The Importance of Diversifying Revenue Streams in Ecommerce

– Smart business owners prioritize having multiple streams of revenue to de-risk their overall business strategy.
– Many ecommerce companies mistakenly believe that selling on multiple channels or releasing multiple product variations is sufficient for de-risking, but this approach often erodes margins and lacks optimization.
– The ecommerce sector tends to be overly optimistic and reluctant to acknowledge the challenges and changes in the industry, such as rising costs and increased competition from Amazon.Diversify revenue streams and develop a sustainable long-term strategy instead of relying solely on selling through multiple channels or releasing variations of products.Smart owners view their business as having multiple streams of revenue, de-risking their overall business strategy. Yet, nearly 100% of ecommerce companies view de-risking as simply selling on multiple channels or releasing multiple variations and lines of their products. THIS ISN’T DE-RISKING. This is often willful thinking at the cost of eroding margins while guessing first and trying to optimize second. People in the ecommerce sector are eternal optimists, which can be good at times, but rarely does this match reality. No one wants to talk about what’s really going on right now with their businesses. Everyone is waiting for Facebook to go back to the way it was, but it’s not going to. Costs have gone up 40% in the last few years. Amazon has a bunch of aggregators that have been acquiring all sorts of businesses, only to have 34% of their topline cut, plus having to spend money on Amazon’s ad network to compete and make sales. Oh, and compete against private label brands Amazon loves launching with more options than their competitors can offer, and they’ve launched quite a lot of them. Amazon only has to cover costs with a little bit of cushion; they don’t have to buy advertising on their platform, they don’t have to pay for ads outside of their platform, and they don’t have to worry about margins. BECAUSE THEY HAVE DERISKED THEIR ENTIRE MARKETPLACE ON THE BACK OF CLOUD, LOGISTICS, AND 3RD PARTY SELLER FEES, THEY CAN UNDERCUT EVERYONE. The unit economics don’t make sense for a lot of businesses these days. And the investment is all being poured into the bottomless pit of paid advertising rather than something that is sustainable and even has a road to long-term profitability. I’ve watched nothing change now for going on 7+ years. Yeah, that’s when things were good, but you know what didn’t work for us 7 years ago? UGC and social, because our product didn’t photograph well. So I’ve had 7 years to think of ways that didn’t require those channels. So although not everyone will agree with me or tell me that it’s going to take longer, what they don’t realize is I’ve lived this new normal for the last 7 years. I’m the closest thing to a crystal ball out there when it comes to consumer behavior and marketing expensive goods to a niche audience where social channels have historically been difficult with limited resources to be able to push out creative. When you combine millions of dollars spent with short term thinking (almost always what happens) you get a hamster wheel of being stuck.I still see this daily and it’s painful to watch.The problem is the skills needed to solve for this aren’t taught because people don’t pay people to solve them and haven’t had to solve for them until now.Now no one has a choice. Get excited, this is where things get fun :)

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top