Why Do So Many New Websites Fail?

[DGTG Wholesale]

After beingin this industry several years it still amazes me that so many websites fail, I think it is worthy to discuss the pro's and con's and to try to explain to new people coming in of some of the pitfalls that may occur.

1. The main reason that a lot of new websites fail is lack of research, many people have heard that online retailing is easy money that you can make a fortune overnight, and they buy a website expecting within 24 hours tohave had loads of sales and making tons of money. This is purely fairy tale stuff, online retailing is a business like any other business and it takes hard work and patience to develop. You may have an online store but unless you put the intial effort in researching supply, products, etc you are never going tobe a sucess.

2. Lack of commitment, an online store is like any other business, and you have to be prepared to put the work and time into it. You have to create an online store that is unique and is going to attract the right interest that converts into sales. You have to ensure that your site can be found, that your site is updated, that it is user friendly. An online store is the same as a store on the high st in some respects you have to put the work into it. Sure you can buy an online store populate it with products and submit it to the search engines but if you then just leave it thinking it will just grow on its own, you are mistaken, it takes commitment and hard work to suceed.

3. Mark up, so many online stores request csv feeds upload it to their site and don't even change the price of the goods to ensure they are making money. The goods they are selling sometimes are the same price they are buying from their supplier, so of course they are never going to make any profit. This is tied into research and commitment, if you do your research you will know what you can charge for it and make money, and if you have commitment you will do the research in the first place. One other point to remember here if your mark up is too low then if the customer returns the item you are left out of pocket so always ensure that your mark up is enough to deal with the occassional return.

4. Supply choosing the right products and the right supplier for you, and building a working relationship between you. If you have a good relationship with your choosen supplier very often you can ask them what they think and you can benifit from their experience.

These are the main reasons I have found that new websites fail so often, but to summarize Research is key to developing a new online business find the right market for you, research the products the prices etc before jumping in blind. There are two types of people that get involved in online retailing those that are committed and want to develop their own business and who put hard work into their sites, doing the research, building a working relationship with their suppliers, constantly upgrading their stores virtually everyday, these people generally survive they are committed and make their business work for them. The other type is the people who think that the iternet is paved with gold and that they only need to have a site and that the money will roll in these will never succeed.

[scotserve]

One word - undercapitalisation

Until I got started in servicing "dropshipping" clients I had a surprisingly low turnover of clients especially those involved in e-commerce - since then roughly 30% of all the dropship based clients we have taken on have dropped out within 2 months ( not went elsewhere but just dropped the business)
Many dont realise the commitment not only in time but financially to make a business work and many make the mistake of seeing dropshipping as a "business" when it is only a form of stock control and one that can significantly eat into the profitability of the business.
The less money you start off with the longer it will take to establish and the more risk of getting pissed off 

[seamus]

I'd add advertising to the above aswell,

instead of writing it all out again, I thought I would pull this from one of our sites

Advertising.
This is where you need to put a lot of thought, time and effort in.
You will need to draw in customers, how will you do this?
There are plenty of ways to do this, and a lot of these are free.
EBay is a useful tool for advertising, these days its isn’t really a place to make money, but it can be a perfect place to get your products and your business name noticed. Having a constant presence on eBay is a useful thing, but make sure you at least break even with your eBay sales. Take your time, research your costs properly, eBay fees, paypal fees, final value fee, the costs can be a lot higher than you would expect.
Free ad websites. These type of sites can be very useful. Gumtree, vivastreet etc, place ads everywhere you can, make sure you link back to your website from sites that let you. Hotfrog and BT Tradespace are also handy places to advertise your business. All of these examples are free, and there are countless free ad websites around, and lots of business directories that you can use to advertise your site.
Social networking can have an excellent effect, facebook, create a page for your business, linking back to your site, facebook now have a shop front feature that allows you to sell products directly from your facebook page. Twitter is another useful tool, we would suggest using as many social networking sites as you can, given the time you have to spend networking.
Then there are paid adverts, use these carefully, as they can cost you more than you get back in sales.
Google pay per click advertising is quite hit and miss, we would suggest planning your advertising carefully, choose your keywords carefully, allow a small budget as a test and stick to it.
Local newspapers are worth thinking about, as well as old fashioned shop window flyer’s in your local newsagents etc.
Friends and family, they can provide you with valuable word of mouth advertising. Getting some business cards printed and handing them out to everyone you can is a must. Vista Print offer free business cards, and have plenty of offers that you could take advantage of, from T shirts with your business name on, to car magnets to advertise your business as you drive around.
Advertising is something you have to think very seriously about, as no-one will find your business if they don’t know you exist.
The websites we sell are Search Engine Optimised, but you can’t rely on search results alone to drive business your way.

