Ecommerce Lies That I Wish Were True
One person in a garage making millions online.
Any business is tough at the best of times. Really, it is. That’s not a cliché I use lightly. I hate clichés but this one is spot on. At the best times in your business you’ll still be fighting for your position, fighting to grow and fighting to stay alive. Just ask Kodak, Polaroid or VW.
Then ecommerce arrived and with it, many myths.
Myths so vast and so widely and blindly believed that they haven’t gone away.
I’d liked to dispel some of the myths around ecommerce and this article will try to do just that.
My experiences at Nic Harry — The luxury sock company — have taught me some long and hard lessons about ecommerce (and retail) as a business. Nothing has been easy or simple and almost everything has come with an immense amount of work.
Here are the lies we believe and the truth behind them.
Ecommerce is passive income.
I have never been more active in my entire life.
Since I started Nic Harry I have worked more, thought longer, built aggressively, and hustled harder than I have on anything else. Ever.
Ecommerce is not for the lazy. Retail is not for weak.
If you are selling a digital product, fine, maybe you’ll get away with less work. But selling socks online and producing them ourselves makes for an incredibly intricate and work-intensive business. And it’s not just me. I don’t know of an ecommerce player who doesn’t work hard and struggle with the daily complications of the multi-faceted nature of ecommerce.
There is nothing passive about the income we generate at Nic Harry. It’s all very, very active.
If you build it, they will come.
Putting up a website is free and easy today. You can use Woocommerce, Shopify or any number of solutions to launch something. When the barrier to entry is that low it means that the market will clutter very quickly. That’s what is happening right now. The market is cluttered. Maybe not in your vertical, maybe not this very moment, but it’s coming if it isn’t here.
The Internet is an endless space. It is, quite literally, endless. The more people create, the more there is. The more there is, the more distance there will be between you and the customer.
The equivalent in real world retail would be opening a brand new store for your hot, on point brand in the middle of a desert with 50 other stores selling the exact thing but with no city near by and no road leading the people to your door.
That’s not how it works. Roads need to be built, people need to be told, marketing executed and customers hunted.
Offering free shipping is complicated.
It isn’t complicated at all. Not if you’ve structured your business properly from the start.
There is a lot of hype around free shipping. Yes, it is important but for the first year of Nic Harry we asked people to pay us to ship our socks to them. It was a small fee but it helped us survive in the beginning. We may have lost a few customers but we made up for it with amazing customer service and an incredible product.
Two things are pretty important to securing low shipping costs and neither are complicated.
The first is volume. How many parcels do you send out every day? If that volume is high, you have leverage to negotiate for lower pricing with your courier company.
The second is your product margins. If your margins can support it, then you can take on the cost of shipping and your customer wont have to. This is the more likely of the two requirements in the beginning. So be sure to pick a product with high margins.
Which leads me to the next lie we believe.
I can sell anything online.
You probably can sell anything at least once on the internet.
I could probably sell a worn out pair of socks with holes if I really tried. But building a business by selling that product online will be virtually impossible.
The variables required to make an ecommerce business work are vast. There are all kinds of unforseen costs that you wont factor in: production of the product (or licensing), packaging costs, picking and packing costs, shipping costs, return costs, marketing, advertising, content production (because advertising doesn’t drive real traffic, content does), storage costs, rent, transaction fees, website building, maintenance, development, troubleshooting and many, many, many more. It’s complicated.
So do yourself a favour and figure out what your margins are if you want to sell anything online (or anywhere really). Not a general, generic, broad view of finances. I’m talking about a down-to-the-cent calculation. Exactly what percentage are you making in net profit per product? You don’t know? Goodluck.
If you can figure that out and then figure out your cost of acquiring a new customer then you can start to work on your business model.
If your acquisition cost is too high, your shipping costs are too high and your basic cost of sale in unmanigable then you are not going to make it.
Margin is everything.
My competitors are local.
Gone are the days of local domains meaning local competitors. Yes there is some value in ring-fencing your business and limiting your exposure so you can manage the growth of the company. But if someone thinks your product is too expensive they can google it, find a cheaper and bigger version from a company abroad, order it, ship it for free and be using it by the weekend.
Don’t forget about the rest of the world.
Not only are your competitors there but so are new customers and potentially huge opportunities to expand. Starting small is important but thinking globally is too.
Customers will love our brand because we’re special.
You’re not special.
My sock company is one of many out there. I’m not afraid to admit that.
But we use various tools to make our brand stand out. We use incredible fibers (bamboo socks are amazing), we have absolutely amazing customer service, we produce great content consistently and we have a community forming around us.
No one has to love your brand. You don’t deserve anyone’s money. You earn it. The way I do that is by being attentive, and providing a great product that speaks for itself. Find your unique value proposition and sell it like no one has ever sold before.
Ecommerce is going to kill brick and mortar.
It might look like that is happening right now but the truth is that old retail is dying, not brick and mortar. Retailers that wont adapt are dying. Retailers who refuse to integrate are dying. Retailers who aren’t offering up a multi-channel solutions (buy anywhere options) are going to be in trouble in the next decade.
I opened my first brick and mortar store after two and a half years of being a pure play ecommerce company and I haven’t looked back since. Our retail store in Cape Town outsells the website 4 to 1 every day. Without fail.
Amazon has just opened their first book store. That’s right, Amazon the giant has opened a brick and mortar store and you can bet they’ll be rolling out more over the next few years.
I have been working in my brick and mortar store almost every day for 3 months. Here are some quick things that I’ve learned about ecommerce vs brick and mortar:
- Conversion rates are significantly higher in store than online. Online my conversion rate (like many other stores) hovers at 1%. In store it’s closer to 30%. If 10 people walk into my store at least 3 of them end up buying somether. Online, if 10 people visit my shop only 0.1 of those people buy anything. You see my problem?
- Luxury retail requires all five senses. I have a brand scent in my store. When you walk in you smell what our brand smells like. You see all of our sock designs and are hit by a wall of colour. I greet you and engage with you about our fibers, designs and brand ethos. Online, you have to choose to click on our story, our links, content and assume that bamboo socks are soft. A single sense is at play. Sight.
- Logistics are simpler offline than online.
In store: People walk past, choose their socks, pay me, I put the socks in a bag, print a receipt and they leave. Happens like that every day.
Online: People have to find nicharry.com somehow (search/ads/content/social/word of mouth, fuck knows what else), browse the navigation to find the area of the site they want, page through the store to find the sock they like, add it to cart, view the cart, click checkout, give me a full name, email address, phone number, billing address, shipping address, credit card details, 3D secure (an extra security step in South Africa) and then leave. Then I have to receive the order in the warehouse, pick the socks off the shelves, pack them into our packaging, write a courier waybill
- People do not want to give me their details in store. This is actually also true for online. Conversions for email signups are abysmal everywhere. If you ask someone to email a receipt to them or to print one out, they take a printed receipt 99 times out of 100. VERY few people willingly offer up their emails to sign up to our newsletter.
In short — I wish I’d opened an offline retail store to complement my online presence a year ago. If you’re about to build an ecommerce store selling a real world product, maybe you should consider opening up a real store too, or instead of.
Published in #SWLH (Startups, Wanderlust, and Life Hacking)