In January 2019, I started an e-commerce store. During the past one year, I learnt all about digital marketing, SEO, website development and conversion rate optimisation.
I learnt all of this while running my first startup Skiron Gaming. You can read about that startup here: Lessons Learnt From Failure.
I was prepared to run an e-commerce store and make money.
I called my store Acoustic Bits and decided to sell musical instruments on my website.
Purchasing musical instruments on the internet is a pain in the a**. It’s a pain because the information available on the internet about most instruments is not good enough. Customers generally need a salesman to understand all the features of a particular instrument before they can make a purchase.
Also, musical instruments are fragile in nature. So a lot of customers face breakage during delivery. Most big marketplaces don’t ensure whether the packaging is safe or not.
I wanted to solve these problems with my store.
I had my inventory in place. I instructed my packaging team to add multiple layers of protection while packaging. I ensured safe delivery through FedEx. I offered live chat support on the website for a smooth customer experience. I also had customer support available 24×7 through call/whatsapp.
I was pretty confident about the success of the store.
Seven months later, I shut down the store.
I shut it down not because I couldn’t make online sales, I was actually pretty good at that. Sales were roaring and so was revenue but the profits were meagre. I figured my time would be better spent on a different business.
So are e-commerce stores still viable?
The short answer is – if you’re a retailer then no. But they can be viable and profitable if your product has great margins.
The two major problems I faced were i) thin margins on retail and ii) customer support is harder than most people expect.
Being a Retailer Is Not Enough
With my e-commerce store, I was basically acting as a retailer. I was a middleman. I didn’t manufacture the guitars and keyboards I was selling. I bought products from a distributor and sold it to the end consumer.
I had to price my products based on the pricing set by Amazon and other big shopping websites. If my price was even slightly higher than Amazon, I wouldn’t make the sale.
This meant I had to sell my products at a really low price.
With the rise of amazon and other e-commerce giants, margins on physical products have reduced drastically.
Such thin margins just aren’t exciting enough.
Customer Support Is HARDD
My whole business strategy hinged on good customer support. Most customers appreciated this but only a few thought this was a deciding factor.
As I mentioned before, the information available on the internet about most instruments is not good enough. Customers need a salesman to understand all the features of a particular instrument before they can make a purchase.
I provided this service. Customers talked to sales people right on the website. My team helped customers shortlist the right products for them.
What happened next? The customers thanked my team for helping them and then made the final purchase on another website which offered a cheaper price.
Providing customer support isn’t hard. It’s hard because it’s mentally exhausting.
Apart from this I also had to manage after sales services, returns, refunds and all other basic problems of an online store. All these issues seem easy but once they start mounting up, it becomes a challenge
I Love a Good Pros And Cons List
After 7 months, I finally decided to make a pros and cons list of running the store.
Cons:
- Thin margins
- High competition
- Providing pre-sales support is mentally exhausting
- Managing returns, refunds etc is a hassle of its own
Pros:
- 404 error – not found
On average, my profit margins after shipping and returns were around 10-12%. Last I checked, Amazon offers an 8% commission on musical instruments to affiliate marketers. I figured it would be better to become an affiliate marketer. The hassle would be 90% less and the profit would be almost the same.
That’s what I did. Acoustic Bits is now a blog having information regarding musical instruments. Now I earn a passive income through ads. Right now the earnings aren’t that high but I plan to grow the website very soon.
Final Verdict
Being a middleman retailer isn’t sufficient anymore. You can still have a successful ecommerce business but only if you sell high margin products.
The two suggestions I can give to you are: i) either manufacture your own branded products or ii) don’t hold any inventory (dropshipping).
If you are starting a new e-commerce store and have any queries, feel free to contact me.
