Business Management

Why many Ecommerce businesses Struggle in a time When We have Best Tools for its Success

It’s a weird time to be in an Ecommerce business. With tools such as Shopify, Lumi, Shippo, AWS, Instagram, Facebook ads, etc, building an online store couldn’t get easier. Yet we come across dozens of businesses every month who have invested thousands of dollars, if not millions into building and marketing their ecommerce business with little success. Being a Fashion ecommerce agency serves us a unique opportunity to analyze business trends closely and why so many online fashion retailers struggle and eventually fail.

Online retailers who are suffering from low website conversion rate, if we look at the problem at the granular level we find that often the problem is at the owner’s mindset level. To be fair, running any business does require the owner to be so much in love with their business that it becomes difficult and rather painful for them to look at its weaknesses.

These businesses seem to be following the trends that started around 15 years ago. I am talking about the success stories of undifferentiated ecommerce businesses that sold a similar set of products to customers who were shopping just for the convenience of being able to order things without stepping outside their home.

For example, you don’t need a degree in MBA to know the value of differentiation but only a few businesses we come across are differentiated. The obsession and naiveness which is required to start any business backfires and leads owners into starting a company which does nothing better than producing products and services similar to what’s already out there in the market.

Why do so many businesses postpone differentiation and pay the cost of selling an undifferentiated brand, products, and services with a failed business?

The truth is that most retailers do start with a clear differentiation in mind but within few months of starting out they realize that customers don’t care about what they thought makes them different. By the time they realize, they have already invested so much time and money that they can’t step back. This causes them an emotional pain and they try to patch fix the problem by substituting differentiation with price, quality, inauthentic stories and VVP [vague value propositions].

Having said that, there are also examples of retailers who are making more than a million dollars in revenue with undifferentiated or mildly differentiated online fashion stores and multi-brand marketplaces. They have a great looking online store, they have traffic and also customers placing orders. From the outside, they look happy and thriving, but inside they are miserable. No matter what they try, they keep hitting an invisible wall. They are bleeding money. Imagine yourself being in the shoes of a retailer who has invested 5 years running such a business. It hurts.

The Exceptions
Now let’s talk about the revelation – the vertically integrated brands that have been able to successfully leverage technology and marketing opportunities to their advantage when others failed. We’re talking about brands such as Bonobos, Warby Parker, Cuyana offered clearly differentiated value – Digitally native Vertical Brands [DNVB] as Andy Dunn, founder of Bonobos likes to call it.

What’s common in these brands?
1) These brands solve an unsolved problem that matters to its customers
2) The brands sell ‘strikingly unique’ signature designs that its customers love
3) The product has a high perceived value and presented their products better than anyone else in that category
4) The products have a high frequency of purchase or high average order value or both
5) High-Profit margins of 50-70% or more
6) Their customers take so much pride in being a customer that they share it on social media

If your brand has all these qualities, you stand the best chance for success.

It’s easy to check a business against these 6 parameters when it’s in the ideation stage in terms of whether to drop or tweak an idea. But it’s not that simple to make adjustments in a running business. I mean the brands who have been in the business for last 2 years or more. Can they all of a sudden shift gears and become vertically integrated? Maybe YES but these decisions are taken at the foundational level of business on its inception. Of course, you can change your brand communication, improve your customer service, focus on specific core category and invest in improving your brand’s perceived value but you can’t pretend to solve a problem. You can’t produce a market gap and fill it. It has to be there.

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