13 things to keep in mind while starting an ecommerce brand

We often see new sellers struggling in starting their ecommerce brand and they usually ask us what it's like to be running a successful ecommerce brand. The straightforward answer is, when launching an ecommerce brand, at the beginning it feels like everything is a mess, you're bouncing between product ideas, setting up a store, advertising, and it's easy to overlook some key fundamentals that will ultimately determine whether your brand survives its first year.

You are not just selling a great product; you need to zone in on your niche with well-written product descriptions, competitor analysis to see a) there is competition and b) how strong that competition is, the platform you work with, and, just as important, the risks involved. Anyone can change their policies overnight on a platform, anyone's advertising account can be suspended in a day without any recourse for you the seller, and your competitors could hijack your listings. If you do not actively and honestly prepare for these risks, you can lose your entire revenue stream or the opportunity for one day to another.

You also need to look out for numbers in the form of profit margins, customer acquisition costs, inventory planning, if you don't know them, you'll exhaust cash quickly. Branding, legal setup, and scalable systems are not optional if you want to potentially grow, without everything breaking down at some point.

So, we tell them to print this, then read out loud. A checklist that shows these 13 core areas. Do them one by one, in order. Check them off only when they're fully taken care of. Don't rush. Don't skip around. If you start this structured way from day one, you'll already be ahead of 90% of new ecommerce businesses, and you'll be saving yourself the grief, and expense, of the bigger mistakes that most people make by just "figuring it all out as they go."

How we Saved Sarah's Failing Ecommerce Business Using our 13-Point Success Checklist

6 months into running her eco-friendly phone case venture, Sarah came to us feeling defeated. She had spent her next year's savings which was about $5,000, had her Amazon account suspended, and now she had inventory she could not sell. What she thought would be an easy path to becoming an entrepreneur turned out to be a nightmare of blunders and sleepless nights.

In our ecommerce Amazon agency services, we saw this play out all too often. She had fallen prey to every trap that can shatter a new online business. In reviewing her scenario, we were able to identify 13 critical areas where she had gone wrong, and more importantly demonstrate how she could improve on them for her next attempt.

1. Product Category Selection Sets Your Foundation

Sarah had chosen phone accessories without realizing the cold hard facts associated with this category. She now realized that returns are exceedingly high and there is a very low profit margin with the competition being incredibly fierce. She had learned too late on how much time and money it takes to test and qualify electronics, get them under warranty, and knowing that in inventory there would be constant change.

Sarah learned about the importance of understanding a certain category's challenges before she put her money into it. Electronics may have high demand or sales volume but they can be complicated; consumables might have virtually no returns, but you are limited to repeat sales. Before running into a category, she should consider her skill set, what she delivered to customers and if consumables with a solid repeat customer base might be a better choice.

2. Niche Definition Gives You a Competitive Edge

Although Sarah's "eco-friendly phone cases" sounded quite specific, she was competing with everyone else from branded accounts to dropshippers. Her generic messaging that failed to connect with anyone specific and lost her budget on advertising that reached everyone.

There are several advantages of picking a specific niche. Instead of "eco-friendly phone cases", we suggested she pivot to "biodegradable phone cases for outdoor enthusiasts" or "solar-powered cases for digital nomads". Specificity cultivates loyalty and helps employers a premium price. She chose her niche according to that.

3. Competition Analysis for Market Reality

3 months after she started her business, a competitor began selling the identical products at 50% her price. Sarah had never explored the competitor's supply chain, pricing, or customer acquisition. Her "unique" product was not unique at all.

We taught Sarah how to do competitive analysis using tools such as SEMrush and Ahrefs to garner data about competitors, assessing their social media and customer reviews. We explained it is also critical to identify any space in their offering where her company could sustainably compete.

4. Platform Choice can Impact Your Business Model

Sarah went all in with Amazon. Then, her listings got buried by an algorithm change, and within 24 hours of a rival's insane complaint, her account was suspended. She lost her main source of income overnight. And she had no other channels, no contingency plan.

She needed a contingency plan because she put her eggs in more than one basket, start her own website and diversify! She should have established herself first by using Amazon where she would have complete control, utilize Amazon for market reach, and experiment with Etsy, eBay, and possibly some niche channels. Whether you sell physical goods or sell digital products on Amazon, no one should rely on a single distribution channel and put all their eggs in one basket.

5. Policy Changes are Quick

Amazon's sudden packaging policy changes made half of Sarah's inventory non-compliant! She had to pay to have everything repackaged, had further delays and begin critical slowdowns to getting orders shipped. She couldn't pay too many more shipping costs or incur more fees and with Amazon, once again, no-one expects to pay extra costs for returns or slow service fees when they are at the mercy of their marketplace. And, the general idea is that platform policies are not industry "suggestions", they're business-critical requirements, that change without warning!

We helped Sarah understand how to keep herself up to date on important platform policy changes, join seller groups and stay in the clear on compliance buffers. We suggested that she subscribe to sellers' newsletters and join seller forums for early alerts on changes that might affect her business.

