While the B2C ecommerce industry grows at a compound annual rate that’s already over 10% per year, individual online retailers continue to face a lot of obstacles when trying to survive and stay relevant in the long run. Out of all the ecommerce challenges they can encounter, there are seven you need to look out for the most.
7 Fatal Ecommerce Challenges That Must Be Addressed For Success
If you’re not careful or prepared enough, any of the following setbacks can put the livelihood of your ecommerce business in jeopardy. Keep in mind that some have remedies and solutions that depend on you, while others can come down to the sheer luck of the draw.
1. The overly-crowded industry
There are millions of businesses in the ecommerce space today, with more being added every day across all niches—including health and wellness, technology, pet care, fashion, home improvement, and entertainment. For all intents and purposes, you could be thinking of selling rocks and suddenly you’re up against stiff online competition.
For customers, both the amount of choice in the market and the amount of advertising can be overwhelming. For example, a simple Google search for a regular home necessity like dining cutlery can return thousands of different options, vendors, and pages.
As an ecommerce business owner, your store can easily get lost in the sauce. This is why you need to think about how your company can stand out from the crowd, and how your online presence can grow strong enough to cut through the noise. The simple truth is this: if you can’t bring shoppers to your site, then you can’t compete.
What can help
Study the ecommerce industry, explore your niche, and test the market demand for your products by putting out smaller batches for sale. These first few steps will determine whether you should pursue the initial strategy or change your plan of attack.
Next, make sure your idea isn’t already taken by someone else, as customers are smart and can easily sniff out a clone. From the design choices of your logo and website to the colors of your buttons and web copy, you should be unique in how you arrange your online presence.
In other words, don’t do what everyone else is doing. Your products and the way they’re marketed must stand out in some way. For example, you could be selling the same items as your biggest competitor but your ecommerce branding could be completely different from theirs and target different customers. Try to come up with products that are unique in solving the challenges of appealing to your customer base.
2. Choosing the product line
Choosing the right products to sell is not an easy task. To simplify things, however, you can look at this challenge in two main ways:
- How to choose the right line of products for your specific audience
- How to choose popular products that are also of high quality
Your customers’ preferences are just as important as the products you sell. Ask yourself if they are finding them useful, and in what way, because just putting a whole bunch of general products in an online inventory and hoping it attracts a large audience could turn out to be a costly mistake. It’s likely you won’t attract any buyers and will have a tough time making ends meet.
In terms of winning products, your top picks should be of high quality but also unique enough so that buyers will become proud owners and maybe even vocal ambassadors for your brand. For example, Sony products are slick, meticulously assembled, and futuristic-looking, ASUS TUF gaming graphics cards are sturdy, robust, and resilient, and the three stripes featured on Adidas apparel are recognizable around the world.
However, don’t fall into the trap of selling products that are popular and nothing else. They should also have good margins to play with to turn a healthy profit.
Another pitfall to avoid is selling cheaply made products just to keep the prices low for customers. In these cases, the low prices are only good until they receive the product. At that point, any unsatisfied customers might do a number of things that you don’t want, including returning the product, writing a negative review, or worst of all, never coming back to your store. Too many of these actions and you’ll be forced to close your ecommerce business for good.
What can help
Define your ideal customers and match products to them. The more you know about who you’re selling to, the easier it is to create strategies to attract shoppers and convert them into repeat buyers.
The questions you should be asking in order to achieve this are:
- Who is your core customer base? For example, they can be single moms, retired healthcare professionals, or people who became business owners later in life.
- What’s their age, household income, and other demographic info? Are they part of a three-person family with a toddler and a joint high six-figure income, or a new couple with a relatively low income but a high earning potential?
- What’s their personality like? How would they react in certain situations? When was the last time they returned a product and what was the reason behind their decision?
- What do they struggle with? Have they taken out a loan to cover their monthly mortgage payments, or perhaps they’re dissatisfied with the distance they have to cover to get to the nearest grocery store?
- What are their occupations and hobbies? For example, are they accountants, self-employed business owners, freelance writers, avid chess fans, or pickup basketball enthusiasts?
- Where do they spend time online? Where do they shop? Examples include Amazon, eBay, and BestBuy for technology and home improvement items, Zara and Target for clothing items, and Walmart, Piggly Wiggly, and Costco for groceries.
- What kind of products do they buy regularly? What do they need? For example, tech enthusiasts may be excited to try out the latest home automation gadget, while pet owners may be more interested in a timed food dispenser for their little buddies.
Once you have the bulk of this data, the road to becoming a successful ecommerce owner becomes much easier and more clearly defined.
