5 Things I wish I knew before starting the e -commerce business

As the founder of the 3X and the publisher of the book, I have brought thousands of authors to the market, including many in the New York Times’ best seller list. Like most publishers, I also relied on traditional channels to handle sales and distribution, including, of course, Amazon. He always worked for me, but it’s expensive because you lose more than half the retail price from the middleman.

Frustrated by the business model, I decided to sell both retailers and wholesalers by selling directly to consumers through my e -commerce platform. I became a publisher and e -commerce seller.

Although I have achieved some success, in less than a year, after revenue of more than $ 1 million, the transition also removed me from the guard. I discovered that what looks straight from the outside was practically more complicated. The highly competitive world of online retail is a minefield for logistics and financial challenges that can also be the most developed.

Here are five things that I wish I knew before jumping in e -commerce. These factors can determine whether you can create a promoted business.

Related: method of making money, growing and making money with e -commerce

1. Your contest is all the rest of the online sellers

Unlike traditional retailers, your e -commerce business doesn’t just compete with the store in the street. You are competing with the seller around the world. It turns out that there are millions of them. There are an estimated 4.82 million direct shop stores around the world – and it’s just a platform, and each one is competing with the same dollar.

For this fact, the product you think about the product you are selling requires a fundamental change. Success in e -commerce is not just about keeping a good product at a good price. This is about the search for unique angles that give you competitive advantage. Whether it’s your brand story or how your purchase cart works, successful businessmen in e -commerce are the ones who find ways to compete on products and costs other than products.

2. Customer acquisition costs can break or break your business

The biggest shock for me was to discover how expensive users could be. I have learned the days of “its construction and they will come.” With changes in iOS privacy, increasing advertising costs and increasing competitiveness for consumer attention, many businesses of e -commerce spend between 30 and $ 50 to acquire the same user.

Before launching, you need to understand your Customer Lifetime Value (CLV) and how much you can afford to spend on getting profitable. If your average order price is $ 40 and your profit margin is 30 %, you can spend only $ 12 in acquiring this customer while maintaining profit, unless you have a re -purchase strategy.

Mathematics is difficult, and if you are not careful, your enthusiasm for your topline income can quickly become a nightmare. Therefore, calculate these numbers quickly and build your business model around sustainable acquisition costs.

Related: How to Reduce Consumer acquisition costs with SEO

3. Operation and completion are far more complicated than you think

Inventory management, processing orders, returns and shipping products require system and processes that I understand less. What is easy when you are following hundreds of orders, when you are selling some things every week, what is easy?

I tried to save money by doing it myself, but soon found out that the hidden expenses were paying more than me. Fortunately, I decided to hand it over to a complementary company before it was too late. Consider taking advantage of services like third party logistics provider (3PL) or Amazon FBA. Each option has commercial relations in terms of cost and scalebuability. Remember, when self -fulfillment provides you with control, it also costs you in space, time and system.

4. Cashflow management will test your business capabilities

E -commerce creates unique cash challenges that even catch the best businessmen. You usually need to buy before selling inventory, and payment processing companies often have funds for new business. Increase advertising, website hosting and completion costs, and you can immediately find yourself cash and underwater.

You can plan for facts by maintaining proper working capital and understanding your cash conversion cycle, which is time between collecting cash from inventory purchase and sale. If you are not cautious, you can lose money during the period of development. It can be particularly under pressure.

Try to avoid maximizing your inventory. It is in greed because the cost of your goods is low, but trading in terms of your cash position can take off your business. As you grow, you can transfer the inventory for better margins and faster shipping hours.

Related: How to properly manage your start -up cash flow

5. Social Media is your lifeline, not just marketing

In the traditional publication, I can rely on channels and industry contacts to reach readers. In e -commerce, social media is not just another marketing channel. That’s all. Platforms such as Instagram, Ticotok and Facebook are the main methods of discovering for many users, and not only underage settlements.

I quickly learned that it was a mistake to think of social media later or to fully assign it to agencies. Social media takes your brand awareness and traffic to your online store. It directly enables users’ engagement and provides social evidence through the user’s content. So you have to own it.

The key is consistency and integrity. Consumers are detected when the brands are just pushing the products forward with their community. Take time to understand the culture of each platform and make the material that is properly related. A viral post can save you multiple times that you have to spend on equal ads.

E -commerce provides tremendous opportunities for business people who are ready to approach the strategy. But this is not a magic wand. Success requires more than just a good product Idea. It calls for digital marketing, operations management, financial planning, and yes, sometimes demanding the nerves of steel.