6. Account Suspensions Can Kill Your Business

One customer complaint over product quality caused the automatic suspension of all Sarah's accounts. Unfortunately, more than 95% of suspensions are automatic. Sarah's account was suspended by an automated program, and getting human review took weeks. During that time, her inventory was frozen and cashflow ceased.

We instructed Sarah to take excellent care of customer service, respond to any and all complaints as fast as possible, and try to build relationships with the platform representatives. We told her to document everything. Have suspension insurance or legal contacts lined up.

7. Listing Hijacking is Dangerous for Your Brand

Sarah also discovered that other sellers had copied her product descriptions, product images, and had even taken over her Amazon listings, causing her customers to purchase lower quality products that were using her brand name. Her brand recognition was lost literally overnight as customers began associating her products with junky knock-offs.

We suggested that she register her brand right away, get trademarks on her products, and monitor the listings on a daily basis to avoid Amazon Listing Hijacking in time. We showed her how to become part of the Amazon Brand Registry, and to pay for better professional photographs, and unique content that would not be as easy for others to copy.

8. Profit Margins with Sustainability

Sarah cheered to her first $10,000 in sales until her realized profits. We walked her through the process of Minimum Budget Required to Start Your Private Label on Amazon and she knew this was not the original profit margins. After platform fees, advertising spend, returns and labor, she was making less than minimum wage. Just because you have a high revenue does not mean, in fact, you're running a profitable business ultimately.

We encouraged her to track true profit margins from the beginning, which would take all costs into account along the way; product sourcing, platform fees, advertising, shipping/delivery, returns, and labor. We encouraged her to aim for at least a 20-30% profit margin in order to have wiggle room to cover business growth and unforeseen expenses.

9. Customer Acquisition Costs Should be Manageable

Sarah's advertising spend kept increasing while her profits were decreasing. She was spending $50 to acquire customers who purchased a first time for $40. The math of impacting your business by throwing more ad spend identified a serious problem.

We walked her through tracking her customer acquisition costs and customer lifetime value from the beginning, so as to not to put money in parenthesis like this because of taking money out of each sale means you are losing money on that customer. We shared how to focus on customer retention and repeat purchases to support rectifying the equation.

10. Inventory Management Affects Cashflow

Sarah’s inventory decisions almost destroyed her business. Her understanding of GTIN and UPC was strong but that was not enough. She made the mistake of ordering too many slow moving SKUs and didn’t have stock on enough of her bestsellers. Her cash was used up on products she knew would not sell, and she could not fulfill the profitable orders.

Sarah had to start small with proven demand, and to incorporate data analytics to forecast demand, and have the right inventory levels. Additionally, she considered just-in-time inventory or dropshipping while she learned how to manage risk.

11. Brand Building with Time and Consistency

It was clear Sarah expected instant ecommerce success but had not yet come to peace with what it would take to build sustainable ecommerce brands over time, which she believed would occur overnight. Building trust, finding the right products and developing loyal customers is a time-consuming process, her depleted savings did not allow her that time. It is crucial to keep your Amazon fake reviews in check as they might hurt your reputation as a new seller.

We worked with her to begin the planning process with a longer-term view, and encouraged her that she would be best served to focus on customer lifetime value rather than instant profits. We told her to begin thinking in terms of investments in quality and consistency and value delivered vs just looking for barrels of quick profit.

12. Legal and Tax Compliance to Protect Your Business

Until receiving notification of an audit, Sarah had never considered or acted upon the need to register her business, file taxes, or pay taxes. Sarah had no structure around her business, her personal and business finances were intertwined, and tax penalties for late filing and late payment were beyond thousands of dollars.

Sarah needed to get a business attorney and an accountant, and make sure she understood the importance of properly registering her business from day one, opening separate business bank accounts, documenting the business, and having an understanding about tax obligations.

13. Scalability Planning for Long-term Growth

When Sarah started her second business, she thought everything was going well, until it started to take off, and her manual processes fell apart. What worked with 10 orders a day did not work with 50 orders. She spent weeks between "fires", and used that time to get back on track to grow, while simultaneously losing the momentum she had created with customer trust.

We illustrated how she could have done all this planning and set it up to be scalable from day one, taken advantage of technology and automation, documented everything as she went along, and chose the right fit of tools that allowed her to grow as her needs grow. To flip related advice, plan for success, before you need it!

You Don't Have to Struggle Like Sarah Did

Sarah could have avoided the pain of her journey from failing to succeeding. What cost Sarah $5,000, 6 months of time, and a lot of sleepless nights, was trying to figure out everything on her own. You will not have to make the same expensive mistakes or learn the same lessons the hard way.

You may also undergo some really unusual issues such as Sticky ASINs and the resolutions to these issues like RSD Sticky Delete Flat File, might not be as simple as it seem. That’s where expert advice will come in handy for your brand growth.

At SpectrumBPO, we have helped hundreds of entrepreneurs avoid Sarah's landmines and build profitable ecommerce businesses from day one. Our proven 13-point checklist was not simply conceptual, it is a battle-tested plan that has saved our clients thousands of dollars and months of headaches. Start your plan with $399 today!