Running and growing an e-commerce startup comes with its own unique set of challenges for e-commerce founders compared to other sectors, ranging from; generating targeted traffic, audience retention, increased competition on digital channels and finding the right product message.
In the first article of a three part series focusing on what e-commerce founders are doing to navigate the fast growth e-commerce industry, Information Age spoke to 13 founders of some UK-based e-commerce startups, and six founders of e-commerce support agencies, to understand the main pain points of running an online business.
1. Generating targeted traffic
According to Tim Harrison, co-founder at WatchPilot — the online watch e-commerce business selling a large range of high quality designer watches — generating targeted traffic is hugely important and a challenge for his business.
He says: “If the wrong target audience is visiting your website, advertising costs can soon exceed revenue.
“As a start-up e-commerce business, it is also particularly important to build a brand and website that consumers feel they can trust and that is easy to use. If a consumer does not trust your business or is confused by your website, they will not buy from you.
“Once you have valuable website visitors on your website, you must continually focus on conversion optimisation to ensure they then buy from you.”
He comments: “Creating succinct product messaging and getting your adverts served to the correct audiences (if direct-to-consumer) — all for a price that meets your cost per acquisition targets — is probably the hardest thing to get right.”
As well as generating targeted traffic, Rob Abrahams, co-founder at COAT Paints — the carbon neutral paint company — believes the main challenges e-commerce businesses face are building connections and relationships with customers without a physical presence to connect.
“We have to get our User Experience right across on digital channels and create user journeys that work. Another often overlooked challenge is being “always on” for customers and having to react outside of traditional retail hours,” he says.
Anna Brightman, co-founder at UpCircle — the pioneering skincare product that’s regenerative by design — shares this challenge and says her “main challenge is establishing the brand ‘experience’ without having a physical store. As our range diversifies it’s a huge task continually evolving our website along with it. To fully get across the personality of our highly aesthetic brand, it can be challenging to build all the design elements we would like into our website. It’s also hugely time consuming and expensive, given that the website needs to constantly evolve.”
2. Conversion strategy, customer retention and acquisition
As a new company with new products, one of the main challenges for Francesco Majno, co-founder of insect-based snack startup Small Giants, is gaining people’s attention on social media for long enough to explain our product.
“For something that is not immediately straight forward (as insect-based snacks are not), we need to hold attention long enough to explain the benefits of the product,” he says.
Looking at another angle, Francesco also highlights Brexit as the biggest challenge to online sales growth, as Small Giants had to interrupt all shipments to the EU, and are now having to work towards having a warehouse in Europe.
Sarah Giblin, founder at Riut — the safe backpack for urban travel — agrees and says that “the hard part [of running an e-commerce business] is telling the world your store exists in a profitable way that reaches the right people in time. If you don’t want to give half your revenue to Facebook — I’ve tried it, it works but I’m always searching for a more sustainable model.”
Helen White, co-founder at houseof.com — the online renovation retailer with expertise in lighting — says “the key to running a successful e-commerce business is fine tuning your conversion strategy, your customer retention strategy and the value of each customer who visits your store.”
3. Juggling investment
As e-commerce businesses grow, juggling investment on top of running the growing business is a challenge.
Thomas Vosper, ex-Amazon and founder of ecommerce startup, aisle 3 — the comparison shopping site –.was made redundant at the start of the first lockdown and set up aisle 3 13 months ago. They are about to announce a second successful funding round.
He comments: “Failing to juggle fundraising and actually running a business is probably the downfall of most startups.
“Securing investment is a near full time job and particularly challenging when only 1% of businesses manage to complete their rounds. Once you add on developing the product, securing commercial agreements and partnerships and then recruitment it becomes a near impossible task for a sole founder.
“This is even more acute when founders are unable to take a reasonable salary and end up moonlighting in the evening just to pay the bills. The echo chamber of social media celebrating the successful 1% doesn’t help the mental health of founders who are in the 99%.”
4. Increased competition on digital channels
The lockdown caused by the pandemic has intensified an already competitive space on digital channels.
Sahil Verma, CEO and, co-founder of food platform and recipe box delivery business, The Cookaway, comments: “Due to consumer demand, particularly since lockdown measures were introduced, the majority of UK businesses have activated digital channels or are entirely online based, creating an incredibly crowded market in the digital space. The knock-on effect of increased competition on digital channels has been that Facebook has doubled its CPM’s resulting in half the number of impressions and conversions for the same marketing budget as compared to just 2 months ago. This along with all the extra noise on digital means it is far more challenging now to reach your target audiences and scale using a paid marketing strategy. For us, the solution has been to own our own distribution channels through a unique content strategy and focus on organic social remaining true to who we are so we can effectively communicate our value proposition to our audiences.
“As a business that is purely digital, you are also up against well-funded and very sophisticated competitors that are constantly evolving user experiences and optimising their digital platforms whether it is for SEO, conversions or traffic. In order to compete at scale you have to be able to offer a world class experience in terms of the look of your digital shop front, user experience in discovery of your products and easy and seamless checkout. The work doesn’t end here as the comms need to be on point along with your product and customer services especially if things go wrong.”
White adds: “There is a lot of competition in the market and you need to demonstrate why the customer should shop with you.”
5. Stock management
She explains: “We underwent quite a steep learning curve in order to find the best solution, as some of the software available to aid e-commerce businesses in this area was too big and expensive for
us to invest in as we started up, but it was key that we mastered stock management in order to grow. We created our own bespoke software, which was pivotal to our growth and is something we continue to use and develop to this day.”
6. Money and manufacturing
The biggest challenges faced by Jessica Kruger, founder of Luxtra — the retail brand creating conscious, accessible luxury fashion accessories crafted from the most innovative vegan and sustainable materials available — concern money and manufacturing.
