E-commerce: preparing to succeed

Ben Szejka at Your Ecommerce Accountant explains why so many e-commerce businesses are failing and how to avoid it

 

E-commerce is currently among the most vibrant sectors of the UK economy. There were 56,616 new online businesses created in 2024, making it the most common business type registered last year. And the sector now represents 30% of all retail sales, which is the highest level it has achieved outside of the unprecedented peak of the pandemic. 

 

But despite this apparent vitality, all is not well within the sector. In the UK, 7 in 10 e-commerce businesses fail in their first year – that’s more than double the average rate of general business failure. So, what’s going on? And how can e-commerce startups make sure that they don’t become just another statistic?

 

What’s going wrong for e-commerce startups?

Having worked directly with e-commerce brands every day for the last several years, my view is that there isn’t so much a problem with the e-commerce sector; it’s because those trying to enter it have a tendency to underestimate it.

 

Time after time, I see startups struggling for the same three basic reasons.

 

Lack of preparedness

For several years now, there has been a misconception that anyone can start an e-commerce business. You just have to have an idea, buy your stock or materials, and use a website builder; then away you go. Unfortunately, it takes quite a lot more than that.

 

So, although, in theory, anyone can start an e-commerce business, it’s a lot more difficult to follow it through. Consequently, people will invest their savings in a course that will teach them the fundamentals of their prospective business model. Then they’ll lack the time, the drive, or the direction to see it through. 

 

Trend trailing

The next big thing holds enormous allure. Every day on social media, we see hype about this product or that movement, and a flurry of activity ensues as people work to maximise that moment’s potential. The problem is, once a trend hits the internet, it’s no longer an original idea and competition can be significant.

 

Too many e-commerce businesses launch on the back of an idea spawned by an online trend with limited market research. This leaves would-be entrepreneurs with stock they can’t sell and a company that will shortly become defunct. 

 

Limited business acumen

Lastly, there are those people who have the idea, have the commitment, and have been able to successfully navigate the initial stages of launching an online business. But because they’ve not worked in the sector before, and may never have managed any form of sales-related business, they don’t know what to do next. 

 

The fundamentals of business financial literacy – profit and loss, understanding how to use a balance sheet, and what drives their numbers – are alien to them. This means that with the best will in the world, they end up making decisions based on incomplete data, ultimately causing what could be a viable business to eventually fail. 

 

What can e-commerce startups do to improve their chances of making it through the first year?

 

There is no major secret to making a success of an e-commerce business. All you can do is commit to it. So:

1. Do your research before you start – and look beyond the social platforms – making sure that you understand your product and your market. Recently, more British e-commerce startups are targeting the US than the EU because of both language and taxation barriers. Despite the proximity, UK sellers have to do a lot less admin when selling to the US than they do to EU countries. 
2. Make sure that you have the time and the inclination to spend on the business. Then focus all your energy on making sales and proving your business works – always keeping track of your financials. That’s all that matters in the first year. 
3. Later on, you can invest in fancy admin tools and in improving the user experience. At the end of the first year, if you make a decent amount of sales, you’ll probably benefit from financial advice – but you don’t need to waste your cash on an accountant before that point. All that matters in the first 12 months is getting your products or services seen by the right people, and making sales. And that’s it.  

The total number of UK e-commerce businesses is now at an all-time high, with more than 166,000 in operation. It’s a sector with enormous potential – despite the growing competition. But if you’re going to make it past the first year, unlike 70% of your peers, you have to look beyond the big idea and learn how to run a business. 

 

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Ben Szejka is the founder of Your Ecommerce Accountant

 

Main image courtesy of iStockPhoto.com