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Starting An E-Commerce Business? Avoid These 7 Mistakes

The e-commerce world is full of opportunity–but also risk. Here are 6 common pitfalls new business owners make.

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BY Arianna ODell - 18 Dec 2017

PHOTO CREDIT: Getty Images

A year ago, I knew nothing about e-commerce. Over the last twelve months, I've had a crash course in the e-commerce world after jumping in headfirst to try my hand at running an online store.

Along the way, I made many mistakes--some of them very costly. Here's what I wish I had known before getting started.

1. Failing to Do Market Research

When I launched my store, I started off with five products I had designed. After my first sale, I was very optimistic and quickly hired a number of designers to help me make over 300 products. Though I have a background in marketing and know the importance of market research, I was having so much fun creating the things inside my head that I went on a "creation spree" without doing any market research to see if the new styles would perform. Though many of the ideas were fun to make, they didn't sell, making it harder to generate an initial profit.

Jitpal Kocher, founder of Lionsmark, recommends doing one thing really well instead of being torn in fifty directions. "Put an emphasis on a singular product type with different themes or the same theme across different products rather than being all over the place," stated JitPal. "Let people find you because you make really cool movie poster spoofs rather than having a collection that isn't connected together."

If I were to do it again, I would have spent a few weeks learning more about what types of products sell well online and researching my competition instead of jumping without a parachute. If you're jumping into the e-commerce space, talk to as many experts in the industry as possible, do throughout research, and assess your competition.

2. Doing Everything Yourself

In the early days of my e-commerce store, I was doing everything myself, from designing products to marketing. I quickly learned that this was a good way to burn myself out without scaling efficiently.

"The biggest mistake we had was trying to do it all ourselves," stated Cathryn Lavery founder of BestSelf Co. "We would have hired faster, put the right people in the right places. Undervaluing key positions like customer support was an initial mistake we made. Now we recommend hiring great customer support within the country you operate from to look after your customers. Don't try to farm it out at $5 an hour overseas."

When building an e-commerce business, it's important to find experts to help with the workload and help you reach your goals fast.

3. Not Focusing on Business Development

My favorite part of running a business is being able to turn ideas in my head into tangible goods. As a creative person who enjoys my craft, it can be hard to sit down and focus on the sales aspect of running a business when I'm excited about what I'm creating. When I first started, I didn't do any marketing and just kept putting things out there without a plan.

I've hit pause on the creation for now and am spending the majority of my time on marketing efforts, sales, and business development. Jolijt Tamanaha CMO of Fresh Prints echoes this sentiment, stating that you have to be aggressive with your sales tactics to grow a business--especially in the e-commerce world.

"When we first launched, we didn't want to spam people. We'd bought into the rhetoric that everyone will hate your brand if you send them emails often. But that's just not true," said Tamanaha. "If you segment your email list so that you're sending people products they might actually be interested in, many will open, click, and purchase. Those who don't, just delete the email. They don't develop a fiery hate for your brand because it doesn't even register.

"With our second line, we launched the week before Black Friday and ran a 14-day campaign in which we emailed each segment every two days. Our open and click rates were 3x the e-commerce average. Very few people unsubscribed. And we sold 2x more in those 14 days than we'd sold over two months with our first line."

4. Find the Right Platform to Sell Your Products

When I first started selling my products online, I put all my effort into the Etsy platform. While it was making progress, I failed to diversity the channels where I was selling. Months later, after putting my products on Amazon, Shopify, and Pinkoi, I saw my sales quickly double--something I could have benefited from six months ago.

While some sellers might benefit from an Amazon partnership, some might be better suited for a very niche platform catering to a specific demographic. Damien Prosalendis, founder of SPXMAC agrees. "Once we had a client who wanted to sell 'digital consultations for room decoration' on Amazon.com. Not only is that something nobody would ever look for on Amazon, but the price of it also was in the $300-$600 range.

"Nobody would ever look for that on Amazon," said Prosalendis. "That's like the owner of a pet shop selling car replacement tires. You will be surprised how often people don't market to the right audience. This example might be a bit extreme, but proves the point that audience targeting is instrumentally important."

5. Brand Yourself for Success

Many entrepreneurs quickly pick a domain name and sometimes don't think about about SEO and product relevance. I named my company "Ideas By Arianna" but I am now considering a rebrand as the name doesn't show people what we sell and, as I'm not a celebrity, no knows who Arianna is yet.

"The biggest mistake that I made was naming my company Fine Art America when we launched back in 2006," said Pixels founder Sean Broihier. "It locked me into a specific product (i.e. fine art) and a specific geography (America). At the time, the only products that we sold were canvas prints and framed prints--so the name made sense. Within just a few years, however, we were selling greeting cards, throw pillows, T-shirts, and more. We're now the largest print on-demand company in the world with 500,000+ international artists and 15 manufacturing facilities located all over the world, but as you can imagine, it might be hard for a buyer from Germany to wrap his head around purchasing a T-shirt from a company called Fine Art America. As a result, we rebranded as Pixels.com back in 2012. It was costly and confusing to our buyers and sellers.

"When you're launching an e-commerce business, make sure that your company name not only reflects what you're selling right now but what you may be selling many years down the road. That's the beauty of e-commerce--everyone on the planet is your potential customer, and it's relatively easy to expand into new product categories. Make sure that your company name doesn't hold you back."

6. Failing to Talk to Customers

With orders to fulfill and marketing campaigns to get out, customer research and feedback can often fall by the wayside. Your customers can provide you with valuable feedback about your products, but can also shed light on how they're finding you and what they think of your brand.

"One mistake we made early on was not staying in closer contact with our customers post-purchase. We would certainly stay in touch via offers and newsletters, but we were missing a more back-and-forth, human relationship with them," claimed Mack McConnell, founder of Taster's Club.

"Once we added a phone number and chat box to our site, we heard from people more often. We started reaching out to customers personally and hear about their experience first-hand. You have to find those customers who have a lot to say and listen up."

7. Underpricing Your Products

When I first started my company, I was selling mugs for $12.99. After production, marketing, listing fees, and platform costs, I was shocked when I talked to my accountant and discovered that I had been losing money instead of generating it when I took taxes into account. After crunching the numbers, I realized I needed to price them upwards of $20 to generate a positive cash flow.

It's important to do a financial analysis that takes into account shipping, returns, and all overhead costs to properly price your products. "Margins and cash flow are everything," said Nate Ginsberg an e-commerce entrepreneur. "E-commerce can be VERY expensive. And you can often lose money and not even know it if you don't know your numbers."

Whether you are an e-commerce novice or a seasoned pro, the industry is constantly changing. It's important to keep yourself updated on everything from SEO algorithm changes to platform fees. Online shopping isn't going away--get started with e-commerce today and if you're lucky, you'll benefit for years to come.

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