eCommerce Mistakes Over The Years

This is a reprint of an article I wrote for The Net Effect.

We all make mistakes. Whether it’s because we’re beginners who don’t know any better or we’re experienced storeowners having a “dumb moment” – it happens to everyone.

Of course you always learn from your mistakes but isn’t it so much better to learn from others so you don’t have to suffer the stress and/or profit loss to gain the knowledge? Absolutely. So here are my big eCommerce mistakes – we’ll start simple and go from there.

Some of these really are like duh… if you’ve made any of the same you can laugh along with me if you haven’t you can go right ahead and laugh at me while making a mental note not to do it yourself.

Whoops #1

The first order I ever received was paid through PayPal. It was simple; I got the order notification followed almost immediately by the PayPal payment receipt. It was awesome; I was on top of the world! Previous to store ownership I had sold on eBay and everyone paid me through PayPal, it worked the same way.

The second order was paid via credit card and so was authorized for the order amount… but not automatically charged. Since I had never had a merchant account or payment gateway and in all my store building excitement I set them up but didn’t bother to learn anything about them, I didn’t realize I had to charge the card myself.

I lost $200 on that sale and only realized it when I went to look in the backend to figure out how to do a refund.  I noticed it hadn’t been charged and the authorization had run out two days before.

Lesson learned, be sure you know how your gateway works or you may not be charging for your products.

Whoops #2

About eight months into the life of A2 Armory I got an email from one of my vendors about a new Braveheart Replica Sword they just started carrying. The price was low and the sword was hot! I immediately added it to the store, created an eye-catching ad for the home page, sent out a newsletter, and put a banner ad on a bunch of ezine type sites (they were still worth something then) – all without considering how many other stores were doing the same thing or the stock my vendor had.

I was able to fill two orders, the rest turned into irate customers who didn’t want to wait six weeks for the next shipment. Not fun.

Lesson learned, always check stock before running a big promotion.

Whoops #3

Finding a new vendor is exciting… all the new products and sales possibilities always put a smile on my face. But I don’t let myself get caught up and forget to make sure I know the vendor’s policies.

I once found a vendor with an awesome line of daggers and swords. I read all their sales literature and it seemed straightforward and acceptable. I added a bunch of their products to my site and since it was well-established orders for the new products started coming in right away. So far the new product line was performing exactly as planned.

I placed the first few orders and received an email from the vendor saying, “None of the orders placed meet the minimum order requirement for drop shipping and so would all be cancelled.”

Wait, what?

So I get on the phone, fighting to keep my cool, to find out what is going on. Apparently the sales literature was incorrect and the drop ship minimum is $100. Each of the items I’d added cost me less than $40 – I couldn’t sell their products unless I packaged them together. All the yelling was for naught, they wouldn’t budge. So I ended up cancelling the orders and dealing with disappointed customers.

Lesson learned, don’t assume anything about your vendor or their policies. Double check everything – at worst you spend a little extra time on the phone, at best you save yourself hassle and upset customers.

Whoops #4

A customer calls wondering what the charge from A2 Armory is on their credit card. I tell them who we are and what we sell and the customer says okay, he doesn’t remember ordering anything but he would sort it out. I say to please let me know if he has any more questions or needs more info about the order.

A few days later I receive a chargeback in the mail describing the order as fraudulent. I have no record of my phone call to send to the credit card company and the package has already shipped. The best I can do is refute the chargeback with my AVS information and the shipment tracking number, usually not enough for this type of chargeback.

I call the customer and get no response, same when I email. I ask that he please either refuse delivery or send the package back so I at least get the product back. I follow up my original chargeback case with a letter explaining that the product had already shipped and the customer was not responding to my emails for it to be returned, hoping they would see that something was amiss. No good, judgment in his favor and I never heard from him again.

Lesson learned, handle all customer issues yourself. Don’t rely on your customer to fix it, do the right thing, or even understand what’s going on. Once you relinquish control it’s hard to get it back again.

Whoops #5

There are problem customers who argue about restocking fees and return shipping then there are problem customers who threaten and/or waste huge amounts of your time.

I once had a customer who I’ll call Logan who fit into the second group. His first order from me was for a full armor breastplate and spaulders. He wrote me an email to tell me how excited he was to be getting his first real piece of armor and how he couldn’t wait to wear it, etc. It was nice – I like getting customer feedback.

After he received it I got another email. This one extremely hostile in tone saying the armor had cut him and was unsafe and if I didn’t take it back for a full refund I was going to be hearing from his lawyer. Whoa. I wrote back asking how he had put it on. After all the armor wasn’t sharp and if it was worn over something (as it is supposed to be) it would be very hard to cut yourself with. The response was more threats so I refunded him and paid for the armor to be returned.

