Is e-commerce a dying industry?
I just had the most depressing conversation with a neighbour who is a senior leader in a big 4 management consultancy. He ran me through the stats. The Iconic still isn't making money, Surfstitch are barely breaking even and e-commerce has the highest churn/ failure rate of any Australian sector. He thinks that the segment is inherently flawed. He advised me to take the brand we have patent worthy products under, pull it offline as we're time poor and focus on retail supply/ international expansion and to sell the other e-commerce business as if it's making money it's an anomaly and to get out now whilst we still can. What do you guys think? I'm rattled.
CAROL JONES Owner at Interface Pty Ltd
Good morning Joslyn from rural Australia,
Don't be depressed about online shopping. It's going to be here for a very long time.
As others before have said, the failure rate is very high because of the low entry level to start.
So that in itself attracts men and women who are not suitable for running a business. And many online stores are only part time businesses. To derive extra income. But it's not their main income.
We run our international business from our remote rural property in the beautiful Central Tablelands of NSW. We started this business in 1994. When the tyranny of distance ruled all rural businesses.
We were a mail order business with established customers before the internet. Email. And call waiting came to our rural village in 2001.
We already had a website developed and ready to launch on Feb 01 2001. The day dialup opened up a whole new world to us.
We became international within the blink of an eye. With many customers dropping into our website from the USA. The UK. And Europe.
This business pays our bills. The mortgage. And feeds our dogs.
We treat it as a real business. And work on it every day. All day.
We not only make a profit. But we grow every year. Some years are more spectacular than others. But we have steady growth. All thanks to the internet and online shopping.
To succeed as an online business you need different skills. You need to understand the impact digital marketing has on everyone. And you need to stay in touch with your customers via digital marketing. Without harassing them.
This is an evolving technology and staying on top of what matters to your business is a full time job. But worth it. I'm forever taking online courses to keep me sharp and at the pointy end of not only technology. But also about how to keep in touch with those people who pay my bills.
The people who fail, do so because they not only lack the stamina to run an online business. But also because they don't take their business very seriously.
eCommerce is exciting. But not for the faint hearted.
So cheer up. There's a lot to love about being an online business.
~Carol Jones, Ironing Diva❤
Purveyor of The Fitz Like A Glove™ Ironing Board Cover And Other Goodies
350,000 customers. In 29 countries.
E-commerce isn't dying. Anyone can setup an e-commerce site for free and most people online do. The issue is a lot of people will just try and find cheap products off ebay and try to resell them on their own site with a large markup.
Since there are so many people trying to sell the same product, people have a lot of choice, larger e-commerce sites would be feeling this as people have more options and in most cases cheaper options.
If you want to be successful in e-commerce do some research like Jef said. There are a lot of hobby sellers online that don't really care about sales volume, they are just happy to make a little extra cash.
Nothing is forever when it comes to retail. If you found a great product that is one of a kind, enjoy it while it lasts! It is only a matter of time before the same factory starts pumping out cheaper alternatives. So you have to be creative, look for the next trend and do some of your own R&D.
For a long time e-commerce was seen as a easy income, now you actually have to do some work it is not so appealing to larger companies as costs increase. So when someone says to you the e-commerce industry is dying, it is just their point of view based on their experience. If your friend is a consultant for the big 4, it would just be that they are not making as much profit as they used as more effort is required.
A lot of people pay too much attention to large companies, they tend to believe large companies know it all because of their size. This couldn't be further from the truth! Look at the big 4 banks in Australia. Look at the big 4 collection companies in Australia. They don't know it all and if you keep watching the news you will shortly see this.
Large companies are very slow to change, mainly due to internal red tape. Smaller companies don't have that issue so can change/adapt a lot faster. Large companies are looking for large profits with little effort. This means smaller companies willing to actually do some work can succeed. Larger companies have the ability to buy out smaller companies, this is an easy way for them to develop with little effort.
I believe what you are seeing in the e-commerce industry is a tipping point, and to me this is the most interesting time.
Jef Lippiatt Owner at Startup Chucktown
As Steven mentioned above, e-commerce is definitely not dying. It is expanding especially in mobile purchases (from phones or tablets). There has been a bit of a resurgence in physical stores, but online shopping is not going anywhere.
I also agree with Steven's point that the barriers to selling online have lowered significantly over the last several years. But remember, just because people have online shops does not mean they have gotten everything right.
- Many people are only doing it as a hobby (not trying to turn it into big business)
- Many fail to understand marketing to the proper customer base
- Some don't even have products or services that the market wants but have enough capital to stay in business.
Don't let a gloomy message doom your aspirations. If anything it should embolden you to double down on research and really figure out:
- Who your customers are
- What do they think of your current product / service
- Are you doing enough to reach them
You must be realistic (you may not have 100's of customers overnight, I know I don't). But you must remain passionate. If you've received good feedback, press on. Things may take more time than you'd like, but overnight success usually takes 2 to 3 years.
Failure rate is probably higher than anything before as barrier to entry is at an all time low. Almost every man and his dog has set up some kind of online shop or is an Ebay seller. Not everyone is going to reach huge success.
With that said it's not a shrinking industry. Most people we all know are increasingly spending online for all sorts of things.
If anything e-commerce is going stronger. Look at Amazon, Alibaba, Ebay, etc, I'm worried about brick and mortar retailers that sell the same thing those e-commerce sites sell.
Considering e-commerce as an industry in itself is an interesting thought. E-commerce is an alternative sales generation tool for a business; however, a lot of smart businesses understand that it is a lot more than that and are also exploring the side benefit of e-commerce, being the ability to gather and analyse personal data. But can we define e-commerce as an industry? Perhaps we could say that this “industry” is constructed of those businesses that solely rely upon their e-commerce capabilities as their sales platform – or that exist solely in the digital world. And do solely digital businesses have a higher failure rate than more traditional businesses? If this is the case, perhaps it is because the digital space typically has a lower cost to entry than traditional bricks-and-mortar businesses. Ease of entry may also mean that the business venture is entered into more quickly, potentially delaying the consideration of external advice and or implementing established business protocols such as plans and budgets. My belief is that far too often a business starting with an idea and a laptop may be undercapitalised and therefore not adequately equipped to deal with all the requirements of its operations, such as statutory costs and legislative compliance.
Does this mean that e-commerce (as an industry or tool) is not relevant or useful? The answer is yes and no, depending on the business. Certainly, e-commerce like any other tool has both its advantages and disadvantages as a sales strategy. Businesses need to consider their product, target market, logistics and set up costs as well as their marketing strategy. Businesses need to consider the scalability of their e-commerce platform, the ability to meet demand, the banking and payment platform relationships and their online terms and conditions, as well as whether or not to collect and retain data. In short, business leaders need to consider e-commerce as part of the overall business strategy and make a considered decision on whether resources are best committed to e-commerce as opposed to another sales option, such as international trade. If in doubt, potential options should be discussed with a trusted independent business advisor. And if you don’t have one, the question is - why not?
Jennifer Lancaster Owner at Power of Words
The big players will keep on. Look at Shark Tank, episode 17 July. Snap Social. The solo tech founder is selling try on-snap-and-buy-later for real retail shops - charging $1500 a month - and is doing well. The hybrid of social media and retail is definitely a gap in the market if you have great tech and a sales team.