Over the last decade, globally the e-commerce industry has witnessed explosive growth. The innovative e-commerce brands have multiple opportunities to build direct relationships with customers and capture a large chunk of the online market. One way to achieve these goals is by expanding their operations beyond their backyards.
Yet, many e-commerce companies hesitate to jump on to the expansion bandwagon.
This two-part series explores the key challenges that contribute to their apprehensions. Let’s kick off Part 1 by digging deeper into challenge #1 – lack of capital. The lack of capital funds prevents a brand from investing in online advertising, setting up an e-commerce-enabled website, and tightening the store’s security to let a buyer execute a worry-free transaction.
Lack of Capital for Advertising and Marketing
E-commerce companies know that advertising and marketing are vital to trigger a purchase decision among consumers. However, many brands don’t have deep pockets to plan out advertising and market their offerings.
Email newsletters, search engine optimization (SEO), search engine marketing (SEM), and social media marketing (SMM) all cost money. Brands that have been in the market for some time; are popular but are yet to scale up feel the pinch of these costs as their return on ad spending (ROAS) is not substantive. Facebook advertising, for example, cost 47% more in Q3, 2021 versus Q3, 2020. Even Instagram, the favored advertising playground of many e-commerce brands, has become steeper, with ad costs increasing by 32% from Q3, 2020 to Q3, 2021.
As advertising costs increase and online marketing budgets shrink, e-commerce companies lose confidence to establish a presence in a new market and grab the eyeballs of a new audience segment, which ultimately adds to their apprehensions about expansion.
Lack of Capital for Setting Up an E-commerce Enabled Website
A unique, visually appealing website with an easy-to-navigate user interface (UI) plays a huge role in nudging e-commerce conversions and sales. Easy navigational features like menus, breadcrumbs, search options, and user-friendly input controls like radio buttons and checkboxes all contribute to user experiences (UX). These features work together to empower a brand in acquiring new customers and retaining them. When a store offers a great UI, buyers enjoy shopping on the site and prefer to return for future purchases.
However, brands also know that a great store with a great UI doesn’t come cheap. Before setting up a store, the brands must conduct user analysis and audience research, define clear information architecture, design wireframes, and create a prototype. It implies that a brand has to call in information architects, site designers, and developers who know how to design an impressive, responsive, and effective e-commerce website. Smaller brands rarely have the budget to spare. They mostly rely on reasonably priced preset templates available on platforms like WordPress or Shopify, which limits them from customizing the site as per the need of the brand. The additional cost for customization adds to their apprehensions about growth and expansion.
Lack of Capital for Strengthening the Store’s Security
Some e-commerce companies successfully set up online stores with visibly appealing UI and offer great UX – thanks to the co-curricular expertise of the business owner. But a majority fall short in the area of site security. The e-commerce industry is a prime target for cyberattacks. In 2021, 82% of online retailers in the U.S. witnessed a spike in fraud attempts. Additionally, fraud significantly damaged the profitability of 26% of global retailers.
To prevent fraud, account takeover (ATO) attempts, and other types of cybercrime, e-commerce companies have to invest in security for their online stores. They must also implement strong security controls such as the Payment Card Industry Data Security Standard (PCI DSS) or General Data Protection Regulation (GDPR) which is designed to protect the personal data of the residents.
To meet these requirements and secure their stores, e-commerce companies must invest in advanced security utilities such as web application firewalls, address verification systems (AVS), and vulnerability scanners. Smaller companies often find investing in these areas a major hit on their cash flow. They also know that they cannot operate with their existing security measures when they plan to go global. As a result, they push back their decision to expand.
Lack of Capital to Replicate the In-store Experiences
Many e-commerce experts talk about replicating consumers’ in-store experiences online. Some suggest that e-commerce brands should provide tailored shopping experiences to each online customer. To do this, brands have to analyze customer data, understand customer interests and behaviors, and offer personalized digital offers and recommendations across all their online channels. According to these experts, studying buyers’ digital identities enables brands to improve their engagement approach even though the physical connection is missing.
To get it going, brands need to collect vast quantities of customer data and implement an omnichannel engagement approach. They have to invest time, effort, and money into creating well-structured product pages to replicate in-store experiences in the digital space. These pages must include high-quality product photos, accurate pricing and shipping information, sales-focused copy, and compelling CTAs. The site should clearly show the value a consumer gets by engaging with the brand and buying from its store. Creating such immersive and impressive online stores requires a massive investment that smaller brands are bereft of.
Conclusion
Many e-commerce business owners restrict themselves from expanding their brands as they focus too much on maintaining the fundamental operation expenses. If you can closely relate to these challenges, feel free to contact us. At Ergode, we help e-commerce brands successfully expand their operational footprint and grow their customer base. Talk to our team to know more about our approach and cutting-edge AI-based solutions for e-commerce/D2C companies.
