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Discover the top reasons why ecommerce businesses fail

December 6, 2023
5 min read

We are living through an unprecedented period of growth for online retail, which can make it surprising that so many e-commerce businesses fail!

eCommerce has been increasing steadily for years. However, COVID-19’s impact accelerated the demand for internet shopping and home deliveries. This trend is unlikely to reverse, as consumers have become even more comfortable with the advantages of buying online.

By 2019, the value of e-commerce worldwide was already 3.53 trillion US dollars. Industry insiders expected this to rise to 6.54 trillion by 2022, even before the pandemic boosted reliance on home delivery services.


Unfortunately, none of this guarantees success for new or even existing e-commerce businesses.

In fact, according to one study, a shocking 90% of e-commerce start-ups don’t survive beyond their first 120 days!


The reasons e-commerce businesses fail are often wholly avoidable. This article looks at the main reasons online retailers don’t survive. Or why some online shops fail to achieve the sales success they aim for.

Lack of capital and cashflow issues

Often flawed business plans contain miscalculations of the funding needed to get an online store live and trading, this causes entrepreneurs to fall before they even get started.

According to one piece of research, a third of e-commerce ventures run out of cash and subsequently fail in the first few weeks!


Underestimating the importance of smooth fulfilment

The capital needed to design, build and host an attractive and high functioning website is only part of the story. Getting your products to customers demands a seamless fulfilment service.

eCommerce fulfilment needs to be a resilient and well-constructed system of getting your goods out swiftly and faultlessly. Modern consumers have been conditioned by the likes of Amazon to expect quick, reliable delivery of their goods when shopping online.

If customers start receiving notifications of out-of-stock items or slower than expected shipments, they can be unforgiving. If they receive the wrong goods or need to return items due to damage, it’s likely you’ve lost their repeat business.

To grab - and hold on to - market share in your area of e-commerce, it’s important not to underestimate the impact of order fulfilment services on customer experience. They must be as well organised and watertight as your digital platform. Otherwise, you’re doomed to promise more than you can deliver.

Killed off by competitors

Any e-commerce business plan should include competitor analysis and careful checks that your proposed product offering has a ready market.

Some online retainers make the point that e-commerce businesses fail when they are too small and trying to compete with established ventures or having too few customers to rope in. This begs the question, how do some e-commerce businesses go from strength to strength, even in sectors with plenty of competition?

The defining factor could well be marketing prowess, but also how well they build value around their brand and protect high standards of customer service.

If you want to take on the big players, you need a reliable, competitive edge. Can you get goods to people faster, cheaper, at a higher quality, with a relatable brand or with lots of in-person advice and support?

Matching your brand statements and e-commerce promises to streamlined order fulfilment then becomes doubly vital. Such as outsourcing your warehousing and fulfilment to an experienced provider.

If, in fact, your delivery is slower or more expensive than your competitors – or be prone to errors – customers will disappear to your rivals in a ‘click’.

Lack of online visibility

Much of the above focuses on the mechanics of running a successful e-commerce venture and retaining customers by exceeding their expectations from the online experience to the delivery service, to the quality products. However, first you need to get customers ‘to your door’.

Unfortunately, you can have the best-designed e-commerce website and still see insufficient levels of internet traffic if you achieve poor online visibility.

Search Engine Optimisation is not a ‘bolt on’ to digital marketing; it should be a central pillar of your e-commerce venture. Your product pages must reliably appear in the top five search results for your specific category to ensure you generate enough sales leads.

You must also have a responsive website to stand any chance of surviving. Over 50% of your potential customers search and shop from their mobile phones. This figure is always increasing. Your site must perform brilliantly on any device and browser.

Poor marketing and UX

Off-page SEO, social media, advertising and other forms of digital marketing are also important ways to create e-commerce traffic. However, e-commerce ventures that get substantial website traffic but still fail to convert could suggest one of two problems.

It could be that your marketing is not focused on the consumers most likely to buy your products, so you could be wasting cash and effort on PPC, for example. Or, your lead conversion is low due to bad User Experience (UX).

There are lots of ways poor UX drags down sales figures. This requires a detailed analysis of buyer behaviour and your customers’ interaction with your website.

One of the biggest clues is if you have large numbers of abandoned shopping carts. You have clearly got your product pages right, and consumers are impressed enough by your brand statements to add items to their basket. So why do they leave without buying?

One of the leading causes of this is a flawed checkout page. This could be unexpected delivery charges, out of stock notifications and unattractive shipping details. Or even something as simple to fix as an over-complicated payment form, or an insistence they ‘register’ with no option to pay as a ‘guest’.

Could your consumers also be expecting free delivery as part of your customer service?

Many checkout issues can be rectified by working in partnership with the right order fulfilment service. The promise of receiving goods swiftly, reliably and without reason to complain could also protect your brand loyalty and bring customers back for more.

Steps to e-commerce success

Careful planning, robust marketing strategies and systems to underpin good customer service are central to survival as an online retailer. Including working with the proper order fulfilment partner, so you can deliver on your promises and meet the demands of modern consumers while saving time to focus on the other challenges faced in growing your business.

Get these things right, and you could not only be the one in ten that survives, but you could also be hugely successful!

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