A month later I got another order from Logan. It was for a sword and it was followed by an email asking if the blade was sharpened. I responded saying, “No, the blade is not sharpened but could still be considered sharp. Was he sure he wanted it.” The answer was yes, he was thrilled about the sword, he went on to say how beautiful it was and he was going to use it for display. Okay… I sent it.

Another nasty email asking if I knew what the word sharp meant. Once again my product was too dangerous and if I didn’t pay for it to be returned I was going to be in big trouble. I sent a semi-terse email back suggesting that Logan was handling the sword incorrectly and I would pay for the return again but he was no longer allowed to order from A2 Armory.

The next month Logan ordered again. This time he didn’t even get the chance to send an email about how excited he was. I cancelled his order immediately. He still tries to place orders from time to time but they are never filled.

Lesson learned, don’t deal with these problem customers – cut them off at the knees, they will only waste your time and money.

Whoops #6

A couple months after the Armory started to produce a steady income I decided to open a second store. I brainstormed, did a bunch of keyword research, and found a few drop shippers. I ultimately decided to open a store selling a line of dishware. I was meticulous about all the demand research I did and went in full force to build the store.

I had gotten everything in place – all my products, the site design, the merchant account, etc and it was ready to go. I started promoting it through paid ads and went to work getting it to rank in the natural search listings. In total I spent about two months dedicated to this store… all without looking closely enough at the supply side of the equation.

That was a major mistake. Ranking for every term related to my product line and bidding on the top spot in all the paid listings was my drop shipper. Their retail prices were too low for me to compete with, in some cases even lower than I could buy the items for.

They were unsympathetic when I called about it, saying their prices would not change. It was suggested that I concentrate on other ways of marketing like mail order or print ads and not try to compete with them. Yeah, okay, that’s ridiculous and I just wasted two months of work for absolutely nothing.

Lesson learned, do not neglect to research supply. Demand can be huge but if you can’t compete with other suppliers it won’t do you any good.

Learn from my mistakes, these are all big time and money wasters that will frustrate you and impede your forward progress.

Drop Ship Versus Wholesale

I’m partial to drop shipping, I always try to find a company that will drop ship a particular product. Drop shipping usually fits my business model better than wholesale stocking, for a few key reasons;

1. I have several eCommerce stores that, in total, carry thousands of different products. If I purchased those products wholesale, I’d need a very large and expensive warehouse for all of those boxes to live.

2. With that vast of a product line, inventory management would become a fulltime position along with shipping and receiving.

Keep in mind that the above situation is not true for all eCommerce storeowners. I happen to own many stores with many products per store – not everyone does.

Also, many eCommerce storeowners don’t sell products that occupy the same amount of space as a suit of armor, medieval shield, or wall-sized tapestry – I do. The products you sell may not take up a huge volume of floor space.

The bottom line is, your decision to warehouse inventory or find a drop shipper to do it for you must be based on factors specific to your business situation, like:

1. Do you have the room in your home to store goods?
2. If you don’t, do you have the means to rent a small public storage facility or share warehouse space with a local business?
3. Do you have the operating capital to purchase a quantity or products in bulk from a wholesaler?
4. Are you prepared to deal with yourself or hire someone to do your shipping and handling?

Those are pretty obvious. But what might be surprising to you is that when you purchase bulk wholesale from a company, you may be able to do so at a substantial savings over drop shipping. In fact, when I do purchase goods in volume, I often realize a savings between 10% and 40% over a drop shipped product.

If you’re in a very competitively priced market, having those extra margins may mean the difference between competing effectively, or not competing at all.

However, I want to share with you a concept that I believe can make a huge difference in your ability to grow your business. That concept is called “Effective Time Management”. What I’m talking about is not being able to schedule your business work time effectively – even though that’s important, it’s not what this is about.

I’m talking about being able to make a judgment between low value work and high value work. Here is what I mean…

The most effective use of your time online, or in any business environment for that matter, is growing your business’s sales volume. That means getting more traffic, turning that traffic into customers, and turning those customers into repeat buyers.

You turn your traffic into customers by having an effective sales presentation on your site, offering incentives to buy, and merchandising products in a unique way. You turn customers into repeat buyers by following up with them, communicating information that they are interested in, and offering a pleasant buying experience. And you spend time refining and enhancing all of the above by testing different methods.

I’d like to think that I have some experience in these areas, and it’s been that experience that all other considerations for your business, other than the above, are secondary. Sure, you need to manage your books, your Internet connection, your vendors, your credit card merchant, and your cash flow, etc. But what makes a business successful is the amount of sales volume that it generates.

