As an online seller, I quickly learned that the e-commerce industry has some nasty tricks up its sleeve. Ultimately, realizing that online sellers could use help and protection led me to start my three businesses, which provide training and resources to online sellers worldwide.
If you’re just starting out in the world of online stores, here are some common traps and ways to protect yourself from them.
1. Unreliable Suppliers
An unreliable supplier can ruin an e-commerce business fast. Just a quick Google search will demonstrate the multitude of online product suppliers. It can be extremely overwhelming for new e-commerce store owners to sift through all the suppliers that are available to them, comparing prices and assessing trustworthiness.
The sad news is that there are plenty of poor suppliers out there. A bad supplier might provide you or your customers with cheap, low-quality products, take forever to ship items, or, in a worst-case scenario, disappear with your money. These scammy suppliers represent a major threat to e-commerce businesses, both new and mature.
The good news is that the e-commerce industry has recognized this problem and created an effective solution: directories. With a directory membership, you can let someone else do the legwork of researching and verifying suppliers. All you have to do is log on and pick the one who has your products. When I first started selling on TradeMe, I had plenty of people approach me asking where I found my suppliers. It was obvious that finding supplier companies with good-quality products was a challenge plaguing many e-commerce entrepreneurs and people needed resources. That’s why I created a directory of wholesale suppliers called SaleHoo.
That said, not all directories are created equal: some will let less-than-perfect suppliers join. Just as it is important to trust your supplier, it’s important to trust the directory where you find your suppliers. Be choosy.
2. Your customers
It is an unfortunate reality that your customers are both your best friends and worst enemies when it comes to the e-commerce business. Some customers—though not many—will falsely report that they never received a shipment and ask for their money back. This is just one example of e-commerce fraud.
A customer has a lot of power over your business through their online presence, so it’s naturally important that any complaint or return request be handled with care and tact. But e-commerce store owners need to recognize that not everyone is as trustworthy as you might think.
There are a variety of ways to protect your business from this type of fraud. First of all, prevent even sincere misunderstandings by prioritizing detail and accuracy in your descriptions. Sometimes, new store owners think the description of a product is just another change to use sales copy. While the description should highlight a product’s benefits, it should also be clear about exactly what it is, how it works and what it looks like.
Another way to protect yourself: Have someone with legal experience—even better, legal experience in consumer regulations—help you write your terms and conditions. Terms and conditions will protect you from liability and even allow you to put a cap on how much money a customer can ask to have returned. These nitty gritty details aren’t much fun, but they can protect you from the threat of fraud down the road.
3. Expensive, useless training
Like almost any industry, there is an entire library of useless, expensive training resources for online store ownership. For people just entering this industry, there is a lot to learn. New store owners are seeking education and information, of which there is plenty, but much of it is worthless.
Do your research and read reviews of any training resource you plan to purchase. If possible, contact someone who has used the tool and can give you an honest review that isn’t posted publicly. If something sounds too expensive, listen to your gut. You need to invest in your business education but be savvy about how you invest.
4. Price competition
Price competition in e-commerce can be cut-throat. Not only will other online stores drive down their prices to compete, but if Amazon and eBay are selling your items at the same price, their name recognition is likely to steal your customers away. All this price gouging will stifle your profit margin fast and you can’t simply keep lowering prices. In fact, I’d advise you not to compete on price at all.
When you’re a small online store, competing with these big names in e-commerce is self-defeating. There will always be someone who will sell the item for less money, and the customers looking for the cheapest option have no brand loyalty—they’ll go straight for the best price. Big names have the power and money to keep cutting prices—you probably don’t.
Instead of competing on price, just focus on quality and value. Make sure your customers understand why it’s worth it to buy from your store and pay a little bit more. Don’t sell anything but products you can stand behind and always keep improving your customer service. You won’t make money by selling the cheapest products, but you can make money by being an amazing business.
5. Platform safety and security
One of the most important decisions any online seller makes is what platform to use for their online store. While you can operate your store from eBay or Amazon, there are a lot of downsides to using these major outlets, including increased competition and seller fees. Instead, most serious e-commerce professionals choose to build their own online storefront, which puts them at risk for platform security issues.
Your customers will be checking out and inputting their payment information on your site, so you need to make sure it is secure and safe for them. The easiest way to ensure this safety is by taking serious security measures while building your online store or using a platform that clearly prioritizes e-commerce security.
Don’t be discouraged
It’s not all doom and gloom. For every bad supplier, customer, training program and competitor, there is a good one. It’s simply a matter of being alert and aware, preparing yourself and listening to your instincts. Like all industries, e-commerce has a number of traps for new business owners to fall into, but with proper research and attention, you can be very successful.
Simon Slade is CEO and co-founder of SaleHoo.
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