Everyone is wondering how to start an eCommerce business today.
eCommerce businesses are one of the most profitable in this country. Back in 2021, retail e-commerce sales amounted to approximately 5.2 trillion U.S. dollars worldwide. This figure is forecast to grow by 56 percent over the next couple of years, reaching about 8.1 trillion dollars by 2026.
It is one area that many budding entrepreneurs want to enter especially as live eCommerce has emerged. However, as profitable as the industry can be, there are numerous risks associated with starting a business within it.
So to help to ensure that this doesn’t happen, I’ve rounded up a list of the 9 most common risks startup eCommerce businesses should be aware of:
Table of Contents
The Risks for Ecommerce
This might sound like an obvious one, but many startup eCommerce businesses underestimate it. They underestimate just how dangerous it can be to operate online without suitable safeguarding practices in place.
In the digital age, eCommerce businesses don’t only have to contend with cyber criminals hacking into their sites. As well as phishing attacks, harmful malware, credit card fraud, etc.
Because of this, not only is their sensitive data at risk of being exposed but their customers’ sensitive data may also be stolen.
A huge risk to be aware of, by implementing cybersecurity measures, will ensure that your business maintains its reputation and doesn’t lose significant revenue.
But How Can You Do This?
There are several methods you could use to guarantee that your online data stays away from hackers. However, the most popular for many modern eCommerce businesses is to outsource their safeguarding requirements to a managed IT service.
Easing the pressure and ensuring that you have a long-term solution, you can focus on other aspects of your business. Let the professionals handle your online security for you.
Even though you might not have a lot of data as a startup business, these safeguarding practices will undeniably benefit your business.
This is especially true in the long term as it starts to grow and you acquire more customers as you learn how to start an eCommerce business.
Hire Part Timers for Ecommerce Businesses
It is advisable to prioritize hiring part-time staff for specific duties initially, as this strategy can effectively manage costs and enable you to adapt to fluctuating demands during the initial phases of your business.
The Grey Market
The grey market (or gray market) includes platforms in which your products could be sold outside of your permission.
Even though it is technically legal, it can cause many damaging repercussions. These could be harming your brand’s reputation or the relationship that you have with your distributors.
Although there isn’t really a way of stopping this from happening, there are steps that you can take. You’ll want to ensure that your customers are aware of what’s happening.
For example, you could inform them about why they should always opt for shopping with you. Or know the authorized dealers that you trust.
Despite the fact you’re a startup, your items can still be sold on the grey market. Plus, when you start to expand internationally and people recognize your business to be a big player within your industry, the chances of this grow exponentially.
Warehousing/Logistics Issues
At first, warehousing might not really be an issue. But as you start to acquire new customers, you’ll need an efficient solution. As you add more stock to your site and the demand increases, you could face warehousing and logistics issues.
For example, if you’re sending shipments internationally, there’s the risk of packages going missing. Not only that but arriving at your customers damaged or being delivered to the wrong recipient.
To try and mitigate this risk immediately. It’s important that you stay on top of your logistics operations. You will want to be ensuring that you use a warehousing and delivery company that can cope with the demand.
An Example of eCommerce Businesses
Recently I purchased some logo t-shirts from I Amy My Imagination’s Etsy Shop. Owner, Dana provided me with details of when to expect my order and let me know immediately when there was a delay.
If she had not done that, I would have been wondering where my order was and may not have ordered again from her in the future.
Therefore, you want to guarantee that your logistics are reliable and trustworthy. You will not want to receive negative customer reviews.
Issues With Taxation For eCommerce Businesses
No matter what the size of a business, it’s vital to know exactly what taxes should be paid each month or annually.
But when it comes to eCommerce businesses, taxation might prove to be an issue. Why? Because if you’re sending shipments across the world, you’ll have to be aware of what sales taxes apply to each location.
To ensure that you file these correctly, it’s a good idea to seek expert advice from a tax consultant at the start. You don’t want your startup to face issues down the road with this, after all.
Reliability With Systems
As you will be operating online full-time, you want to guarantee that your systems are reliable.
However, no matter what precautions you put into place for this, there’s a possibility that at times your systems will fail. Not only is there a risk of your IPS (internet service provider) crashing, but the system you use for online payments could face errors.
Due to this downtime, your business may either experience a drop in sales or customers grow frustrated that it’s not working as it should.
Customer Issues
Every business, no matter what they specialize in, will face customer issues and disputes at one time or another. That’s a fact. And within your eCommerce business, this is no different.
Whether this is because of the product not arriving, not meeting the customer’s expectations or they have been charged twice for it, there are so many problems that arise.
Although this is just part of running an eCommerce business, it’s important that you have the practices in place to try and cope with them. To do this effectively, it’s a good idea to invest in customer service.
