#5 5 Key Reasons Ecommerce Companies Stay Small
I’ve been in this game for over 20 years, and there isn't much I haven’t seen or done.
There are consistent patterns in the thinking habits of eCommerce founders and entrepreneurs, some of which can be excruciating to watch because I already know where the story ends.
Today I want to break down for you 5 key reasons why eCommerce companies stay small (under £10M).
You Tackle Warehousing & Logistics As a Core Competency
Companies usually get to a size where they find out that outsourcing to a 3PL is the smartest move they can make.
Just ask companies like 'Anker' or 'Pretty Little Thing'.
I get it, there's an ego thing to having your sign above the door, and SMEs get quite cranky about this subject. But trust me, the sooner you outsource this the faster you will scale. Let go of your pride, and focus on what matters.
I did it myself. We moved 6 times in 2 years, finally into a purpose-built 80,000 square foot warehouse which we outgrew in 6 months. It took me that many go’s to realise that whilst ever we were growing, and we didn't know where the ceiling was…we could play this game forever!
Cost savings, flexibility & scalability, expertise, technology, rate negotiation, and risk mitigation. Just some of the obvious reasons to lift this burden.
It is NOT your core competency! If it is then you’re not good enough at sales.
You Want To Hire Everything In-House
There are 2 ways this mistake is made. It is either done from the beginning, on a shoestring, which is utter lunacy in my view, or it's reverse-engineered when it's working as an outsource…which is equal lunacy.
If big companies like Coca Cola know that they cannot possibly hire in every role, what on Earth makes you think you can?
Leveraging help outside of an organisation can offer expertise and cost efficiencies as well as introduce an outside perspective that isn't in the weeds of the day-to-day business.
Aside from warehousing, which we have already covered, some key areas the biggest companies outsource are customer service, digital marketing, website development, HR and finance roles.
But here is the most overlooked issue: The best talent isn't looking to get hired anymore, they’re looking to leverage their skills for more money. What are the chances that you’ll be able to hire a star on indeed.com at first attempt? And if you get lucky, how long will they stay after you’ve invested in training them?
Truth is, it can take a decade to get it right through trial & error and build a team in every area of specialism. If you think thats worth the investment, and you’ve got that long, good luck. But what could you be doing with your time to scale the business if you offloaded some of this and focussed on the build?
Again, I know because I’ve done it. We have that in-house resource, but it took me 13 years to get it right…and I’m still learning! I would do it differently over again.
You’re Unreasonable On The Time It Takes
Yes, we exist in a world that operates faster than ever and expect everything tomorrow. But one thing hasn’t changed. It takes time to build something meaningful.
Patience is crucial when building an eCommerce brand for the long term.
You overestimate what can be done in 6 months, but underestimate what can be done in 3 years.
To see the fruits of your labour, you must get your head down, ignore the nonsense you read online about that tearaway brand in your industry, ignore the competition, sell a quality product, gather positive reviews, and let it compound. Look up in 3 years.
You’re Unreasonable On The Money It Takes
If you want monkeys you pay peanuts, right?
The same thing goes for those costs involved in building a serious brand. Of course, you can bootstrap, and of course, you can hustle, but you have to be reasonable about the fact that money needs to be spent to receive quality.
This applies to staff, agencies, consultants, warehousing and marketing. Do not scrimp on those things that will set you back a year if you get them wrong.
For example, if you want to build a new product on marketplaces you have to be prepared to break even for a period of time to gain reviews. There is no other way. If anyone tells you differently, they’re scrambling for business and you’ve got another monkey.
BONUS: Time alone can build a good business, Money alone can build a good business, but Time + Money is where the magic happens. Pledge allegiance to both and this thing will compound better that the S&P!
You Think Its More Complex Than It Is
Warren Buffet said, “Business is simple, people make it complicated”. If the Oracle says so, I believe him. So should you.
Agencies and consultancies make a living making this stuff look hard, think about it for a moment. Of course they would. They use fancy terminology and lose you in funnels and analytics to justify the job.
It’s not that hard: Make something nice at a price people want to pay and figure out where/how to sell it.
Here's the easiest way to do that;
DO: Find the people or companies who have the resources or expertise you need and ask them for help.
DON’T: Spend years and millions of pounds building your own.
You Won’t Ask For Help
This one kind of envelops the previous 5 points we’ve covered.
You’re a proud business owner, you might have built this thing to £5M, £10M even £25M! Congratulations to you. But here’s the thing that might isolate some of our subscribers (please don’t unsubscribe)…you’re still small and you don’t know what you don't know!
SME owners and entrepreneurs often fall into the trap of thinking they are at the top of the food chain and that they know best. Their ego gets the better of them and they think they do it all alone.
They start going all ‘Dr Evil’ and gunning for world domination. They want control of their warehousing, staffing, marketing, expansion, finance etc…
Then they start wanting everything tomorrow and go through agencies like socks when they don't get it. Worse still, they think they shouldn't have to pay for it, so the vicious cycle gets quicker until they assume that everyone else is inept.
Before long, you’re stuck. Stuck at £5M, £10M, £50M, whatever, the number is irrelevant.
Ask for help. Don’t be too proud. There is someone who knows more than you do and can help you get there faster than you could on your own. I was that stubborn soldier!
I’m not suggesting this is you, and I hope it's not, but perhaps it is and if so perhaps this will in some way help you to avoid some of the most common mistakes in the business.