A study revealed that 22% of e-commerce businesses go bankrupt during the first year.
According to research, 22% of e-commerce businesses go bankrupt within the first year of operations, but why? Here, we give the main reasons, according to a study done by TheeCommerce.
LACK OF INVESTMENT
Money is fundamental to any venture or company because with money, you can invest in different areas. Without money, it will be impossible to buy product stock, create a nice website or invest in advertising to attract potential customers.
In fact, this result is the common denominator for the majority of companies because the lack of investment ends up suffocating them. If we add lack of investment to few sales and bad management, the money and lack of cashflow is the main cause of death for young entrepreneurs.
According to information from Statista Digital Market Outlook of November 2021, in Latin America e-commerce will grow between 11% and 59% depending on each country. This shows the competitiveness that the e-commerce world entails, with the appearance of more and more stores. This is expected to lead to an ultracompetitive market.
Therefore, another cause of death for e–commerce in its first year is competition, specifically, the competition with large established e-commerce companies like Amazon, causing small sites to end up shutting down. This is where a great competition strategy takes on great importance.
A MEDIOCRE DESIGN
In addition to prices, shipments and product variety, the web design is an important part of the pillars of e-commerce. A poor, slow and antiquated web design will cause a person to leave you, especially if the shopping experience is bad.
Many e-commerce sites go bankrupt their first year because they start with a poor, bad quality website. A poor design includes everything related to the graphic section, from the pixelated logo to the lack of personalized shipments, notes, digital identity, etc.
Therefore, the best alternative is not to reinvent the wheel but rather to leverage an e-commerce platform (like Woocommerce, VTEX, Shopify or Jumpseller) and connect it to a website based on WordPress (we use WordPress).
Another common mistake on the majority of e-commerce sites is improperly carrying out marketing. Everything begins with a poor or unknown segmentation of the market. Not knowing your target audience can cause you to generate incorrect beliefs about them and as a result, ineffective strategies.
Similarly, this cause of death joins with those other poorly planned and poorly executed marketing initiatives. A bad campaign on Google Ads, Facebook Ads or discounts without prior calculation can cause you to go bankrupt. It is important to research and get to know your market before launching marketing initiatives.
POOR SHOPPING EXPERIENCE
Lastly, we can sum up a great number of e-commerce deaths under just one item, poor purchasing experience. A website that has a lot of shipment delays, bad inventory management, duplicate charges, or which does not have enough customer support will end in bankruptcy.
An e-commerce business can have the best website, the best marketing and basic products with irresistible prices, but if the shopping experience is bad, everything will fail! Due to this, e-commerce businesses must be careful at each stage of the customer experience to avoid a bad shopping experience and to avoid bad reviews. Source: https://www.theecommerce.com/blog/why-ecommerce-businesses-fail