How to Build a Profitable E-Commerce Business
Start with a superior product, meaningful story, and strong business model.
Have you ever wondered how to turn your dreams of owning your own business into a reality? We can help. Each week, as part of our Self Made series, we showcase female entrepreneurs—as well as their quality, handmade goods—and share their best advice related to starting, maintaining, and growing your own business.
Make no mistake about it: E-commerce is a business, and it needs to be treated as such. "The great thing about e-commerce is that you can implement all sorts of new tactics and see results instantly," says Ken Ott, co-founder of Metacake, an e-commerce growth team for some of the world's most influential brands. "The opportunities for growth and optimization are endless."
However, to be profitable, Ott says e-commerce business owners need to make sure that they cover the basics first and avoid getting distracted by the latest growth-hacking trends. "To be successful, you need a product that has a proven market fit and quality you can stand behind; a compelling story; a strong business model; diversified business channels; and what we call a 'hybrid team', which combines your internal team with outside growth experts who can coach you toward success." Looking for more advice from Ott about how to build your own lucrative e-commerce company? We asked him for tips to get started, and here's what he had to share.
Lay the groundwork with a superior product, meaningful story, and strong business model.
Ott says the foundation of a profitable e-commerce business starts with a great product—but you'll need more than that to be successful. "Developing and effectively communicating your brand and the story behind what you do is essential," he says." On a more tactical level, you'll need to dial in a strong business model as well. Know the metrics that matter to you, how much you can spend on marketing your product and acquiring a customer, and what your average order value needs to be in order to keep business running."
Craft a seamless website experience.
Your website makes your first impression on customers, and according to Ott, when new traffic visits, you usually have less than 30 seconds to win them over before they jump ship. "At a high level, your site should be on-brand, conversion-focused, and feature great product photography," he explains. "In order to be conversion-focused, it needs to be as simple as possible for the customer to travel from a trustworthy homepage, through the site navigation, to the product page and onto checkout. This journey should be highly intuitive."
Consider customer channels.
To acquire new customers, Ott recommends using paid marketing channels, such as Facebook, Instagram, and/or YouTube advertising. "Diversify your marketing channels," he says. "Most businesses that see success are living precariously on one marketing channel (like Facebook ads, for instance.). In order to see success (and protect your business from one channel's decline) you must invest in other areas to test where you can acquire more customers in other places."
Focus on customer growth—not just sales.
According to Ott, a customer purchase is just the starting point of a relationship that can grow more lucrative over time. "The purchase is not the finish line," he says. "The focus should be on customer lifetime value, instead of return on ad spend (ROAS), because it's far more cost-efficient to focus on maintaining the customers you already have than paying to acquire new ones."
Diversify your business channels.
If you really want to run a successful e-commerce business, Ott says e-commerce shouldn't be your only channel. "We strongly recommend you diversify so that all of your eggs are not in one basket," he says. "In addition to e-commerce, consider wholesale, affiliate programs, retail, and marketplace (such as Amazon). It may seem overwhelming at first, but diversity is an investment you need to make when times are good in order to be prepared when things go awry."