You’ve had a great idea. You’ve started selling and it’s going better than you expected. But now you face some big decisions around your eCommerce business – investing more money, hiring and outsourcing to name just three.
Get ahead in your thinking with these seven points which successful eCommerce entrepreneurs have told us were critical for their eCommerce business.
1. Knowing the size of your eCommerce business potential market isn’t just exciting – it’ll help you make the right decisions to fully exploit it.
It may be hard to imagine making huge sums in an eCommerce business with a £10 product but remember that if it is suitable for 10 million people then that means your potential revenue is £100 million!
So the first thing is always to fully understand this number – this number may even form your Big, Hairy, Audacious Goal or BHAG – a term coined by Jim Collins and Jerry Porras in their book, Built to Last: Successful Habits of Visionary Companies. This thinking was adopted by Microsoft, General Electric and Google among others.
Knowing this number is the difference between thinking you’re doing really well to make £4k a month and realising that you’re only scratching the surface at that number and you need to take immediate action to grow to hit that £100 million eCommerce business.
What actions will you take? Will you find investors? – it wouldn’t be that difficult if you can prove your product resonates with 10 million people!
2. Now, how will your eCommerce business reach all those people to sell them your product?
The next step is to ask yourself is how can I promote my products for more people to buy the product? Here we very quickly get into a lot of very important detail and yes, expense!
How much will the marketing cost and will I still be able to make a profit? Can I contact my customers by email once they have already purchased to make sure I can sell further products to them? Are they my customers or is that customer data owned by the eCommerce business platform I am selling on?
Gut feel is fine but make sure you know the numbers too.
These are key decisions that entrepreneurs make based on a mixture of both science and gut feel, so you want to make sure you make as many checks as you can before you commit your cash to the scale up of your eCommerce business. Ask your network, make some pitches to your friends, do they really like the product? Would they buy it? Why? If you can answer these questions and you started to sell some product you may be ready to commit to scaling up your eCommerce business.
Have a look through our website and see the stories of the entrepreneurs who have partnered with fulfilrr, this will give you a great understanding of the journey that they have taken and whether you are ready to take the steps needed to scale your eCommerce business up.
3. Which eCommerce platform should you use for your ecommerce business?
There are multiple platforms available to you with Ebay, etsy, Amazon and multiple others available in addition to creating your own website using one of the over 90 web platforms available such as Shopify or Magento. Watch out for fees and add-ons with platforms that appear ‘cheap’ to begin with.
The platform you start out on may not be appropriate to your eCommerce business as you grow
Each platform has both opportunities and risks that you need to consider for your eCommerce business. Getting up and running on ebay is often a first start for entrepreneurs and allows you to get market feedback on your products. Some of our eCommerce businesses are only on this platform and have achieved a scale up just on this website but it’s a fast-paced market and things can change quickly.
An increasing proportion of entrepreneurs use Shopify to help them scale up as its quick to set up and relatively low cost.
Once you have proved your business model, consider using your own website for your eCommerce business – this allows you to market and attract customers under your own set of rules rather and makes sure you own all that valuable market information and customer data.
4. How strong is your eCommerce business supply chain and can you scale this up?
As you grow, you’ll need to buy more inventory so your costs per units will normally drop but your initial cash outlay will also increase as will your logistics needs. Whilst shipping a container from Asia may get you the lowest cost of product you may have to pay a deposit before production, substantial fees to ship your product and you will need to sell more of your product to get your costs back and move into profit.
Will eCommerce business have the cashflow to allow you to outlay £50,000 on a container full of your product if you’re used to shipping much smaller amounts?
You should also consider how your supply chain will adapt as your eCommerce business volumes grow. You may start with a small production run or making product as needed but how do you scale this up as you grow? Will your production need to shift to a new country how will you manage this and oversee the production?
A clear supply chain strategy based on building your network of suppliers is critical in an eCommerce business scale up, so make sure you think through the options and have more than one producer, so you don’t get caught out with short supply and can’t meet demand from your customers.
5. It can be tempting to offer to supply wholesale, but it does come with risks attached.
We often find that our successful eCommerce business entrepreneurs are approached to sell their product at retail, This gives them access to significant orders and distribution across multiple stores which can be great in building a brand and getting you to scale. Whilst volumes can be attractive you lose control of the price of your products, don’t know who your customers are (they are now owned by the retailer) and you quite often don’t get paid for 60-90 days after you have delivered the goods.
You will need to ask the question: ‘Why will the customer buy from your eCommerce business website rather than the retailer? How can you control your brand or are you happy to sell your products as a commodity through their stores?
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6. The big question: Should you lower your prices to sell more?
Without doubt pricing is the hardest thing to get right and the most common mistake people make in their attempt to scale up their eCommerce business.
To increase volumes people will often reduce their pricing to a level where the profit margin becomes unsustainable. If your product margin is 50% and you reduce your price by 10% you lose 20% of your margin and you will need to sell 20% more of your goods just to get back to where you started. Once prices for a product are low this makes putting prices up much harder although you should be actively reviewing sales prices in the current inflationary market.
Our general view is the market will set the price, so do everything you can to help customers buy at the market price and for you to retain as much of the margin as you can within your eCommerce business. If you have bought your product well and have a much better cost then everyone else in the market try to keep that margin and invest in marketing, not price reduction.
7. What role does a fulfilment company play in my eCommerce business scale up?
Outsourcing fulfilment is almost certainly something you will consider and is not a decision to take lightly. You will find a flow of articles on the subject published in this learning centre to help you.
In our view when your shipping is starting to take up more of your time than your marketing and web site you should be thinking about a move to outsourcing. It may also be that your fulfilment is costing you lost orders because you can’t meet peaks in demand.
Our pricing illustrator will enable you to see the costs compared to your current costs of fulfilment.
It is certainly true that once you have outsourced your fulfilment, you will free a huge amount of time to allow you to focus on your eCommerce business sales drivers, putting you on the path to a scale up and turning your dream into a successful reality.