Would you like to run an eCommerce business without surprises in 2023? You know what we are talking about, the unpleasant and unexpected turbulences such as “Oh, we’ve just lost our supplier, and we need products ASAP!” or “Oh, the tool we’re using has just changed prices… seems we’re going to increase a budget for that”.
Yeap, these kinds of things! And if you run an eCommerce business, you’ve probably faced these situations, especially during 2022. But the question is, is there any system or method to avoid these surprising moments?
Yes, there is…
How to create a solid ground for your eCommerce business?
What makes one business solid? Well, there are external and internal factors that might influence your business.
- External factors, such as technological, political, economic, demographical, social, ethical, competitive, natural, or global, affect your business daily. These factors are changing your business environment, and you have no control over them. But, managers should track these changes and minimize the risks these changes might bring to your business.
- Internal factors, such as human resources, finances, and current technology, are the main factors influencing your business. You have to ensure all of these factors are covered in the best way possible.
External factors and your business
External factors impact your business, and since you’re powerless to influence or change anything regarding them, the only thing left to do is make your business as adaptable and flexible as possible.
Now, first of all, let’s mention that the effect can be positive or negative… well, actually, it can also be both, at the same time. Let’s quickly go through all external factors.
Yes, you run your business internationally, and yes, your buyers come from every corner of the earth, but political factors might still influence your business. Political decision-makers create
- political stability
Needless to say that all three impact eCommerce businesses, and you should always pay attention to changes in this segment.
Now, when it comes to economic factors, you probably know how they can impact your business.
- interest rates
- economic growth
- exchange rates
Out of all these changes, eCommerce businesses mostly feel inflation and exchange rates because they need to adjust the prices of their products and services to the new situation.
When inflation is high, it typically harms every type of commerce. People buy less, especially luxury goods. And when your currency drops, your goods are cheaper for buyers abroad, but at the same time, if you import goods or materials for production, it might cost you more.
When it comes to social factors, they will most likely impact your choice of niche and what products you will offer to the market. Any of these three, but mostly lifestyle, will sometimes require you to change the product or service you provide if you realize that your niche has shrunken.
- Tastes and trends
Social factors will impact your business regardless of the eCommerce business model you choose, but they will most influence B2C, B2B2C, and C2C eCommerce business models.
You’re in the eCommerce business, and you know it’s something that came along with technological expansion and the internet boom. So, your business is impacting other firms, such as brick-and-mortar stores. Besides that, among this group of factors, you can find:
- ICT (information and communications technology)
- Research and development
Yes, you’re right. All of these factors impact your business.
Automation became imperative for successful eCommerce businesses, and ICT changed sales and marketing channels immensely. And if we look at the trends in eCommerce, we’ll see that AR, VR, and 3D modeling are gaining momentum.
When we talk about environmental factors, we’re talking about
- Climate change
And if you think the green economy does not influence eCommerce business, think twice. Sustainable shopping, vetting products, and minimizing waste can help your business to grow.
You’re probably familiar with this one. Yes, it’s challenging to beat competitors, and when you’re entering the eCommerce world, you have to pay attention to:
- Price wars
- Product differentiation
These three might decide the future of your business. You might get stuck and lose in this game if you’re not careful. The truth is that, if you’re running a small business, you can’t beat the big ones in a price war. You can only ruin yourself by selling goods without profit. So, try to differentiate your product and find some added value to justify the price difference.
You see, it’s more complicated. You need a lot more research on trends related to your business idea before you build an eCommerce website, kick-start your new business, and actually start selling.
Internal factors depend only on you and your eCommerce business. Will they have a negative or positive impact on your company? It’s up to you how capable you are of navigating through every segment and creating a wise plan.
Within this group, we can find
- Human resources
So, how about that budget? Do you have one, or do you still think eCommerce is a special kind of business where you don’t need budgeting?
Well, eCommerce is just like any other business, so you need to pay attention to your finances. What does it encompass?
First, your finances encompass the money you get from selling goods or services and your expenses for running your business. And if the money you get is less than the money you spend… well, it’s not such a great sign, isn’t it!
So let’s focus on these expenses every eCommerce business has.
They can be
- Fixed (the same every month, regardless of the level of sales) and
- Variable (depending on various factors, changing from month to month).
You probably know that when it comes to cutting costs, you always tend to lower the variable ones. Why? Because the fixed costs are crucial for functioning.
And this is something you need to think of when creating your eCommerce business plan. For those looking for an eCommerce business plan template, here’s a video that might help.
Why is a business plan so important? It answers one of the crucial questions: How much does it cost to start an eCommerce business? When you put everything on paper, you will know exactly what budget you need and is your eCommerce business idea worth pursuing!
