If any one of these elements are missing or lacking then the business may be in jeopardy before it even gets out of the front gates. Let's assume that the product is extremely desirable. Now all that needs to be worked out is a way to let everyone know about the product and a way to get the product to the customer. Which brings us to the last element, capital. Unfortunately, you could be slightly lagging in all departments and still manage to generate some business, but if you are lacking in capital then you will find it extremely difficult to succeed.
Having substantial capital can help a business get off the ground by simply providing the time necessary to test the market and make the necessary adjustments needed to insure profitability. If an ecommerce business does not have the capital to do this then all other elements need to be extremely appealing and effective.
The product would need to be in heavy demand, the overhead extremely low and the marketing highly effective, the business would basically need to be profitable right from the start.
In essence if you don't have the capital to sustain a business, and yourseld, until you can generate enough then you may have to make some adjustments. As an individual, you may actually be able to get an ecommerce business off the ground even if you don't have much capital to begin with. The key would be to start small, start your new ecommerce business as a hobby, something you do after work or on weekends.
Steps to starting an ecommerce business
First familiarize yourself with your products, if you haven't already done so. Research what it would cost to get your product into the homes of your potential customers. Remember that you can market exclusively to particular regions and states with a Google Adwords account. Make a note of who you want to sell to and what it would cost to ship the products. You could start wth a single state that you think you could generate the most sales from.
Now that you know who you are selling to and what it costs to send products out you can figure out how to market appropriately. Once you have created your banners and slogans or catch phrases suited for your particular demographics then it is time to calculate costs. You can use the tools that come with Google's Adwords or Yahoo Search Marketing campaigns to calculate projected advertising costs. Find out how much your competition is bidding for your keywords. If you are not sure what keywords to use, then use the tools that come with the campaigns. A pretty good strategy would be to use brand names if applicable and model numbers, otherwise try to be as specific as possible without getting too narrow as you might loose out on some search result opportunities, for example if you plan on selling custom motorcycle helmets then you can bid on the keyword "custom motorcycle helmets" and it might be cheaper but you may lose out on folk who would like custom motorcycle helmets but happened to search for just motorcycle helmets. Naturally however, if you are on a budge then you can start off with only bidding on "custom motorcycle helmets" as it is a more targeted audience.
Once you have set up your keywords and campaign then you will start to understand the effectiveness of your campaign. How many clicks and visits does it take to get one conversion? This number represents your ROI. Your return on investment, basically how much money do you need to spend to get 1 paying customer? Once you have been able to calculate this number then you can calculate how long you business can sustain itself. If it costs you more to get a customer than you make then you are obviously losing money.
If you think that you can improve your ROI by adjusting your marketing strategy then do so, but remember that you should allow a campaign to run for a substantial amount of time, perhaps a month or two so that you can more accurately assess trends and have more data to work with. Sometimes the problem may not be with the marketing or PPC campaign, check the website for usability issues. Can a customer easily navigate the website and find the products they are looking for? Can they easily check out?
Some questions to ask and data to look for if you are experiencing a low ROI.
- How long do visitors stay on the website?
- What pages do they visit?
- What pages do they exit from?
- Where is the traffic coming from?
- Do customers add product to a shopping cart and then abandon it?
- Are customers having problems processing payment?
- Do customers leave after getting the shipping costs?
- What ads did customers click on to get to the website?
If your ecommerce website starts off with a low ROI and you simply cannot find any trends that would account for this then you may need to reconsider your product, is it really appealing? Are others selling the same or similar products successfully? You can get these answers by conducting some market research and if you find that others are successful you may want to carefully examine what it is they are doing, although, you might have probably done this initially, revisit the task and see if anything has changed.
A low ROI does not always mean, however, that your ecommerce business is doomed. Sometimes a new ecommerce website need time to create a presence. You may find that some potential customers may come back to purchase weeks after visiting your website, you may also enjoy repeat clients after some time and in addition to new business trickling in, you can experience growth, slowly but surely.
Not all ecommerce business will start off as highly profitable ventures, in fact many will fail under poor management, bad product, or insufficient funding. The key to success is to carefully research your market and plan ahead so that you are ready for anything that may come your way. If you cannot raise capital by finding investors or partners then it may not be a bad idea to keep your day job until you start seeing substantial returns and have accumulated enough funds to keep your business and yourself going for at least a year in advance.
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