Practical Ecommerce

The formula to online success, from ‘Lessons Learned’ merchants

Since March 2012, I’ve been writing the monthly “Lessons Learned” column, which has profiled online merchants selling products ranging from remedies for intestinal problems (“Trusting your Gut to Online Success”) to inexpensive garden sheds (“Fall of Communism Leads to Cheap Sheds’ Success”).

Could there be a formula for online success?

From analyzing the stories, it would seem the secret formula to a multimillion dollar online businesses may include an entrepreneurial relative, previous online experience, time in the market, a high-end shopping cart, three or more employees, in-house search engine optimization, and creating a robust website design from the start.

Family History

You don’t need relatives with an entrepreneurial background to succeed, but it may help.

Nine merchants had grandfathers, fathers, or a friend’s father who were entrepreneurs, while a further three were serial entrepreneurs. Serial entrepreneurialism is no guarantee of gross revenue however. One recorded $15,000 a year for glass handbags (“Selling Specialty Handbags Expensive”), while the other earned $65 million a year for window blinds (“Entrepreneurs Select Blinds”).

Previous Online Experience

Nine of the 21 ecommerce merchants had online experience prior to launching their websites. But this expertise means nothing without a robust business model, demand for products, time in the market, and the founders’ abilities and budgets.

One of these nine experienced online merchants, Select Blinds, was the highest revenue-grossing retailer. Its founders had successfully run a mortgage lead website launched in 1999. At the other end of the scale was Cakes And Kids with $150,000 in revenue (“Finding the Recipe for a Successful Cake Decorating Website”), the founder worked for 20 years in online marketing.

The remaining 11 merchants had worked in the industry, had an interest in the product category, or saw an opportunity in the market before launching their websites.

Launch Year

In general, it takes time to be a success. The two highest grossing retailers launched their websites in 2002 (Pimsleur Approach, “Licensing a Language Platform Is Ecommerce Success,” $35 million) and 2003 (Select Blinds, $65 million).

However, longevity does not always equate to high gross revenues. Stork Gifts (“Personalized Gift Site a Family Affair”) launched in 2003 and its most recent yearly gross revenue was $900,000, while BedroomFurnitureDiscounts.com (“Making Online Bed Shopping a Dream”) launched in 2010 and recorded gross revenue of $8 million.

Shopping Carts

Merchants used a wide range of shopping carts, however the highest grossing retailers — Pimsleur Approach and Select Blinds — built their carts from scratch. This was partly to provide the process and experience the founders wanted, but also because the range of carts available today did not exist in 2003 and earlier.

Generally, merchants upgrade to ever more server-intensive shopping carts as they grow larger.

Eight merchants used Magento or Volusion. Four Magento merchants recorded gross revenue ranging from $1.03 million (VacuumSpot Founder Comes Clean, Inspires”) to $8 million (BedroomFurnitureDiscounts.com) while the four Volusion merchants earned from $300,000 (Stork Gifts) to $3 million (“Discount Cleaning Products Really Cleans Up”). Two used Bigcommerce while a further two used osCommerce.

Employees

Typically, gross revenue grew as employee numbers expand.

Of the nine merchants who recorded gross revenue of $1 million or less, five merchants (earning $15,000 to $720,000) had no employees, while Specialist ID, “Specialist ID Identifies a Niche,” ($920,000) hired eight employees from family members and friends.

The 10 merchants who recorded gross revenue between $1.03 million and $8 million employed between two and 20 employees.

But merchants don’t always hire employees in proportion to their revenue, with Select Blinds ($65 million) hiring 60 staff while Pimsleur Approach ($35 million) numbered 166 employees.

Search Engine Optimization

Retailers are most likely to outsource search engine optimization at first and then bring it in-house.

Eleven merchants undertook their own SEO and the other 10 outsourced it. Of those who undertook SEO in-house, most had used external providers until they became dissatisfied with the lackluster results, Google’s penalties, or cost.

Biggest Mistakes

Ten merchants mentioned they wasted money on an inadequate or ineffective website design, print advertising, online advertising, pay-per click advertising, comparison shopping websites, or SEO.

Three merchants said they made a mistake waiting too long to hire staff or they hired the wrong people.

Two merchants said they made mistakes saving money on shipping and cheap hosting, another two cited outsourcing customer service, while two more purchased too much stock that didn’t sell.

Biggest Successes

While repeat customers and profitability were frequently mentioned as the biggest successes, nine merchants also felt most satisfied mastering their websites’ conversion, pay-per-click advertising, and social media.

Eight merchants mentioned their biggest highlights as being showcased on television, print, a government website, getting licensing rights, or winning a spot on a coveted business list.

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Comments ( 8 )

  1. Prashant Telang February 5, 2014 Reply

    About mistakes: one could be out-sourcing projects from the firm quoting the least rates. Selecting an outsourcing contractor is a critical decision.
    As a thumb rule I would suggest not to go for the cheapest developer and not to hire from freelancing sites like elance where there is massive under-cutting during bidding process; finally resulting in shoddy work quality

  2. Ashish Kothari February 6, 2014 Reply

    Nice post, however If you are planning to start or just starting out, don’t get disheartened because you don’t have an “entrepreneurial relative” (because that’s not in your hand, right!), nor get disheartened by “time in the market” or the “number of employees” (because you have not started yet or have just started).

    If you are good in other areas, and have what it takes to run a business successfully, knowing all those skills will help, but is not mandatory as far as you are willing to learn, outsource or hire smart people.

    Magento, BigCommerce, Shopify, osCommerce, Volusion are some of the most popular e-comm platforms, however you have to find which one works best for you. Because one platform earns someone $80M does not mean it should work for you as well.

    While Shopify is the easiest and prettiest to start with, Magento requires a bit of learning and outsourcing help if you are not a web developer. However if you have a really large catalogue, Shopify is not for you. Magento should be your best bet in that case.

  3. Elizabeth Ball February 6, 2014 Reply

    Hi Prashant, I definitely agree with you on not taking the cheapest quote, but the freelancing sites can be excellent for inexpensive work such as photo editing, data entry etc. I’d also suggest businesses setting up websites get references from 3 clients on the developer/designer’s work.

  4. Elizabeth Ball February 6, 2014 Reply

    Thanks Ashish, you’re quite correct, people shouldn’t get disheartened but I found it interesting to see that most retailers ended up bringing SEO in-house after out-sourcing it, and many found it a mistake to outsource customer service.

  5. Ashish February 6, 2014 Reply

    Hi Elizabeth, being an SEO I can understand the value of bringing it in-house. Customer service is the most critical touch point with your customers, so I think it should never be relegated to a third-party.

    Just wondering if you have any e-comm examples from Canada in the pipeline.

  6. Elizabeth Ball February 6, 2014 Reply

    I am always looking for retailers wishing to share their Lessons Learned and would love to hear from Canadian merchants.

  7. Ashish Kothari February 11, 2014 Reply

    Hi Elizabeth, Just to give you an idea of Canadian companies, here is a list of companies – big and small, that won Canada Post 2013 E-Comm Award.

    http://www.canadapost.ca/cpo/mc/business/campaigns/ecommerceawards/default.jsf?LOCALE=en&ecid=murl12010444

    Hope few of them might agree to share their stories.

  8. Elizabeth Ball February 18, 2014 Reply

    Thanks Ashish, that’s a great list!

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