ecommerce challenges

3 Major Challenges Facing Ecommerce Businesses

By Nidhi Dave

With the growing adoption rate of internet and increasing use of smartphones, the ecommerce sector is witnessing a major shift. A large number of consumers now prefer to shop online due to convenience and cost. There has been a tremendous rise in the worldwide ecommerce sales, and it is predicted to reach 4.48 trillion US dollars in the year 2021.

While ecommerce still accounts for a small percentage of total retail sales, its growth is likely to dramatically accelerate in the coming years. In 2016, e-retail sales accounted for 8.7 percent of the total retail sales worldwide, which is expected to reach 15.5 percent in the year 2021.

Due to the ecommerce boom, budding entrepreneurs are finding it attractive to start an online business. Setting up an ecommerce store, however, isn’t smooth sailing most of the times. With ecommerce giants like Amazon already setting high standards for shipping and customer service, it’s difficult for small retailers to build up credibility and integrity. When running an online store, you’ll come across many ecommerce challenges, which are to be tackled proactively. This post talks about different challenges faced by ecommerce businesses and tips on how to deal with them.

1. Business Models

Ecommerce businesses have to face challenges in adopting the right business model. Some common ecommerce business models are listed below

Inventory-Led

The inventory-led model requires a lot of investment as businesses have to manage inventory, keep track of orders and shipping, and incur expenses in storing the inventory. When choosing this model, you need to ensure there is a proper inventory management flow. Giving Cloud access can also be beneficial, which can allow managing stock remotely.

Marketplace

Marketplace is a platform, which acts as an intermediary between the buyers and sellers to transact with each other. This model requires sufficient liquidity on both the sides to enable transactions. An effective price discovery mechanism is important to implement including devising strategies to solve the chicken and the egg problem. Both the sides are to be built gradually as in the case of fewer sellers, buyers leave and vice versa.

Drop Shipment

Drop shipment offers an easy way to enter the ecommerce business. You just need to contact the supplier when an order is received. The supplier ships the items to the customers, and you keep the profit. There’s no need to maintain and track the inventory, which helps you save time and reduce costs. This can, however, lead to problems if wrong products get shipped or if there is a delay in shipment, resulting in a delay in order fulfillment as well. You need to have proper coordination with the suppliers as soon as the order is received till the order is fulfilled.

Ecommerce businesses prefer adopting different models as per their requirements. Some of them prefer having a marketplace model instead of the inventory-led model to reduce the cost of capital investment. Marketplace model provides more opportunity for scalability, and allows stocking a wide range of products and having a large number of sellers. Ebay follows this model. Amazon has a hybrid model, which is a mix of marketplace and inventory models.

2. Inventory

One of the biggest challenges faced by ecommerce businesses is maintaining the right level of inventory. Many businesses complain about stocking up too much or too little inventory. Stocking a little extra is alright, but you can’t understock. Conduct research on your competitors and niche, and analyze the requirements of your target audience.

You need to consider the demographics and find out about the products that are demanded the most. Instead of stocking up all products in equal amounts, it is preferable to stock products that are in demand. During the festive season, it is crucial to have extra backup stock of the popular products, to avoid stockouts and customer dissatisfaction.

It is also important to choose the right software for your ecommerce business that can help you track your inventory, give notifications when the stock reaches re-order level and give a real-time view of your inventory.

3. Conversion Rates

Low conversion rates are a major problem for the online businesses. If your website visitors aren’t getting converted into customers, your bottom line will remain low. You need to find out the cause of the low conversion rates to boost your sales and revenue.

There may be a chance that your site is being found on the search engines, and people are browsing it too, but what if they are not buying anything? You need to understand the reasons why visitors leave your website. Some of these reasons may include:

An Ineffective Website

People aren’t able to find the information they are looking for. The navigation is poor, or there are design issues or poor filtering and sorting. If you have a high bounce rate, you can improve the design of your website, look after the visibility factor and check your conversion funnel.

Poor Product Descriptions

Customers like to know full details about the product they are buying, making it important for you to keep a proper product description. Not having a detailed description can result in buyers turning to your competitors’ website, leading to low conversions.

Unclear Target Audience

It is crucial to target the right audience, check what people do on your website and look at the social analytics to ensure they are sharing the right information and there is engagement. It is equally important to consider the online reviews given by the customers and maintain your online reputation.

Not Search Engine Optimized

You can have low conversion rates if your site isn’t search engine optimized as people won’t come to know about your business. You, therefore, have to do keyword research and ensure that your web pages meet the requirements of the searchers.

Not Mobile-Friendly

It is important that you have a mobile-optimized ecommerce store to attract customers who are searching for you through their smartphones and tablets.

Poor Product Photos

You should keep high-quality images to improve conversions. If you have small sized, low-quality images, people will not be able to see your products clearly and not prefer buying from you. You can even keep videos on your ecommerce website because 4X as many customers would rather watch a video about a product than reading about it.

Sub-Par Call to Action

Keeping a single, clear call to action with the right design and color ensures visitors know what next to do.

Complicated Checkout Process

You can have low conversion rates if you have a complicated checkout process. As per Baymard research, 27% of US online shoppers have abandoned an order due to a “too long/complicated checkout process.” You should, therefore, remove unnecessary elements in your cart pages. It is crucial to make the buyers know where they are in the checkout process through a progress bar. You can even have a guest checkout option to allow buyers to purchase from you without signing up.

No Returns Policy

A clear laid-out returns policy is important for every ecommerce business to encourage more customers to buy. A free returns policy can assure buyers that they can return the product if they don’t like it or if it is not as per their requirement or is damaged.

Lack of Email Follow Up

To save yourself from losing customers, you can send abandonment emails. If they are leaving your website without buying from you, you need to persuade them to buy. You can send emails to help them solve technical issues if any, inform them that their cart is going to expire and even offer them incentives to purchase.

The Bottom Line

Entrepreneurs can face many obstacles when starting and running their ecommerce businesses, preventing them from keeping up with competition from the major players. With ecommerce becoming a buzz in this digital era and growing at a rapid pace, it has become important to continuously find solutions to address these challenges. By using the above-mentioned tips and techniques, you will be able to overcome the challenges facing your online business, ensuring you enjoy a seamless growth!

Photo credit: Ecommerce concept from Pla2na/Shutterstock

Subscribe to the Small Business Bonfire Newsletter
And get your free one-page marketing plan template.
Nidhi Dave on FacebookNidhi Dave on LinkedinNidhi Dave on Twitter
Nidhi Dave
Nidhi is working as a content and brand strategist at ProDesigns - a graphic design company, recommending strategies to meet customers’ goals and deliver a superior user experience. She provides content leadership, ensuring that a consistent brand message is delivered to the audience.

Leave a Reply

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

This site uses Akismet to reduce spam. Learn how your comment data is processed.