The vast majority of eCommerce startups are set to fail within their first 120 days of operation, new research has revealed. A survey of 1,253 owners of failed startups in the UK, carried out by leading digital marketing agency, Marketingsignals.com, revealed the top ten reasons why eCommerce start-up businesses are failing.
According to many sources (including Forbes and Huff Post), 90% of eCommerce startup businesses end in failure within 120 days. Just why they are failing so quickly has been revealed in new research from Marketingsignals.com. The research found two main reasons for failure. Poor online marketing performance coupled with an overall lack of search engine visibility.
Startups failing to deliver online marketing
Of those companies surveyed, 37% said their failure could be attributed to an inability to compete or deliver online marketing. In addition, 35% say a lack of online visibility was the main factor.
Further research found that 35% of respondents felt failure was down to them being too small to compete or there being no market for their products/ services. Another 32% of respondents reported that it was due to them running out of cash.
Completing the top five reasons for failure, was price and costing issues. Twenty-nine percent of failed startup owners claim this was the reason why they folded.
Competing against Amazon
When further quizzed on the reasons why their online business failed, 23% said that it was due to being outcompeted. Furthermore, 19% blamed retail giants such as Amazon for dominating a large share of the consumer online retail market.
Sixteen percent said their business collapsed due to their lack of customer service. Fourteen percent of respondents, felt it was due to the poor team they’d built around themselves.
Completing the top ten reasons why eCommerce startups fail was product mistiming. Eleven percent of startup owners claiming that the reason why their business failed was due to ‘right product, wrong time’.
Gareth Hoyle, managing director at Marketingsignals.com said, “It’s clear to see that having an online presence and being visible on search engines is a key area. Ecommerce startups need to focus on this to ensure they succeed.
“It’s incredibly important that business owners put provisions firmly in place well before launching. This must include a bulletproof search visibility and online marketing strategy. Startups must ensure there is a market for their product offering.
“A targeted, strategic approach to digital marketing is vital to success of any online business in this day and age. This is more so for small businesses who are just starting out. Many tools can be used to increase their brand awareness and search visibility in their first few days and weeks. Especially when consumer trust and loyalty hasn’t yet been established.”
The top ten reasons why UK eCommerce startups fail:
- Poor online marketing – 37%
- Lack of online search visibility – 35%
- Little to no market for their products or services – 35%
- Running out of cash – 32%
- Price and costing issues – 29%
- Got outcompeted – 23%
- Retail giants dominating a large share of the market – 19%
- Lack customer service – 16%
- Poor team around them – 14%
- Product mistiming – 11%
Enterprise Times: What this means for business?
At times, there appears to be a lot of venture capital money heading into every variety of eCommerce startup possible. However, just because everybody is getting into startups, doesn’t guarantee immediate success and an instant revenue stream. Marketingsignals.com research suggest nine out of 10 startups will fail. However, what’s surprising is the speed of the failure. Many fail within 120 days, around 3 months after launching.
The figures from the US is similar to the UK, with 90% of startups ending in failure. A number of high profile eCommerce startups have fallen in the last few months across a range of sectors. San Francisco-based robot maker Anki shuttered after using up its sizable pile of cash. Other notable closures include customised footwear maker Shoes of Prey, which decided that its approach didn’t have enough mainstream appeal. Stratolaunch, a satellite launching company founded by late Microsoft co-founder Paul Allen.
With nine out of 10 startups failing, this means the VC money invested into these ideas will also disappear. The Marketingsignals.com research did not indicate the amount of money lost on these ventures. However, in the US, analysts have estimated that failed eCommerce startups will run into the billions of US dollars. Hopefully, VC don’t run with fright and stop investing the cash.