Things Most E-commerce Businesses Miss When Starting Their Online Business

Starting an online store has never been easier. You can launch a shop in an afternoon, connect a payment provider and start advertising the same week. That low barrier is also why so many e-commerce businesses struggle: it is easy to start before the foundations are in place.

There is no single recipe for success. A good product and persistence matter, but they are not enough. Below are the things most e-commerce founders miss when starting their online business, and how to avoid them.

Why do new e-commerce businesses fail?

External shocks such as recessions, supply chain disruption or platform policy changes play a part. More often, though, problems come from decisions made at the start: weak planning, too little cash, unclear demand or a business set up in a way that makes it hard to get paid. The good news is that most of these issues are preventable.

1. Inadequate planning

A short, honest plan forces you to answer the questions that matter before you spend money. Your plan should cover:

• Unit economics: product cost, shipping, payment fees, returns and marketing cost per sale.
• Where and to whom you will sell, and in which currencies.
• Start-up costs and how long your money will last.
• Competitors and what makes your offer different.
• Suppliers, stock levels and fulfilment.
• Realistic sales targets and the risks that could derail them.

Our guide to the fundamental steps to getting started with a new company is a useful checklist at this stage.

2. Cash flow issues

Many profitable online stores still run out of money. Stock has to be paid for before it sells, advertising is paid upfront, payment providers may hold funds or delay payouts, and tax bills arrive later than you expect. Before launch, work out:

• How much it costs to start and run the business each month.
• How long it will take to reach break-even, and how you will fund the gap.
• When payouts from your payment provider and marketplaces actually reach your account.
• What reserves, chargebacks and refunds could do to your balance.

Plan for slower growth than you hope for, and review cash weekly in the early months. An accountant can help you build a simple forecast.

3. Not validating demand

It is common to build a store around a product the founder loves without checking that enough people will pay for it. Test demand before you commit to large stock orders: run small ad campaigns, take pre-orders, sell on a marketplace first or launch with a limited range. Keep watching the market after launch, because demand shifts with trends, competitors and the economy.

4. Marketing failure

Inexperienced founders often target the wrong audience or try to reach everyone. Define your ideal customer, choose two or three channels where they spend time, and measure customer acquisition cost against the profit from each order. Good product pages, clear delivery and returns information, and genuine reviews often do more for conversion than a bigger ad budget.

5. Choosing the wrong company structure or jurisdiction

Many e-commerce founders trade for months without a company, or set one up somewhere that does not suit their customers, suppliers or payment providers. A limited company separates your personal assets from business risk and makes it easier to open business accounts and work with marketplaces. Where you incorporate affects tax, reporting and which providers will work with you.

Read our comparison of company structure types and their benefits and the guide to the best places to incorporate a company. WeForm forms companies in six jurisdictions, including a UK limited company from GBP 175 and a Hong Kong company for businesses sourcing or selling in Asia.

6. Underestimating payments

Payments are where e-commerce businesses hit the most unexpected problems:

• Payment provider approval: providers review your business model, website, refund policy and the company behind it. Missing terms, unclear pricing or a mismatch between your company and your website can lead to rejection.
• Rolling reserves and payout delays: new merchants, especially in higher-risk categories, may have a share of their revenue held for a period.
• Chargebacks: too many disputes can lead to account closure. Use clear billing descriptors, track deliveries and respond to customers quickly.
• Payment methods: customers expect cards, digital wallets and local methods in their market.
• Currencies: receiving and holding several currencies avoids repeated conversion fees. See our guide to opening a multi-currency business account.

Our article on the best payment solution for your business compares the options, and our payment solutions page explains how we help with processing and collections.

7. Ignoring tax and consumer law

Selling across borders brings obligations that founders often discover late:

• VAT and sales tax: you may need to register in the countries where your customers are. In the EU, the One-Stop Shop scheme simplifies VAT on distance sales. In the UK, overseas sellers can have VAT obligations from the first sale.
• Customs and duties on physical goods shipped internationally.
• Consumer rights: many markets give online shoppers a right to cancel and return goods, and require clear pre-contract information.
• Data protection: privacy policies, cookie consent and secure handling of customer data.

Take advice from a tax adviser familiar with e-commerce before you start selling into new markets.

8. Misguided motivations

Running an online business takes time, money and persistence. If the main goal is quick money or more free time, the early months can be discouraging. Founders who believe in their product and treat the business as a long-term project are better placed to handle setbacks.

FAQ

What are the most important things to know before starting an e-commerce business?

• Know exactly what you are selling and your margin on each sale.
• Understand who your customers are and where to reach them.
• Plan packaging, shipping and returns before launch.
• Decide how you will market the product.
• Set up the company, business account and payment processing before you start trading.

What are the main types of e-commerce?

The three main models are business-to-business (B2B), business-to-consumer (B2C) and consumer-to-consumer (C2C), for example online marketplaces where individuals sell to each other.

How long does it take for an online store to become profitable?

It varies widely by product, margin and marketing spend. Plan with enough cash to cover costs for an extended period rather than counting on early profit.

Do I need a company to sell online?

Not always, but a company limits your personal liability and is often required by payment providers, marketplaces and wholesale suppliers.

Start on solid foundations

WeForm sets up your company online in one of six jurisdictions and includes assistance with opening a payment account in every package. Compare all jurisdictions, explore our banking services, or start your application. If you have questions, contact us.