Easy to Start, Hard to Soar – E-Commerce

It has never been easier to start an E-commerce business. Within just a day, you can have everything up and running. Unfortunately, that’s also your biggest challenge.

Today, I would argue that anyone can launch an online store, fill it with their own products, or simply find partners for dropshipping within just a few days. With only a minimal investment of money and time, you can have a shop ready faster than it takes to order a pair of shoes from your main competitor. The step into becoming an e-retailer is very easy to take.

This means a few things for you as a store owner. The first is that new competitors will constantly appear. A steady stream of others will try to take your customers. Up until now, we’ve lived in a world where e-commerce has been growing rapidly every year, and on a booming market, competition hasn’t been something to fear. But sooner or later, online shopping will take such a large share from traditional retail that the massive growth will slow down. At that point, it won’t feel as good to face an endless wave of competitors.

It also means you’ll face competitors who don’t need to take out a salary. In many niches, “basement entrepreneurs” actually do quite well. People who have a full-time job but run their store on the side. Unlike a physical shop, you don’t need to be present all the time, and in many more niche segments, customers are willing to wait a little longer. This means that while you may need to take out a salary, your competitor may not. In a store on the high street, your competitor would be at a huge disadvantage if they weren’t present (because the shop would be closed), but in an online store, that’s not always the case.

The third consequence of this is that size matters enormously. Since it’s easy to start, you need a significant head start, one that isn’t easy to catch up to. Once you’ve built that lead, there’s no reason to stop accelerating—you need to extend it further. This is one of the reasons why e-commerce is full of venture capital (among several others). Where your competitor on the high street may have roughly the same conditions as you, perhaps investing a million in marketing to gain an advantage, your online competitor might be able to put in 100 million more than you.

Competition is tough in many niches, even if far from all just yet. My prediction is that it will become much, much tougher and increasingly difficult for small retailers. The best strategy is to grow already today—because it will be much harder to grow tomorrow.