Online store profits: why is your e-commerce making a loss?

Is your online store making a loss? This is a worrisome signal that requires urgent analysis and action to start profiting from the online store. Today I will give some possible reasons why your store is not making money.

Do you need a more customized approach? Contact me: I will do an audit of the store and see what needs to be improved to start making money.

Table of Contents

1. lack of strategy

Many entrepreneurs start an online business without a concrete plan and strategy.
Strategy
is the foundation from which any venture should start. It’s not just a general plan, but a precise course of action that will lead your business to success. There are thousands of online stores on the Internet, so counting on luck is not a very good plan.

Before you open an online store, it’s worth answering a few questions:

What products do I intend to sell and why do I find them attractive to customers?
What are my unique characteristics and competitive advantages?
Why should customers choose my offering over my competitors?
How am I going to build trust in my brand?
Who are my potential customers and what are their needs?

2. lack of a clearly defined budget

Before you start your business, you need to carefully calculate your startup costs and determine how much money you will need to spend on marketing before your business becomes profitable. A financial plan will help you estimate when your business will become profitable. If you decide to run an online store, earnings will naturally not appear from the first month. However, if after approx. 6 months you still don’t make money, then something might be up.

In terms of finances, too, it’s worth answering a few questions:

How much funding do I need to start my store?
What budget will I allocate for marketing and what are my goals for it?
When do I expect my store to become profitable?
Did I focus on margins and not just revenue?

3. short-sighted pricing policy

Pricing policies have a huge impact on a company’s bottom line. Constantly cutting prices can lead to lower margins and lost profits. Unfortunately, some entrepreneurs fall into this trap: specifically, we are talking about dropshipping, where individual stores compete to see who can offer the lowest price.

Several issues are worth considering:

Are my prices competitive in the market?
Did I include all the costs before I set the price?
Is my pricing policy flexible and am I able to adapt it to changes in the market?
Am I still able to lower prices if necessary, or do I already have a minimum margin?

4. no contingency plan

Wishful thinking, which assumes that everything will go according to plan, can lead to disappointment at best, and at slightly worse: financial problems. You certainly know what kind of profits you want to make from your online store, but can you achieve it with an initial strategy? Maybe the target group needs to be changed? Maybe you need to expand your offerings or, on the contrary, specialize in a narrow niche? Entrepreneurs are often confronted with obstacles that they must overcome, so it is worth preparing for difficulties.

Do I know the key risks that could affect my online store’s business?
What specific problem scenarios might arise, and how might they affect my company?
Have I created a contingency plan or crisis management strategy that can be implemented if problems arise?
Do I have the financial reserve to weather more difficult periods without significantly affecting the company’s current operations?
Have I considered various scenarios of losing customers or declining sales and do I have a plan of action for such situations?
Am I prepared for competition and changes in the market that may affect my company, and do I have a strategy for adapting to these changes?
Do my contracts with suppliers, partners or marketing agencies contain provisions for resolving potential conflicts?
Do I regularly review and update my contingency plan to adapt it to changing market or business conditions?

5. poor selection of employees/business partners

Choosing a partner, such as
marketing agency
or developer, is of paramount importance to the success of your online store. Unfortunately, the wrong
business partner
can do more harm than good.

If you choose to work with a marketing agency or freelancer, make sure they are competent and experienced in the e-commerce field. Conduct a thorough analysis and monitor the effects of their work. Here, too, it is worth asking yourself some questions:

Have I identified exactly what skills and experience I need in my team to successfully develop my online store?

Have I conducted careful recruitment processes to select employees or business partners who best fit my needs and company values?
Have I verified the credentials and professional history of potential employees or business partners to make sure they are reliable and competent?
Have I created clear agreements or contracts that precisely define the responsibilities, expectations and terms of cooperation with employees or business partners?
Do I regularly monitor the performance and engagement of my employees or business partners to ensure that they are productive and committed to the company’s growth?
Am I ready to make tough decisions if I find that employees or business partners do not meet my expectations or violate company values?
Do I have a plan B or alternative sources of support if cooperation with specific employees or business partners is not successful?
Do I regularly evaluate my employment or business partner decisions and learn from my mistakes to avoid them in the future?

Managing an online store is a daunting task, but with the right approach and awareness, you can avoid financial losses and achieve e-commerce success. Try to constantly improve your skills and adapt your strategy to changing market conditions.

Want to benefit from my experience instead of wasting time and money learning by trial and error? I am an e-commerce manager: I will help you get your online store off the ground.