If you make clear plans regarding what you want to achieve and research every aspect of your business, you will find entering the world of e-commerce will be a straight forward and enjoyable experience, but I must stress, research is key, and not to be overlooked.

[Baa]

May I add the following 

Not planning.

Not understanding their ideal customer, many don't appear to have thought about who their customers are or will be.

Thinking every one is a prospect is another similar problem.

Concentrating on selling the items and not the business, people think lifestyle and concepts are new, it's always been that way, everything is a lifestyle product even 3kg packs of pasta.

Seeing themselves as an employee of their business and not the manager of it, many of us are guilty of working in the business rather than on it at times.

Thinking a business is there purely to make money.

Not cultivating good business relationships with customers and suppliers.

Doing the same thing over and over again, not growing and wondering why.

[DGTG Wholesale]

I have to agree that these are vaild points too, we can all see what happens when people come into this business without the research first. I have estimated that for every ten new account that signs up to us only something like 3 or 4 actually survive the first six months. I personally have tried to reason with people over some of the mad ideas some have had about how to run their business, some listen some don't and then realise that after they are in trouble that the advice you gave them was honest and in their best interests. I think people take the first advice they are given sometimes even if it is wrong, I think you should always get a wide range of advice and listen to what is being consistently said not just flop for the first thing that is said, and that is called research. I am not always right but I believe that if your honest then long term then it benefits them and yourself.

[EyeCandiLingerie]

I agree with everything that people are saying here. I never thought personally that it was a get rich quick scheme and have to admit to maybe having one or two problems intially, which thankfully are now being resolved and the website is having everything added to it that you should do.

I have at times been disheartened deffo when i have spent so long sourcing my suppliers but i know this is not an over night thing. It is a shame to see so many people who have tried to make their business work go down the pan because as rightly stated that have not done their research and pricing to name a few things

I personally am not too worried if i am selling right now or not as this is giving me time to readjust and add the things that i might have overlooked previously, but than again i am in a position to do that something that not so many others are.

I am determined that whether it takes me 5 months or 5 years i will do what it takes to get my website to the standard that i want with all the necessary ( or however it is spelt) extras that need adding. One these are done on the site then seo can really start

Wanted to have a say but agree fully with what is being said here too

SW

[conran]

I think one of the biggest reasons sites fail is the lack of investment.

People think all they need to do is pay £20 a month for hosting or whatever and then they'll make a profit in a month.

Few people realize that it is a gamble just like every other business venture, you need to invest some money into advertising, brand awareness. Then you're going to make mistakes too, so you'd better be prepared to loose a few quid in paying back customers you made an error with.

Ultimately, most sites fail because they don't have the investment, and they don't learn the tricks, tools and methods to grow an internet business over time. They expect immediate profit with no investment and then give up after a few months.

I researched my business before I paid a penny. And this is the conclusion I came to: while my general market is a competitive one, I have a niche audience. My immediate competitors have missed out on several very basic ideas to grow their business from day one. So when I started I decided to immediately invest a few hundred quid, create a community around my site, and follow the sensible advice of many of the SEO forums out there.

After four months in business I'm ranking page one for several keywords (not the major ones though). I've gone through several page designs and layouts. I'm seeing sporadic sales. But I am slowly clawing back my initial investment while continuing my limited advertising.

IMO, the one major factor in being successful in e-commerce is investment. That's financial, time and effort too.

[Rainee Bows]

my opinion for what its worth ...

