Starting an ecommerce business, or adding ecommerce to your existing one always
sounds like a good idea. Given the growth rate of online businesses clicking at 10%
per year or more, ecommerce is a valid consideration for a wide variety of reasons.
Ultimately, the one reason that defines it as a good business decision is that it can
There are many pitfalls that many businesses can fall into when venturing into the
ecommerce territory. As you might expect, most online business fail to deliver.
Because they are relatively easy to set up compared with their brick and mortar
counterparts, the risk is lower and the loss is palatable.
If an ecommerce business has a good product and is competitive in the market, why
would it fail? Most owners of failing online businesses have no idea how to answer
this question. The answer almost always is that they "winged" the business. They may
even have a beautiful website but forgot to implement the basics of business planning.
Few successful businesses run without a business plan. Ecommerce planning is just as
much a requirement although developing a plan for an online business requires a
different approach. Sadly, if most ecommerce failures had established a plan starting
with the following guidelines they would probably not have failed. Some may not
even have ventured online as a result of understanding the challenge ahead of them.
Ecommerce planning begins with this simple approach to developing a plan for a
predictable ecommerce business. Begin with the end in mind.
1. ESTABLISH YOUR REVENUE TARGET
If this is a new ecommerce site, be realistic. How much revenue do you need to turn
over in the first year to produce a profit? What would you be comfortable with? I
don't know what a good number is because it depends on the product. $30,000 might
be a great number if you're selling an e-book but might not carry your overhead if
you're selling physical goods that you have to stock and inventory. In any case, know
your target. Let's use $10,000 for this example.
2. ESTABLISH YOUR SELLING PRICE FOR YOUR PRODUCT
A little research is in order to make sure your price is consistent with your competitors
who are already selling on the net. You are always in a better position if you are
selling unique products but we don't all have that luxury. In any case, once you've
established your price, you can by simple division know how many units you need to
sell to meet your revenue target. So far, so good. Let's use $10 per sales for this
Revenue / Product Price = # of Sales required
$10,000 / $10 = 1000 sales required
3. ASSUME A CONSERVATIVE CONVERSION RATE FOR YOUR WEBSITE
E-Books usually have a conversion rate of 0.5 - 5 percent. Big ticket items might have
lower conversion rates. Also, and very importantly, how the visitor got to your site has
a dramatic affect on the conversion rate. If the search terms that your site gets ranked
for are very closely related to the product or services being sold, it is likely that your
conversion will be higher. If you have a relationship with any of your online
competitors, it can't hurt to ask what their conversion rates are. Whatever you
establish, make sure it's conservative (a low number). So now, you can calculate how
many visits your site will require to meet your revenue target. Let's use 1%
conversion for this example.
Visits = sales required / conversion rate
Visits = 1000 / .01
The website needs 100,000 visitors to meet plan.
This is where the rubber meets the road. The challenge is to figure out how to get
100,000 visitors who need your products and services to visit your website. For most
of my clients, this is the first time they've been able to state very clearly their
requirements for their website.
CHOOSE KEYWORDS THAT DELIVER YOUR TRAFFIC REQUIREMENTS
Your ecommerce solution involves a website that is optimized for keywords relative
to your market. Basic keyword research will highlight whether there are enough
searches in your business category to meet your goals. Choosing the correct keywords,
ones that you know you can rank for is extremely important especially for start-up
ecommerce sites. You don't have enough clout to play with the big-boys! Pick your
niches carefully or you'll never see page one of the search engines and therefore never
meet your visitor numbers goals.
Ultimately your ecommerce solution needs enough funding to support a well thought
out website and an on-going search engine optimization plan. Skimp on the SEO and
the money you put up for the website will in all likelyhood have been wasted. Build
the SEO into the marketing plan of your ecommerce site (or learn how to do it
yourself) and your online business should be predictable and profitable.