And that’s what I’m talking about. low value work is the sort of work that doesn’t do anything to increase your sales volume. While it might be necessary in order to operate your business, it doesn’t do anything to grow it.

High value work, by my definition in eCommerce, consists of the following procedures:

1) Site Conversion testing and tweaking
2) Search Engine Optimization
3) Paid Advertising
4) Customer Follow-Up
5) Unique Product Offerings in the form of packages or special value purchases.

Hey, I’m a business owner. I realize that you have to do both. But your priority should always be growing your sales volume. That’s why I drop ship.

I know that is a long-winded explanation for the reason I drop ship. But consider this – when I get an order from one of the stores, all I have to do to fill that order is take the incoming email that I got from my shopping cart, and turn that into an order for our drop shipper.

That means having 2 windows open and copying information from my email into the order form on my vendor’s website. Total time to complete? 60 seconds.

Sure, as a drop shipper, I make less money per sale than I would if I were an inventory stocking eCommerce storeowner, but I spend far less time completing the transaction of the sale. No picking, sorting, packing, labeling, or shipping. In a sense, all I’m really doing it turning around an email. And that’s why I try to drop ship whenever I can.

Having said that, there are times when I can’t find a drop shipper for a product that I want to sell. When that happens, I here’s what I do:

I find a source for that product and ask the wholesaler for some samples. I then create the product listing, drive some traffic to it with some paid ads, and measure the results. I figure out exactly how much money it cost me to generate a sale for that product, then figure out if I can make a profit selling it like that.

If I can, I’ll purchase a minimum quantity from the wholesaler, ship it all to a fulfillment center or ask the manufacturer to warehouse it for me (they will sometimes do this), and start optimizing those product pages for the free search engines while I’m driving traffic to that page with paid ads.

See what I’m doing here? I’m taking a very small financial risk to determine if that product sells at a profit for my company. I’m using paid traffic to determine if I can sell that product. Testing the water before I dive in. Only after I’m able to judge that product’s effectiveness by testing will I make a financial commitment to it and buy a quantity of it from the wholesaler. Then, in order to keep the sales fulfillment cycle short and easy, I send that inventory to a fulfillment center that picks it, packs it, and ships it for me.

The best of both worlds. The key to this method is testing testing testing!

I need to find out if I can make a profit selling that product by using the most expensive method of online advertising available (at least when you compare it to free search engine Traffic) – paid ads. If I can generate a profit from a sale from this traffic, then I’m pretty confident that my profit margins can only improve once I start to optimize that product page for the natural search.

In my opinion, this is the lowest risk method of determining a product’s potential for your store, short of finding a drop shipper right off the bat.

Working with Product Images

Depending on how you operate your eCommerce store, you may or may not have physical access to the products you sell. If you’re one of the many (like me) who use drop shippers the whole point of your business model to NOT to handle the products. So we’re left with the images provided to us by our drop shippers.

If you’ve spent any time shopping online you’ve probably seen several websites that have all or mostly the same product images. As a shopper what did that make you think? That all those websites are basically the same?

If nothing about your site stands out to the visitor they’re going to base their purchase on price. Now, it’s very true there are a lot of ways to make your site stand out from your competitors – Unique Selling Propositions, Discount Offers, Higher Search Positions, etc. Well product images are another that I think is very important but many eCommerce storeowners overlook it in the effort to build their store quickly.

It’s understandable from a store building perspective but what about from a customer perspective?

Let’s talk practically.

You have an image from your drop shipper of jewelry box. It’s sitting on top of a green blanket. Everyone using that drop shipper is also using that image. How do you think taking the green blanket out of the picture so the jewelry box is on a white background will effect the look of your product page? Do you think seeing yours will catch a visitors eye because it looks different than all the others she has seen during her search?

Yes it will!

Anything you can do to make your product stand out from the rest is a good thing. What’s nice about the images is it’s not that difficult. You need an image editor like PhotoShop and, as with all new techniques, it’ll take a bit of practice but spending a minute or two altering a product image is time well spent.

Even if all you do it flip the image horizontally, that’s enough to change your visitors perception of the image.

I take the backgrounds out of every product image I put on my stores. If I’m adding products quickly I sometimes add them as they are and then go back and alter them later… but I ALWAYS alter them.

Drop Shipper Image:

My Image:

This is something that can be outsourced as well. I have an employee who does most of our image work and since I like using PhotoShop I do some myself if I’m just sitting around watching TV.

This is one of the small steps not taken by the vast majority of online store owners. You should, every little change helps.

eCommerce Drop Shipping

All right, let’s say that you fall in to the 80th percentile of people whom do not have a product or service of his or her own to sell. You are in good company! And you have a lot of decisions to make. But these decisions are a little bit more fun than some of the others.