Too many people come into this without a plan of action, spend too much time then debating which way to take the business, chop and change their ideas and suppliers and have no continuity in anything. How can you expect a business to succeed when it has no direction in the first place?



it always comes back to the same thing, lack of research, lack of planning, lack of commitment.


Rain
xxxx

[scotserve]

my opinion for what its worth ...

Too many people come into this without a plan of action, spend too much time then debating which way to take the business, chop and change their ideas and suppliers and have no continuity in anything. How can you expect a business to succeed when it has no direction in the first place?



it always comes back to the same thing, lack of research, lack of planning, lack of commitment.


Rain
xxxx

Another thing I have found with those getting involved with dropshipping is that they research their ass off and still understand little, I even remember a discussion elsewhere where potential dropshipee's would not phone and discuss their needs with suppliers, preferring instead to rely on forum posts and website information, for a small business personal communication is key.
Another point in the lack of planning is when any planning is done many will look at the details and see they cant afford that so will leave it out or will find a level of commitment that they cant provide so end up working around it - if you plan a business you need to recognise the plan and be sure you can afford the time and money or you will fail.

[Rainee Bows]

my opinion for what its worth ...

Too many people come into this without a plan of action, spend too much time then debating which way to take the business, chop and change their ideas and suppliers and have no continuity in anything. How can you expect a business to succeed when it has no direction in the first place?



it always comes back to the same thing, lack of research, lack of planning, lack of commitment.


Rain
xxxx

Another thing I have found with those getting involved with dropshipping is that they research their ass off and still understand little, I even remember a discussion elsewhere where potential dropshipee's would not phone and discuss their needs with suppliers, preferring instead to rely on forum posts and website information, for a small business personal communication is key.
Another point in the lack of planning is when any planning is done many will look at the details and see they cant afford that so will leave it out or will find a level of commitment that they cant provide so end up working around it - if you plan a business you need to recognise the plan and be sure you can afford the time and money or you will fail.

I appreciate what you are saying about the understanding

Rain
xxxx

[Rainee Bows]

Actually one person springs to mind as someone that really has shown commitment to 'the cause' and he'll hate me for this but he started off not knowing an awful lot and has really battled over the last few months, with suppliers and providers etc but he really does have the determination to succeed , he doesnt spend his time 'fannying' about.

To my mind hes a very good example of just getting on and doing it !!

He's kept going despite the knock backs etc and I for one hope it starts to pay off.

Even tho he is a miserable bugger eh Carisma



Rain
xxxx

[E Dropshippers]

