Why E-commerce Projects Fail and What to do About it

The last five years have seen an explosion of online sales activity with growth rates in almost all verticals in the fourteen to twenty percent range. However, ninety percent of all online businesses fail. This is the same percentage given for brick and mortar failures, even though many if not most of these failures are successful brick and mortar initiatives undertaken to build business-to-business, business-to-consumer sales (or an informational) presence on the web. The reasons cited by industry experts fill volumes, and are at the center of much debate. Most of the explanations for why so many online initiatives fail to achieve their objectives are tactical and fail to address the more urgent strategic issues relative to the webs business environment.

E-commerce projects eat up vast amounts of internal resources and funding, and most importantly, a failed e-commerce project means your company is losing out on one of the most dynamic and fastest growing sectors in our economy. Your online sales should be a substantial source of revenue. They may never rival your brick and mortar efforts but they can and should be a major source of revenue and brand exposure.

E-commerce projects fail because leaders do not have the knowledge and understanding of the online world. Every other argument detailing the many issues related to online business failure come in at a distant second to these basic principles. You must understand the nature of the online world if you hope to be successful online. It is a vastly different landscape where your business strategies must be tailored to its dynamic nature.

There are three things your e-commerce initiative must take into account. 1) Brick and mortar businesses are visible for all to see; online your company and products are only as visible as the search engines say you are; 2) In the online world the user/customer dictates what companies will be in there field of view based upon the keywords he or she uses; 3) The World Wide Web levels the playing field, large and small companies have little differentiation. Economies of scale are diminished and do not carry the same weight as they do in brick and mortar.

Emerald Business Services, LLC owns and operates an online barbecue smoker and grill store. This store consistently outperforms the manufacturer of the grills, even though they sell the same grills online. The store is operated by one person, was built with limited funds, is only two years old and still outperforms its larger counterparts. Economies of scale just do not always apply.

Visibility on the Web

Location is still everything, just not physical location. In the physical world retail store location is everything. Studies show that the same is true on the web; it is just that the best locations are on the first page of Google’s search results page, (users click on one of the top 10 results without ever moving to another page.) Not just any first page but Google’s first page, which represent 80% of all search traffic. Winning front-page placement on Google requires a through understanding of how search engines operate, web honed marketing skills, time and technical expertise in search engine optimization.

Finding out how and what people are searching for is very simple and requires no investment and very little time, a popular website of search marketers provides the user with the number of times a keyword was searched for in the preceding month. You will find marketing information on the web readily available; search engine marketing has evolved from a form of abstract art into a science, however interpreting the marketing data requires some experience and a through understanding of how search engines rank websites.

Relativity of Keywords

On the web, people leap from site to site with the click of a mouse, driven by information search engines return, the relative nature of the keywords they use, and the online stores ability to satisfy the users query, (in the opinion of the search engine designers.)

Because users are so mobile, websites must be designed with a certain amount of stickiness. This stickiness is not produced with expensive graphics and Webmaster tricks but in the sites ability to address the users needs based upon their keyword query. For example, if the keywords they entered were for a Brinkmann barbecue smoker grill, the user will be directed to the Barbecue-Smoker-Grill.com where they will find Brinkmann’s name plastered all over the front page. The site is relevant to the users keyword query; it is therefore number one in the search queries returned by Google and has the stickiness to keep a user interested.

The Flat Nature of the Web

The fact that anyone can setup a website and become a competitor with very little investment means the competition from small online stores is significant and can even be dominate in some verticals. Brick and mortar advantages due to economies of scale become less significant, online merchants do not need buildings, inventory, (drop-shipping is a significant force on the web) or a sales staff.

The quantity physically available, and product display attractiveness and merchandizing give way to content and the ability of the online store to display enough information for the customer to make purchase decisions.

Conclusion

Building an online business is a lot like buying and implementing a business system, the software and hardware are purchased and installed, users are trained and then comes the realization that ninety percent of the cost and work are in the implementation. The rate of failure in business system implementation is very high, and for the same basic reasons, leaders are not armed ahead of time with the knowledge and understanding to improve their probability of success.

Online businesses that fail do so because leaders are not armed with the knowledge of just what the landscape of the web world looks like and an understanding of how the online community shops. The web is a new frontier, a buyer driven world with different rules where
buyers enjoy a seemingly unlimited variety of choices, which successful sellers must conform to.

The same basic principles of business still apply to the online world, marketing, customer support, product marketing and capitalization are just as important. Strategy is still important; however the strategies employed require a paradigm shift in thinking, and must take into account another world, one somewhat foreign to what have been used in business ventures of the past.

So here are the simple steps to take in order to beat the odds. 1) Get a firm grasp of just what it takes to get good search engine positioning; 2) Understand what the relative keywords are for your business venture and what it means to own them on the web; 3) Build a site that gives you advantage over the competition, a website that takes into account the issues consumers deal with when buying online.

Creating a website where customers can purchase your products is a relatively simple technical task. Creating a web presence where your website is actually selling product for you is not a simple task, it is expensive and it is not a fast track to increasing sales. Businesses ignorant of the dynamic nature of the webs landscape are destined to repeat the failures of the past and join the growing number of failed initiatives. Companies with an informed approach are in a great position to cash in on the webs fourteen to twenty percent yearly growth rate.

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1 U.S. online retail sales are expected to reach $65 billion in 2004, and will continue to grow by a compound annual growth rate of 17 percent through 2008 to top $117 billion, according to a report issued from Jupiter Research.

2 65% in the 1st 18months and 90% in the 1st five years. It is higher than brick and mortar failure rates. thebusinessdevelopers.com

3 JupiterResearch predicts online sales growth will double to $18.9 billion by 2010, up from $9.3 billion at the end of 2004

4 In a poll by Vividence Corporation, 89% of respondents reported a "strongly positive" experience from using Google.

5 The only investment is in knowledge of the web landscape, SEO skills, and the technical expertise to pull it off.

Why E-commerce Projects Fail and What to do About it

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