mistakes

7 Mistakes New E-Commerce Startups Make and How to Avoid Them

As a serial entrepreneur, business adviser and mentor, I’ve seen many e-commerce success stories. But, I’ve also seen some horrible e-commerce startup mistakes that have cost their founders time and money.

If there was anything I could do to help more of these startup founders, it would be to offer advice on how to avoid the following seven common mistakes.

Nonexistent cash flow

While I’ve seen this with all types of startups, e-commerce startups tend to make this mistake more often. It may be because an e-commerce business has more upfront costs than other types of businesses. E-commerce is also reliant on sales that are seasonal, leading to fluctuating revenue.

How to avoid

Create cash flow by maintaining as lean a budget as possible. Stick to this budget as you prepare your revenue-generating product catalogue for launch. Maintain that lean budget for as long as possible for at least two years until you can realize revenue that creates the cash flow for you. Doing so will also allow you to track the seasonal changes in revenue streams so you can plan for lower revenue periods.

Under-researched idea

Because you can sell it doesn’t mean anyone actually wants it. The founder believes in their idea, and their close circle who will back anything they do. The problem is that these founders didn’t research if there was a big enough audience for the potential product or service. Nor did they consider how much competition they had in their niche for that audience’s attention.

How to avoid

Don’t rush your business launch. Spend a good amount of time on research and follow up on the trends and factors you see impacting your e-commerce startup. Track the competition to see how they handle market changes.

Study your target audience, create personas for them and assess how you can help them. You will either be on track with your products or you will need to make changes to match what your audience and market seek.



Poor product selection (or too many products)

When surrounded by the Amazons of the world, the last thing you should be is a one-product e-commerce company (even if you have not committed Mistake #2 on this list and have something people actually want).

But, I’ve also seen e-commerce startups that are trying to be Amazon with too many products. It comes off like a restaurant that has a 20-page menu: audience confusion and fatigue. Plus, too many products leads to unnecessary costs, as well as many logistics and inventory issues.

How to avoid

Benchmark other companies and leverage audience research to find the optimum number of products you should offer. Balance these findings with your available funding to maintain the necessary cash flow. Even if you could offer more products, it is better to launch with a few and then reinvest that revenue in expanding your product catalogue.

Anemic marketing and advertising

These strategies are the lifeblood of an e-commerce business.

If you are not investing in online marketing tactics and digital advertising, then you are not doing your e-commerce startup any favors.

With small budgets, it’s understandable that startup founders want to scrimp. But, the reality is that this is one of the most important places to spend money. Things like email marketing campaigns and social media ads are how you drive people to your site, turn them into customers and build revenue.

How to avoid

Focus on marketing and advertising that aligns with your available budget, and gradually expand your spend when financially possible.

For example, create a blog and social media presence. Here, you can engage with followers and then work in paid opportunities that target more of your audience. Use channels that provide extra value like targeting tools and analytics to track results.

Not regularly testing and tweaking

There is no status quo in business, especially when a customer base is constantly changing its mind, altering preferences and expecting more. It’s a big mistake to research, test and change your e-commerce business just once. You’ll miss many opportunities to further grow your startup by not regularly testing your marketing and product offering.

How to avoid

Adjust your mindset and actions to appreciate the ongoing need for testing and changing until you see improved results. Then, start the process all over again to identify when customers or the audience may be evolving. Incorporate A/B testing for your online store as well as ask for feedback from your online store visitors.

Assuming it’s an automatic money maker

While more people are shopping online, it’s a mistake to think you will immediately make money. You still have considerable competition from other online retailers and brick-and-mortar stores. Like any startup, it will take time to establish a dedicated following and balance revenue and costs to turn a profit. There is no instant gratification in the world of e-commerce.

How to avoid

Change your thinking. Be patient and keep working at it. Most importantly, avoid the mistakes on this list. Your efforts will eventually pay off. Use the time as a learning experience and training ground.


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No customer experience

Too many e-commerce companies are in a rush to launch. Instead, they should stop and take the time to make their online presence into a memorable customer experience. Many blow it on the first interaction because they haven’t taken simple, but effective steps, like optimizing page speed and creating a mobile-focused website. Also, be sure to align your social channel efforts with your target audience.

How to avoid

Shop your own store and see what it’s like. Get others to test it so they can share how the experience made them feel. Your customers want fast page speed, pleasing graphics and visuals, and video. They like compelling product descriptions and an easy checkout process.

Mistakes happen

Every novice startup founder is bound to slip up somewhere. While many lessons are often tied to your specific business, these common e-commerce startup mistakes are avoidable.

Keeping these tips in mind, you can make that positive first impression, improve results and build on a solid foundation of e-commerce best practices.

Originally published May 8, 2020.

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