5 things I wish I knew before I started an e -commercial company | Entrepreneur

As a 3x founder and veteran book publisher, I have brought thousands of authors on the market, including several who have climbed the bestseller list of the New York Times. Like most publishers, I always trusted traditional channels to handle sales and distribution, including of course Amazon. It always worked for me, but it is expensive because you lose more than half of the selling price to the intermediary.

Frustrated by the business model, I decided to cut out both retailers and wholesalers by selling directly to consumers via my e -commerce platform. I became both a publisher and an E -Commerce seller.

Although I experienced some success, from zero to more than $ 1 million in income in less than a year, the transition also caught me overwhelmed. I discovered that what looked easy from outside in practice was much more complex. The very competitive world of online retail is a minefield of logistics and financial challenges that can derail even the most prepared.

Here are five things I wanted I knew before I jumped into E -commerce. These factors can determine whether you can build a flourishing company or not.

Related: how to build, grow and make money with e -commerce

1. Your competition is all other online sellers

Unlike traditional retail trade, your E -commercial company does not only compete with the store in the street. You compete with sellers worldwide. It turns out that there are millions. There are an estimated 4.82 million live Shopify stores worldwide – and that is only one platform, and each competes for the same dollars.

This reality requires a fundamental shift in how you think about the products you sell. Success in e -commerce is not just about a good product for a good price. It is about finding unique corners that give you a competitive advantage. Whether that is your brand story or how your shopping cart works, the entrepreneurs who succeed in e -commerce are those who find ways to compete on factors other than product and price.

2. The costs of customer acquisition costs can incur or break your company

One of the biggest shocks for me was to discover how expensive it can be to acquire customers. I learned that the days of “building and they will come” have long disappeared. With iOS Privacy changes, rising advertising costs and increased competition for consumer attention, many E -commercial companies spend between $ 30 and $ 50 to acquire a single customer.

Before you are launched, you must understand the Lifetime Value (CLV) of your customer and how much you can afford to spend on acquisition while you remain profitable. If your average order value is $ 40 and your profit margin is 30%, you can only spend around $ 12 on acquiring that customer while retaining profitability, unless you have a strategy for repeated purchases.

The math is difficult and your excitement about your top position line can quickly become a nightmare if you are not careful. So calculate these figures early and build your business model around sustainable acquisition costs.

Related: how you can lower the customer’s acquisition costs with SEO

3. Operations and fulfillment are more complex than you think

Managing inventory, processing orders, handling returns and the efficient shipment of shipping requires systems and processes that I have underestimated. What seems simple if you sell a few items per week becomes overwhelming when you process hundreds of orders.

I tried to save money by doing it myself, but soon discovered that the hidden costs cost me more than they saved. Fortunately I decided to hand it over to an implementing company before it became too late. Consider the use of a Logistics provider (3PL) from third parties (3PL) or user services such as Amazon FBA. Each option has considerations in terms of costs and scalability. Remember that although self -fulfillment gives you control, it also costs you in space, time and systems.

4. Cash flow management will test your business skills

E -commerce creates unique cash flow challenges that even overwhelm the best entrepreneurs. You usually have to buy inventory before you sell it, and payment processing companies often have funds for new companies. Add the costs of advertising, website hosting and implementation, and you can quickly retain money and under water.

You can plan these realities by maintaining sufficient working capital and understanding your cash conversion cycle, what it is time between buying inventory and collecting cash from the sale. If you are not careful, you can no longer have any money during the growth dances. This can be particularly stressful.

Try to prevent you from risking too much by your inventory oversis. It is tempting because your costs of goods are lower, but the assessment in terms of your cash position can derail your company. As you grow, you can switch to keeping inventory for better margins and faster shipping times.

Related: how you can manage the cash flow of your startup correctly

5. Social media is your lifeline, not just marketing

In traditional publications I was able to rely on established channels and industrial connections to reach readers. Social media is not just a marketing channel in e -commerce. It’s all. Platforms such as Instagram, Tiktok and Facebook are the primary discovery mechanisms for many consumers, and not just any more younger demography.

I quickly learned that treating social media as a side issue or fully delegating agencies was a mistake. Social media stimulates the awareness and traffic of your brand to your online store. It makes direct customer involvement possible and offers social evidence through users generated by users. So you have to own it.

The key is consistency and authenticity. Clients detect when brands simply push products versus really busy with their community. Invest time in understanding the culture of each platform and create content that is relevant in the right way. One viral post can save you several times what you need to spend on equivalent advertisements.

E -commerce offers enormous opportunities for entrepreneurs who want to approach it strategically. But it is not a magical wand. Success requires more than just a good product idea. It requires understanding of digital marketing, operational management, financial planning and yes, sometimes steel nerves.