With a handful of staff on hand to tackle these issues, your customers will know that their voice has been heard. You will be able to deal with their problems accordingly.
Wasting Money On A Marketing Agency Too Early
Although this is more of a mistake than a risk, it’s still an important thing to acknowledge when you’re first starting out.
A trap that many eCommerce businesses fall into, could result in you spending more money than needed.
As a business owner, it’s important that you have a firm understanding of how to market your business. With a conceptual understanding of content marketing, SEO, social media, etc. you’ll be able to get the most out of your business.
Then later you can seek out a marketing agency.
Ranking Poorly On Search Engines
As an eCommerce business, you can’t underestimate the importance of SEO. If you don’t utilize it to the best of your abilities, you simply won’t be able to generate traffic or convert leads successfully.
However, even if you are trying to boost your SEO and are following the correct practices, that doesn’t mean that it’s easy.
One of the main risks associated with this is Google’s algorithm updates frequently. And if you don’t have an SEO professional on hand to ensure that your website aligns with these, you’ll experience a drop in ranking.
You could either hire an in-house SEO professional to help with this or outsource the work to an SEO agency. The option you choose will depend on your budget. As well as which one you think will align with your business requirements in the long term.
Communication Barriers
Chances are that as part of your strategy, you want to expand internationally. However, when eCommerce businesses do this, they must be aware of the barriers that can exist.
From language barriers to differences in culture, you’ll want to ensure that you’ve carried out thorough research into the countries that you’re looking to expand into.
Otherwise, you’ll run the risk of creating barriers that will result in low customer satisfaction levels.
The Advantages of eCommerce Businesses
Even though you should undoubtedly be aware of the above issues, it’s also good to look at what advantages you can reap from your startup eCommerce business.
To give you a flavor, here are 3 of the top benefits you can take advantage of:
Lower Overheads
One of the most prominent benefits of running an eCommerce store is the lower overhead costs.
Not only will you save money as you won’t have to rent or purchase a building to work from but you can operate certain processes. Operations like inventory management to billing.
These can be done from anywhere in the world but do keep in mind internet accessibility and speed!
How To Start eCommerce Businesses Worldwide
As aforementioned, you’ll be able to send your products around the world. Because of this, you can benefit from a greater reach than that of traditional stores.
This will make your business more competitive and ensure that it attains higher revenue. Which will, in turn, give you a far greater chance of success in the long run.
Remain Open 24/7
Another reason why you can attain higher revenue is that you can keep your eCommerce store open 24/7. As many of the processes are automated, you don’t need a physical person on hand full-time to deal with the sales.
Therefore, you need to invest in chatbot technology.
Final Thoughts: How To Start Ecommerce Businesses
So, there you go! Those are the 9 most common risks every startup eCommerce business should know, along with the top three benefits.
In an industry that’s booming, if you acknowledge these, there’s no reason why your business can’t be successful.
Have you started an eCommerce business yet? I’d love to know in the comments below if you encountered any of these issues or if you know how to start an eCommerce business now.
She has 30+ years of experience in marketing/advertising with 12 years of experience in content marketing, social media, blogging, and SEO.
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Thank you very much for presenting us with important information such as saving us and our customers from online fraud.
The truth is that for those who are running an online business with the help of very few people, it becomes very difficult to manage in all directions and then they have to face the danger of online fraud. In this case, you have a great idea to tell us, we should be given the responsibility to protect us in the hands of any online security. Then our time will be saved in at least one way. That time we can give to our customer, product, quality or growing or use it in other aspects of the business. Thank you very much again.
Hi Biplob, welcome to Inspire to Thrive. You are most welcome. It is hard to manage by one’s self for sure! I can’t tell you the countless hours I’ve put into it over the years. Anytime you can outsource (or use the right tools) something to help is a huge time saver. Thanks for coming by and have a great day.
Hey Lisa,
Thanks for the shout out. I appreciate that.
Gosh, there was NO way I would have felt right not letting you know about the delays. They are unprecedented (as these are unprecedented times) and you had to know about that before even placing that order (as far as I was concerned). I have that info on my listings for the Etsy store and I communicate it via messages to the buyer themself, but we’re talking about 6 weeks of delayed fulfillment times (for the t-shirts, anyway – the other merch is quicker). That’s crazy late!
At least it seems some of the times are speeding up lately.
What a strange time, right? But we both know there have been some interesting opportunities around as well. Your content is so on the mark with all of that. Really great stuff.
Hi Dana, you are most welcome. Oh yes, I could surely understand why. But it was nice to get a heads up in advance instead of me wondering and then having to contact you weeks later to ask. Plus you also wrote me in between to let me know the status, etc. Thanks for your input on this and for the great products too! Have a great rest of the week Dana.