Fixed costs are costs that your eCommerce business has roughly the same every month. They encompass web hosting fees, software and tools fees, insurance, internet access fees, subscription fees for eCommerce platforms, etc.
Rental and utility fees will also be in this group if you have a physical office or brick-and-mortar store alongside your eCommerce store.
The only way to lower, or at least lock in the prices you pay for this group of costs, is to look for a discount (if it’s the software you pay, for example) or go for the yearly subscription.
Most SaaS companies offer special holiday or seasonal discounts. You can use it to get the best deal for the year ahead and secure the prices, especially if the external factors are turbulent at the time.
Needless to mention that Black Friday and Cyber Monday are the most popular, and whatever software you use will probably be discounted during this period. And there’s an opportunity for you to automate an eCommerce business and save most of your budget.
It’s not rocket science. You get a discount, typically 10% to 40% off, if you buy a yearly subscription. It might seem like a lot of money at once, but if you’re looking at that purely economically, it is the perfect way to lower your fixed costs for that budget year without giving up on anything.
Now, variable costs are a bit different; they are changeable, and you can’t predict them with certainty, such as fixed costs.
Variable costs are all you spend for raw materials, storage, shipping, suppliers, contractors (graphic designers, social media campaigns, etc.), and marketing.
You’re running your eCommerce business, and you probably know well what technology means to you. These are software solutions, apps, tools, and everything related to technological advancements that helps your business grow.
If your business stagnates regarding technology, your competitors will eat you for breakfast over time. So, within your budget, you need to leave space for technology advancements.
This is something to think of, whether you’re just starting and building an eCommerce business from scratch or planning to grow the existing one.
Yes, you have an eCommerce business, but you know that sometimes it’s too much work for a one-person show, especially if you need to build your website from scratch.
You will likely need developers, content creators, marketing experts, a sales team, and a customer support team. Okay, some of them can be engaged as external associates, but the service you’ll get from your full-time employee might be a better option if you’re dealing with sensitive information.
Whether the people you hire are full-time employees or external associates, the quality of the work is what you want to aim for.
When running an eCommerce business, you know that customer reviews count a lot. And many companies pay the price of human mistakes, which might occur in any phase of the business process, starting with taking orders, shipping, selling out of stocks, etc.
That’s why most successful eCommerce businesses aim to automate most processes. It can help you keep the service professional and avoid unpleasant situations that lead to bad reviews.
Not to mention that automation lowers the workload and automatically decreases the need for an additional workforce.
How to juggle all these influences and keep your eCommerce business stable?
You all know, and we mentioned previously, that as for the external factors, there’s not much you can do except to keep your business as flexible as possible.
But, you take all the responsibility when it comes to internal factors. So, what can you do? How to build solid ground and run an eCommerce business without surprises?
Keep your business flexible, lower fixed and variable costs without losing quality, and always keep an eye on what’s happening around you.
Frequently asked questions
Why is eCommerce good for business?
Should online businesses be charged with tax?
Is eCommerce business profitable?
Why do eCommerce businesses fail?
- Choosing the wrong product: If you select a product that is not in demand, you’re increasing the chance of failing.
- Wrong pricing: Setting price too low or too high have the same effect on your business – you go down! The product is not selling (too high), or you have no profit (too low)
- Lack of marketing strategy: Without a marketing strategy, you might invest a lot of money in your marketing campaigns and still be out of results, or you might have the best product ever, which is invisible to the potential buyers.
- Your website is on the 55+ page of Google: You know how they say if you want to bury something, put it on the second page of Google – no one will find it there. The same goes for your website; the higher your Google position, the more chances for success you have.
- Confusing design: Your online business might be a great idea, but if your website’s design confuses visitors (potential buyers), and has no action buttons (to nudge them to buy your product), your business will most likely fail.
- Uninteresting and unuseful content: If you don’t describe your products and how they solve the buyers’ problems, you will struggle to sell them. Your content needs to be clear, practical, engaging, and genuine, and, most important, it needs to explain your products in detail.
- Additional costs: Be very careful with additional charges for your product, especially shipping and delivery costs. These costs are the no one reason your potential buyer might change their mind and go to your competitors who have lower shipping and delivery costs.
- Bad product images: When you have an online business, you need to know that how you present your product visually will vastly affect your sales.
- No differentiation: How is your company different from all the others? What is unique about your product or service? You need to create a value proposition and inform potential buyers so that they choose you instead of your competitors.
What is an eCommerce business model?
- B2B (business to business)
- B2C (business to consumer)
- B2G (business to government)
- B2B2C (business to business to consumer)
- C2C (consumer to consumer)
- C2B (consumer to business)