The first decision is, if you have your wish what would you sell?

I chose to sell something that I had some knowledge about.  This a key concept.  It wasn’t because it was a matter of convenience. Heck NO!  If anything, if you go to Google and type in “Sword” in the search engine there, you have about 1000 different ones to choose from.  So there was already a ton of competition.

But I have become quite the collector over the years and have learned what makes one sword different from the other. So when a potential customer comes looking for a sword, and they want to educate themselves about the different type, brands, metals, etc., I am there for them, ready with all the information that they need.

So when it comes time to buy a sword, I hope they choose me over the dude who is selling swords along with the AB-Roller and decorative soap.

It’s about being the expert in your field. Short of that, it’s having killer customer service, great prices and knowing how to reach your audience.

Lets get the most difficult part out of the way.  You need real products to sell, so let me give you a few ways to find them.

The ideal online store where you are selling a product is one where you do not have any inventory.

Most of us don’t have thousands of dollars to shell out on a pallet of products that we are not even sure are in demand.  Even if you do have that kind of money, I would caution you to not start by having a physical inventory of anything. It’s just far too risky. Until you have identified a viable marketplace and a product that the market responds to with regularity and predictability, tying up your cash by owning inventory is not smart thinking.  There is a better way.

DROP SHIPPING!

A Drop Shipper is a wholesale company or manufacturer of real products that only sell to real-legitimate business. (I.e. business that is registered with a Tax ID. Cost? About $65 depending on which state you live in). What I mean when I say “ sell to legitimate business” is this:

You take an order from your online store for a nice set of wind chimes, or maybe a power drill.  You sell your product for $70.00 plus shipping and handling.  You then contact your Drop Shipper or Drop Shippers (you can have as many as you want covering a wide range of product types).  You buy the product that you just sold online for $70.00 from your Drop Shipper for $40.00 and then the real magic happens.

The Drop Shipper sends the product directly to your customer with your company name on the packaging!

Magic.

Drop Shipping is truly wonderful.  There are literally thousands of Drop Shippers out there.  You can find just about any name brand, just about any category at just about any price point.

The Specifics:

First, you need to become a real business in order to work with a Drop Shipper.  That means you go to your local courthouse and register a business name. Then go to your local IRS office and get a Tax ID number.  This is, of course, for a sole proprietorship or partnership.  If you want to incorporate or form a LLC (Limited liability corporation) check out this site The Company Corporation. There are lots of advantages to being incorporated, including liability and asset protection, but it costs a bit more and takes more time to get started.

Once you have the all of the requisite certificates, you then contact a Drop Shipper and create a relationship with them.  They have you fill out an application, sign you up, and send you a catalog of their products from which you then sell on your website.  Some Drop Shippers may also have a website where you can go and download their images and sales material directly and put it right on your website.

The Drop Shipper sets the price that you pay….

You set the price that your customers pay…

The difference is your profit!

It’s really a great way to start an online business quickly.  You can even do it inside of a week or two if everything slips into place.

Having a relationship with a Drop Shipper is FREE! And if you look more than casually you can find some really unique products (meaning less competition for your store).

What in blazes do I sell?

The $64,000 question. When I first evaluated the vast amount of products available for me to Drop Ship, I was overwhelmed.  Visions of huge virtual shopping malls with my name on the marquee swirled around in my head. And me, swaying in my hammock counting my money…

WRONG!

Even though you will be tempted to sell absolutely everything – don’t! Know this now, you cannot compete with Amazon.com

Maybe you will someday, if the fates have blessed you and you have unlimited cash.  But if you don’t get blessed and have a fixed income – don’t worry! You will not need to compete with Amazon in order to be successful! The key for those of you that want to succeed in online retail is to specialize!  Have a boutique mentality. Not boutique as in knick-knack crap. But boutique as in niche Market.

If you have a personal passion for your Harley – Sell Harley Stuff!

Like NASCAR – SELL NASCAR STUFF!

Why? Not just because you like it, but also because you can TALK ABOUT IT!

For Example; Let’s say your hobby is Astronomy.  You know all about the Heavens and Star Gazing in particular.  USE that knowledge to help your customers make informed buying decisions.  Show them how a Refractor telescope is superior for Astrophotography than a Reflector scope.  Organize a subcategory of your telescopes into a section called “Astrophotography Ready”.

I can’t say this enough – Specialize!

Sell what you know. Especially if it’s a product that you have researched and found it to be “In Demand”.  In addition to making your store stand out vs. the competition, it also helps you zero in on your target market!  And remember, the more focused your audience is, the better conversion rate you will have when it comes time for the shopper to become a buyer.

Stay with me on this – NICHE MARKETS!