3. Pricing products
Yet another challenge for ecommerce business owners is knowing how to set product prices. If you set your prices too high, for example, you run the risk of alienating a lot of your potential customers. At the same time, if you set your prices too low, people may think your products are cheap and not well-made. When you don’t know how or you’re not able to come up with an effective price for a product, this is when your business is most vulnerable to competition.
In other words, without competitive pricing, you’ll never be able to establish a loyal customer base and grow your online shop.
What can help
Often, the simplest solution is the best one. If you’re selling popular and widely available products, you can consult the manufacturer’s suggested retail price (MSRP). Alternatively, you could also employ a cost-plus pricing strategy in which the total product cost is calculated before adding the markup fee.
Another method to determine the right prices for your products is to conduct manual research on your competitors by browsing their stores and tracking how their prices change over time. You should keep an eye on their busiest and slowest seasons, as well as any new product launches, promotions, and discounts. This method is typically referred to as competitive pricing.
Lastly, a third method is to set prices based on how much your customers are willing to spend on a given product. For example, products made from eco-friendly materials can often be priced at a premium compared to their Earth-ruining counterparts. On average, customers are willing to pay up to 25% more for sustainable products. This method is called value-based pricing.
4. Developing a marketing strategy
The term ecommerce strategy is general enough to encompass all kinds of plans, activities, and roadmaps that you can use to promote and sell your products online. Basically, anything that includes reaching the right audience, transforming them into loyal buyers, and creating a smooth and enjoyable customer experience is considered part of an ecommerce marketing strategy.
Many promising entrepreneurs believe that their star products will do all the work of attracting visitors and turning them into buyers. In reality, there are simply way too many businesses selling the same products to rely solely on the type, quality, or reputation of the products you’re offering to bring in customers.
Additionally, conversion rates for ecommerce sites are usually on the low end around 2-3%, meaning out of every 100 people who visit your site, only two or three can be expected to make a purchase. To succeed in ecommerce, therefore, you need a consistent flow of traffic to your website, and it needs to be people who are likely to make a purchase if you want to beat the average conversion rate.
What can help
There’s no way around it: the only way to create an effective marketing strategy for your ecommerce store is to do all of the hard work of creating one.
You’re free to use this guidance from the U.S. Small Business Administration and refer to its marketing plan example as well. Though the example is succinct, it’s packed with all the necessary information to get you started on the journey to ecommerce success.
For entrepreneurs who want to go the extra mile, you can compare and contrast your marketing plan with another template that’s a bit more comprehensive and goes over all major aspects of managing an ecommerce store in greater detail—including how to promote your products, how to establish good customer service, and how to set up your unique selling proposition (USP).
5. Establishing high-quality customer service
Modern technology makes online purchases easier than ever. Most ecommerce stores are just a few taps away on a device that’s sitting in someone’s pocket.
As an ecommerce retailer, however, it takes a lot more than simply listing your own app in the app store or publishing a mobile-friendly website to establish a positive rapport with customers. For example, if they can’t reach your customer support hub while experiencing an issue, they could very easily switch over to your competitors the next time they intend to make a purchase.
Additionally, although it can be healthy to assume that more customers will have positive experiences with your ecommerce business than negative ones, it’s a big mistake not to prepare for any negative experiences at all. If you have a customer service team, instruct your agents in advance so that they can acknowledge negative experiences and work through user concerns when they come up. Many businesses neglect to address this challenge and their operation suffers when they start to lose customers that they won’t get back.
If your ecommerce store is on the receiving end of a lot of negative customer service reviews, you may face the challenge of overcoming a negative reputation. Despite how good your products are—or how much your store has improved its services—sometimes there’s no way to recover after losing all of your momentum.
What can help
Establish a dedicated in-house customer service team if you have the budget for it. To provide effective customer service, consider incorporating these ecommerce best practices into your daily operations:
- Multi-channel support. You can provide different communication channels for customers to reach your business, such as phone calls, email messages, chatbot support, knowledge cards, and social media.
- Self-service options. This practice is typically implemented via a central hub like a help center, knowledge base, or FAQ area, where customers can navigate through a series of pre-made choices and arrive at a solution without the help of an agent.
- Personalized support. As an ecommerce business, you have the advantage of tracking tons of customer information with prior consent. With it, your agents can tailor each conversation to the needs and wants of the customer and treat them like valuable patrons.
- Feedback channels. Keeping your business open for customer feedback is an invaluable practice because it demonstrates that you’re seriously considering what your customers have to say. Use this feedback to optimize your processes and improve how your customer support specialists interact with existing and future clients.
