Ninety percent of new online businesses fail. So what is the number one mistake new online businesses make?
Australia is one of the highest innovation-driven economies in the world with a score of 13.1 percent of Total early-stage Entrepreneurial Activity (TEA), according to Global Entrepreneurship Monitor’s 2014 Global Report.
So what is it about the tantalising lure of the global economy that attracts so many individuals, young and old, to launch a business that in a pre-internet economy they would never have considered?
Perhaps it’s just that is looks so easy, but given that ninety percent of them are destined to fail, the statistics speak for themselves. In fact, it is not so easy after all.
Every morning I take some time out to read an online forum where the members are all new online business owners. I do my small bit to help where I can. Here is a selection of the topics posted today:
“Why are my sales so low?”
“Launched 3 months ago and no traffic, please help”?
“2 Sales in the 6-8 months I have been here, is it time to quit, help please”
“ Active for 6+ months … approximately 2900 visitors… 0 sales”
“Any ideas to what I am doing wrong?”
“4,000 visitors and no sales, any ideas?”
There are probably at least twenty new online store owners per day asking questions just like these.
I try to find the time to go and look at some of them and give them some feedback. But the problem is usually the same for each and every one of these failing stores.
Never before has it been so easy and so cheap to start an online business. All you need is a laptop and something to sell and you are off and running in an afternoon.
Problem is, it just isn’t that simple, as these thousands of poor souls are finding out the hard way. Most of them have invested something in stock and possibly in the store platform. All of them have invested a lot of time, even if they haven’t given up their day job (a very, very wise decision).
Almost all of these failing businesses have made some classic and completely avoidable mistakes. Avoidable, because what they needed to know is common knowledge for anyone who has been in business for any length of time, or anyone who does some reading and research.
The Number One Mistake New Online Businesses Make
But the number one mistake new online businesses make is that they are not selling anything that is unique. There are literally thousands of stores online selling jewellery, t-shirts, men’s and women’s fashion and new ones are opening up every day. Almost without exception, these businesses are failing in droves.
I gather many think that their hand-made jewellery or “designer” fashion is unique, when in fact that is most definitely not the case.
In order to cut through the clutter and qualify for the sale, an online store has to offer something that the buyer can’t, or believes he can’t, get anywhere else. The buyer has to be compelled to hand over their cash. They have to believe their money is safe, they have to believe the store is run by a professional. I read one home page today that says “this is my new venture that I have achieved with the grateful help of my family and friends…” The lack of professionalism hits you straight between the eyes.
In addition to building scarcity and trust, every new business has to have a compelling story. The About Us page is a good place to start. But realistically if there is no story, and the products are largely the same as everyone else is offering, then why waste your time?
Having a compelling unique selling proposition (USP) is obviously crucial, yet I see hundreds of new stores with absolutely no USP, nothing to differentiate them from their competitors. No back story, nothing that builds trust, nothing to compel me to buy.
And that’s before we even begin to critique the lack of quality images, checkout procedures, shipping information, returns process etc.
What none of these new business owners have understood is that starting a business involves a lot of hard work BEFORE the idea is even ready to be considered for an online business.
Just having access to some wholesale t-shirts, or having a talent for turning twisted metal and gems into jewellery is NOT a reason to start up an online business.
Here’s a quick checklist:
- Have you identified a need?
- Is your idea unique or largely unique?
- When you talk about your offering in a few sentences to your friends do they largely say “I want that!” or “I know heaps of people who need this!”
- Can you articulate your USP and key differentiators?
- Have you conducted a substantial amount of online research, sampling your competitor’s offerings, asking potential customers what their pain points are, testing your solution on them.
- Have you seriously considered the financial fundamentals beginning with your pricing strategy? Being the cheapest is just a race to the bottom that no one wins. Being too expensive is sure way to kill sales.
- Can you identify your target market and quantify your audience?
- Do the numbers stack up?
If, after all these steps have been undertaken and if, and only if, the results are looking positive, then I would suggest you go the next step which is to begin putting together your business plan.
There are literally hundreds of steps involved before starting any new business.
If you want to be one of the ten percent of online businesses that succeed you will need to at least start with this checklist.
Oh, and a bit of luck wouldn’t go astray. Believe it or not, I do think that there is an element of luck in every successful business.
So happy researching and good luck!