Someone or some business that succeeded despite defying one or more of these rules. While there are always exceptions, that doesn't mean that rules don't apply. That said though, these rules are only my opinion. Hopefully, they give you insight into common pitfalls that other stores have been caught by. For you to be successful, you'll need to know your business, products, customers, competitors, etc so well that you'll know when to follow the rules and when to follow your expert opinion.