She says that because LUXTRA products are made from innovative new materials that haven’t been on the market very long, there have been issues along the way with manufacturing the products to make it look as she had envisaged it.
“Once we’ve nailed the product, then other production-related questions come into play: timing orders to ensure the “perfect balance” of have enough, but not too much stock; deciding on the number of units to order and in which colours; and of course, making sure we can afford it all.
“The next set of challenges tend to relate to deciding on the optimal channel for marketing spend, and carving out time to work on the business rather than in the business.”
7. Starting from scratch
Sarah Clark-Martin, co-founder of Fuaraìn Skincare — the brand uniting the scientific, energetic and natural benefits of super active Deeside Mineral Water with wild crafted herbs and botanicals for advanced skincare results — says her biggest challenge has been starting everything from base level zero.
“I’m not sure I was fully aware of what starting from scratch entailed. The beauty industry is a very crowded and competitive market, and so getting your voice heard is tricky. Luckily, we relish a challenge and the freedom of being able to create something completely unique is very exciting,” she says.
8. Prioritising time and focus
“The priorities vary hugely from design and pre-launch phase to post launch and scaling, from no customers to customers and then different customers, new data, new products, new suppliers, new customer feedback, new costs, and new opportunities,” he explains.
Lott adds: “Staying on top of the detail of the business, really understanding the metrics and how our business is evolving while also keeping an eye on the horizon and bigger picture is also a constant challenge. Again, it’s a fun one and vitally important to be able to do both detail and bigger picture.”
Natural language processing — the future of e-commerce — explained
Here, some e-commerce support businesses provide their advice on managing the challenges of running an e-commerce start-up.
For example, “Molzi originally worked with brands to sell to brick and mortar retailers as well as Amazon and in fact the vast majority of our revenue was driven by our sales into retailers. But as the commerce landscape and our own business goals shifted, we decided to pivot 100% to Amazon to quickly scale and maintain control over our services. These are the sorts of difficult decisions you have to make when growing a company — especially one that operates in such a changeable sector,” says Mole.
“It’s also important to ensure you build a team of true experts, who know how to quickly understand and respond to changes and predict trends even before they emerge,” he adds.
In today’s world, the biggest challenge according to Jack Williams, CEO at Selazar — the automated logistics and supply chain company — has to be adapting and flexing to the complicated and dynamic environment of the virtual landscape.
He comments: “Opportunities are constantly presented, but determining which will bring value and which wastes time is a real challenge. The past year has seen the world turned on its head but for e-commerce it was a banner year. In the UK, we saw 18% growth in e-commerce spending, up to £84 billion. Significantly, new demographics came online, capturing their attention became a major focus for many sellers. Turning those new online shoppers into lifelong customers through engaging and exciting journey’s is the major challenge. Smart retailers know that capturing a new entrant early could make them a brand advocate for life, making them a priority for many.”
Ciaran Bollard, CEO at Kooomo — the e-commerce platform — suggests the key pain points of running an e-commerce business, particularly since the start of the pandemic, are difficulties in logistics and adaptation when managing an online presence.
He says: “With greater expectations when shopping online, logistics has become a critical issue as lockdown drives shoppers off the highstreets and towards online stores. As part of this, a key problem we have witnessed is retailers not being able to get their products out the door quick enough. A larger volume of orders online has therefore resulted in companies having to review their internal processes. From looking at how quickly they can print out a label to offering gift-wrapping services for products, retailers are all looking at enhancing their processes to get orders out the door swiftly and maximise overall sales.”
Commenting on the impact of the pandemic, he adds: “Undoubtedly, having robust and secure online services are now a requirement for any retailer looking to survive in the current climate. Even those who already benefited from a competitive online presence had to race to adjust their e-commerce stores in light of the current circumstances — changing their messaging, adding new features like Click and Collect services and placing greater importance on creating a flawless customer experience.
“We even saw fashion retailers focusing their efforts on selling loungewear from March throughout the summer months, as opposed to its typical winter popularity. Spring and summer collections were postponed, minimised or abandoned altogether, so adaptation has definitely been noted as a primary pain point for eCommerce businesses over the past year.”
1. Acquiring new customers profitably (a proportion of the customer base for many businesses is loss making and they never know).
2. Growing lifetime value of existing customers.
The key to success in both cases, according to Quilty, is to take advantage of the huge amount of actionable data an e-commerce business generates. Data-driven processes allow you to understand how to overcome these specific challenges across different territories, devices, channels, and customer segments.
“Much of this data will be stuck in silos across the various tools used — most of which don’t ‘talk’ to each other. So capitalising on data can be more difficult than it first seems, and this is compounded by a lack of talent – the best analytics people are highly sought after in this competitive space,” he adds.
4. Update infrastructure
The pandemic has induced sudden scaling for e-commerce businesses. Some have experienced four or five years’ worth of growth in only a few months.
According to James Brooke, founder and CEO at Amplience — the low-code content management company — “one of the main issues has been the exposure of their infrastructure to the enormous demands of this growth. If they were still using older technology, they have found it too inflexible, lacking in the agility they needed and difficult to scale. At times we have witnessed customers battling their own systems to make them work and this has impacted on team productivity and created burnout.”
Despite the challenges…
Despite the challenges of the last year, “the pace of the market makes it an incredibly exciting sector to innovate in,” says Andy Cockburn, co-founder and CEO of Mention Me, a referral marketing platform.
“Whichever part of the industry you’re in, you can really make a difference to the shopping experience, and help your customers to grow and expand. That’s hugely rewarding,” he says.