The Challenges of Ecommerce Success and the Need for Change

– Most ecommerce businesses fail and big exits are rare
– Profitable businesses are less common than perceived, with many struggling with debt
– Outsourcing various aspects of the business can lead to lower overhead and higher profit marginsThe key action item is to reimagine best practices in ecommerce and start operating more like a startup, focusing on building assets with higher profit margins and outsourcing various parts of the business to reduce overhead costs.If best practices in e-commerce worked across all parts of the business, then everyone would follow them, everyone would be able to have success, and everyone would make millions. The truth is, that’s not really the way these things play out. The fact is, 95% of all shops fail, and big exits for e-commerce rarely actually happen. DTC has been in a recession, and most companies that have made it long enough to go public aren’t even profitable. You can’t grow forever. Are there profitable businesses out there? Yup. How common are they? A lot less common than you think. Most of the time, the salaries they pay are sad. There are individual products that can blow up and do amazing things with super low overhead. These are the exceptions to the rule. Instead, there are far more brands that did well, went into debt, then were bought out by conglomerates for pennies on the dollar and resurrected from the dead. Seriously, there are entire people out there who buy brands just for the name and the past glory for pennies on the dollar. Perception is a killer. “We’re crushing it!” really means “we’re living paycheck to paycheck to get more inventory to continue our growth, but wholesale margins are eating into our profit.” That means that scale hurts a lot of brands to the point of bad debt cycles, which, if you’ve been living under a rock, you would have realized that lending companies to e-commerce have outpaced the e-commerce market. There’s a reason for this. Business is tough and expensive. So if all the best practices mean your odds of success of a huge exit aren’t there, then what? It means you have to get really good at building assets with more profit margin, preferably ones with zero overhead. This is what people don’t understand. Outsourced ads, outsourced services, outsourced support, outsourced shipping. You see a trend here. When you outsource all these parts of the business, the big winners are the people providing services for those businesses. They are the ones creating processes that they can then remarket to other companies. It’s not rocket science. The overhead is lower, and they don’t have to deal with the most expensive part of the business, the marketing and selling of the goods in hopes of turning a profit. So all these aggregators have been popping up to streamline operations, but at the end of the day, there’s only so much juice you can squeeze from something that is still overwhelmingly labor intensive. The solution for ecommerce brands isn’t to follow best practices, it’s to reimagine what best practices would look like and start operating more like a startup and less like a consumer products company. Don’t know how to do this like 95% of the other stores out there? You’re not alone. I know I talk to tons of brands. The irony is that most brands could make the shift in less than a year and it would pay off massively, they just don’t understand it. Change is coming.#ecommerce #marketing #strategy

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