One of the biggest problems for new online retail businesses is finding reputable dropshipping companies! This will cause the biggest failure rate in what is a low overhead business environment.
When looking on the Internet for dropshippers you will find that far too many companies that offer dropshipping are middlemen, not real dropshippers. Another thing you will see a lot of is upfront fees to get access to products. I cannot understand why anyone would want to pay upfront fees to find out how much something costs. It's a bit like going to your grocery store and being stopped at the door to pay an entrance fee! Why? So you can go in the shop to see if he has anything that you want. & then after you have paid to get in, you go in and find the milk you wanted was sold out. Shopkeeper is happy because you just paid him to find out that he doesn’t have what you want, and now you have to go and find another shop.
It's a bit like this with some of these so called drop shipping websites. They will charge you a fee and when you have paid to get access to the site you find that they don't have what you want or they are selling goods for more than you can sell them for. You have no chance of selling these and making a worthwhile profit.
Drop shipping and e commerce is still growing, and you will get  people who want to make a quick buck jumping on the bandwagon.
Someone will do a bit of research and  find a genuine drop shipping company, they will then put together a fancy website with, and advertise themselves as a dropshipper. They will charge you a fee to become a customer, after paying their fee you will put the products they are advertising on your website or eBay when you get a sale and forward the details to this new dropshipper. They will then pass the details on to a authentic dropshipper. Who will complete the sale. Your your dropshipper is a middle man. Your goods will be overpriced as they are taking a chunk out for themselves. Also you will probably find customer service slow. Every time you have a problem and ask your supplier he then go to the original dropshipper to get the answer.
The majority of genuine dropshipping companies are an offshoot of a wholesaler or manufacturer. A genuine wholesaler will carry large stocks of items.
Just have a think about the supply chain for a moment.
A typical factory is geared up to produce hundreds if not thousands of the same item. They would find it very hard to keep selling these one at a time to the public, as they only want one item.
The same goes for most of the high street shops they sell single items to the public, could you imagine your corner shop with 100s of each item. His store room would have to be 10 times the size of the shop. Shop owners tend to buy stock in by the dozen usually. He has a nice attractive shop because he needs to attract passing customers and his store room is out of site.
This is where the wholesaler fits into the supply chain. They can buy in hundreds or thousands as they are selling a dozen at a time to the shops. They will be supplying a lot of stores and they will have plenty of stock to keep them supplied. They probably do not have passing trade like a shop does. So an attractive premise is not as important, all they want is to move goods out by the carton to the shopkeeper. The store keeper in turn wants to purchase the goods at the best price possible so he can make a reasonable profit
So how does this relate to dropshipping?
Well in the dropshiping sector you have two types of dropshippers setting up.
The first does not have a warehouse full of stock; usually it is just an office or even a spare room in their house. They will spend their time making a nice website with good keywods and adwords that will grab your attention. They then make their money in two ways. First they will charge you an upfront fee. Multiply that fee by the thousands of people coming to their fancy site enticed by false promises and you can see they make a lot of money just from the fee. Then when you order from them say you buy a widget at £5.00 in the hope of selling it for £10. They will then go to the dropshipping company and pay them £3.00 for the item making £2.00 for just passing your email along. You will find that the shops are selling the widget at £5.99 so you are left with making 99p per sale not counting your business expenses.
The second type of dropshipper is the traditional wholesaler. Over the years their customers have started to have a web presence, so to keep up with the requests for a dropshipping service they have introduced a dropshipping department. This will no doubt be an add on to their main wholesale business it probably will not have all the fancy bells and whistles of some purpose built websites. It is used to just moving stock out. There may not be a fancy office, just a computer in the warehouse office, they do not need to charge you a fee to use the website and buy from them as they can make their money from the products they sell. Say you buy the same widget at £3.00. You can now sell the widget at £5.99 making £2.99 per sale.
So how do you separate the real wholesaler/dropshipper from the middleman?
It will take time and legwork but the best place to start is by contacting wholesalers and asking if they drop ship. When you contact dropshippers ask if they carry the stock they sell in their own warehouse. Even ask to visit. There are plenty of genuine wholesalers out there that do drop ship now and you can make a reasonable profit online.

[DGTG Wholesale]

In my experience, from what I have seen is that of those who start out dropshipping most fail for the following reasons,

1. Lack of Research (They don't know the market they are in, who they are up against, what the mark up should be, how to get found, DSR'S etc)

2. Lack of Resolve (They think by having a website that they will immediate start earning money, which is not true to be successful you have to work hard at it)

3. Lack of resources (They start up and can't see if you sell 10 of something month in and month out it is worth holding that line in stock themselves)

Reading a lot of stuff about dropshippers being middlemen lately, what I find is this and I can only speak for ourselves. We import from each brand, and hold the stock which costs money, but as we are an legimate company we not only have to pay for shipping but import duty, vat on top of that, and what we sell the products at we make just a few pennies from, yet we see others who offer the same type of gear we sell ten times cheaper, yet they never seem to have the stock. I have seen this so many times especially with companies like flirty and a few others and their ultra cheap prices are meant to attract people in so that they can be snared in their wicked web of deceit.

I would have thought that if your dropshipper was a genuine dropshipper, then they are the ones who answer their phones, and are honest with you and don't give you the internet is paved with gold line, who give you advice that actually helps you with your business instead of giving you platitudes and sell you a website that will never sell anything. We don't sell websites, for the simple reason we are wholesalers/dropshippers and we know what we are good at and we just want to be good at that. Yes our stuff may be dearer, but we actually hold stock, we answer our phones and many people who visit here will confirm that we have been always honest and upfront.