As a 3X founder and veteran book publisher, I’ve brought thousands of authors to market, including several that climbed the New York Times bestseller list. Like most publishers, I always relied on traditional channels to handle sales and distribution, including, of course, Amazon. It always worked for me, but it’s expensive because you lose more than half the retail price to the middleman.
Frustrated with the business model, I decided to cut both the retailers and wholesalers out by selling directly to consumers through my ecommerce platform. I became both a publisher and an ecommerce seller.
While I experienced some success, going from zero to more than $1 million in revenue in less than one year, the transition also caught me off guard. I discovered that what looked straightforward from the outside was far more complex in practice. The highly competitive world of online retail is a minefield of logistical and financial challenges that can derail even the most prepared.
Here are five things I wish I had known before leaping into ecommerce. These factors may determine whether you can build a thriving business or not.
Related: How to Build, Grow and Make Money With Ecommerce
1. Your competition is all the other online sellers
Unlike traditional retail, your ecommerce business doesn’t just compete with the store down the street. You’re competing with sellers worldwide. It turns out there are millions of them. There are an estimated 4.82 million live Shopify stores worldwide — and that’s just one platform, and each is competing for the same dollars.
This reality requires a fundamental shift in how you think about the products you’re selling. Success in ecommerce isn’t just about having a good product at a good price. It’s about finding unique angles that give you a competitive advantage. Whether that be your brand story or how your shopping cart works, the entrepreneurs who succeed in ecommerce are those who find ways to compete on factors other than product and price.
2. Customer acquisition costs can make or break your business
One of the biggest shocks for me was discovering how expensive it can be to acquire customers. I learned the days of “build it and they will come” are long gone. With iOS privacy changes, rising advertising costs and increased competition for consumer attention, many ecommerce businesses spend between $30 and $50 to acquire a single customer.
Before launching, you need to understand your customer lifetime value (CLV) and how much you can afford to spend on acquisition while remaining profitable. If your average order value is $40 and your profit margin is 30%, you can only spend about $12 acquiring that customer while maintaining profitability, unless you have a strategy for repeat purchases.
The math is tricky, and your excitement about your top-line revenue can quickly become a nightmare if you’re not careful. So, calculate these numbers early and build your business model around sustainable acquisition costs.
Related: How to Reduce Customer Acquisition Costs with SEO
3. Operations and fulfillment are more complex than you think
Managing inventory, processing orders, handling returns and shipping products efficiently requires systems and processes that I underestimated. What seems simple when you’re selling a few items per week becomes overwhelming when you’re processing hundreds of orders.
I tried to save money by doing it myself, but soon discovered that the hidden costs were costing me more than they were saving. Fortunately, I decided to hand it off to a fulfillment company before it got too late. Consider using a third-party logistics provider (3PL) or leveraging services like Amazon FBA. Each option has trade-offs in terms of cost and scalability. Remember, while self-fulfillment gives you control, it also costs you in space, time and systems.
4. Cash flow management will test your business skills
Ecommerce creates unique cash flow challenges that catch even the best entrepreneurs off guard. You typically need to purchase inventory before you sell it, and payment processing companies often hold funds for new businesses. Add in the costs of advertising, website hosting and fulfillment, and you can quickly find yourself cash-strapped and underwater.
You can plan for these realities by maintaining adequate working capital and understanding your cash conversion cycle, which is the time between purchasing inventory and collecting cash from sales. If you’re not careful, you can run out of money during growth periods. This can be especially stressful.
Try to avoid risking too much by oversizing your inventory. It’s tempting because your cost of goods is lower, but the trade-off in terms of your cash position can derail your business. As you grow, you can transition to holding inventory for better margins and faster shipping times.
Related: How to Properly Manage the Cash Flow of Your Startup
5. Social media is your lifeline, not just marketing
In traditional publishing, I could rely on established channels and industry connections to reach readers. In ecommerce, social media isn’t just another marketing channel. It’s everything. Platforms like Instagram, TikTok and Facebook are the primary discovery mechanisms for many consumers, and not just younger demographics anymore.
I quickly learned that treating social media as an afterthought or delegating it entirely to agencies was a mistake. Social media drives your brand’s awareness and traffic to your online store. It enables direct customer engagement and provides social proof through user-generated content. So you have to own it.
The key is consistency and authenticity. Customers detect when brands are simply pushing products versus genuinely engaging with their community. Invest time in understanding each platform’s culture and create content that is appropriately relevant. One viral post can save you multiple times what you’d have to spend on equivalent advertising.
Ecommerce offers tremendous opportunities for entrepreneurs willing to approach it strategically. But it’s not a magic wand. Success requires more than just a good product idea. It demands understanding of digital marketing, operations management, financial planning, and yes, sometimes nerves of steel.
As a 3X founder and veteran book publisher, I’ve brought thousands of authors to market, including several that climbed the New York Times bestseller list. Like most publishers, I always relied on traditional channels to handle sales and distribution, including, of course, Amazon. It always worked for me, but it’s expensive because you lose more than half the retail price to the middleman.
Frustrated with the business model, I decided to cut both the retailers and wholesalers out by selling directly to consumers through my ecommerce platform. I became both a publisher and an ecommerce seller.
While I experienced some success, going from zero to more than $1 million in revenue in less than one year, the transition also caught me off guard. I discovered that what looked straightforward from the outside was far more complex in practice. The highly competitive world of online retail is a minefield of logistical and financial challenges that can derail even the most prepared.
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