- Automation. By adding automation wherever you can, your team members can save time to focus on higher-impact tasks that move the needle in your organization.
If hiring an in-house team is beyond the scope of your plans or budget, consider outsourcing your customer service operations to a contact center. Many of them specialize in supporting ecommerce businesses, their employees, and their customers. Alternatively, you could also leverage the services of an all-in-one customer support platform like Nextiva or Twilio.
6. Creating and maintaining a well-oiled supply chain
Understanding the complexities of a working supply chain network is key for any ecommerce store. Simply put, if you can’t produce and deliver products to customers in a timely manner, you’ll have a hard time maintaining your business and will self-sabotage your possibilities for growth.
Remember that supply chain management issues don’t just affect ecommerce businesses, so you’ll be competing with traditional companies who struggle with their own supply networks as well. For aspiring ecommerce business owners, the added logistical intricacies of sourcing raw materials, processing online payments, and constantly adapting to fluctuating customer demand can make supply chain management a tough nut to crack.
What can help
Opting for a comprehensive supply chain management software like Precoro and SAP SCM will give you complete visibility into all aspects of your supply chain, including product assembly, inventory delivery to storage facilities, freight handling (if you’re dealing with bulkier loads), and shipping products to your customers.
To further refine your supply chain, consider implementing some of the following optimizations:
- Auditing. Regular reviews of your supply chain can bring you closer to understanding the state of your logistics, products, and revenue. Uncovering and fixing even one tiny inefficiency can make a positive impact on your output down the line.
- Automated order processing. The supply chain consists of multiple variables you have to manage to ensure maximum efficiency. Automated order processing allows you to eliminate some of these intermediary steps, ultimately expediting your order and delivery processes—and reducing their associated expenses.
- Product ETAs. This refers to the expected time a transport system will arrive at its designated location (like a warehouse, an intermediary item handler, or a customer’s address). Having accurate predictions of product ETAs can go a long way in helping you avoid delays in item deliveries and reduce the margin of error related to your transportation system timeframes.
- Order visibility. It’s advisable to know where your items are at any time. Keeping a detailed inventory and a full list of any disruptions in the supply chain will better prepare you to fix things when necessary.
- Invoice payments. As simple as it seems, unpaid and delayed invoices are some of the most common causes of friction between supply chain partners, so keeping track of them and paying invoices on time will bring your business one step closer to conquering your niche.
7. Implementing a robust cybersecurity solution
Cybersecurity issues and concerns are not problems that can be solved once. Instead, they need to be addressed on an ongoing basis. Meanwhile, poorly applied cybersecurity measures are one of the leading factors of consumer skepticism in the ecommerce branch.
Here are some of the most prevalent cybersecurity problems you may face:
- Malware—software that disrupts your online operations, including spyware, viruses, and phishing scripts.
- Social engineering—manipulating employees into giving up their account passwords and/or other sensitive data.
- DDoS attacks—using a network of bots to disrupt your site by flooding it with useless or malicious traffic.
- Digital skimming—stealing payment data during an online transaction.
- API attacks—breaching APIs used by ecommerce businesses.
If left unaddressed, hackers can use one or more of these vulnerabilities to steal your customer data, lock you out of your business accounts, and sell your information to third parties for later misuse.
What can help
To create a strong cybersecurity foundation for your ecommerce venture, you first need to identify the most impactful security factors like website architecture, server location, external connections, and legal regulations, and evaluate potential data backup options.
Next, contact a professional cybersecurity service to implement proper access rights, put up two-factor authentication, and encrypt sensitive data. Using third-party security plugins, especially for WordPress ecommerce sites, is not advisable because they often end up getting hacked themselves. This defeats the entire purpose of cybersecurity to begin with.
It’s also a good idea to reevaluate your cybersecurity implementation periodically to identify gaps and seek more optimal solutions. After all, cybersecurity is an ongoing battle due to the proliferation of hacking tools, and it requires constant monitoring to stay safe.
Recap
The ecommerce sector is fraught with challenges, but some are more impactful than others. The most urgent ones include dealing with direct competitors, choosing the right products, setting competitive prices, developing an effective marketing strategy, managing a sustainable supply chain, keeping your customers happy, and installing strong cybersecurity measures.
If you can manage to address all seven of these challenges and still have energy left over, it’s likely that your ecommerce business has a good chance to thrive. With any luck and a lot of good sales, your reputation can improve until you become a key player in your respective niche.
If you found this interesting, you may also want to check our guide on the best strategies for ecommerce merchandising.
