The worldwide e-commerce industry is believed to be responsible for more than $3.5 trillion in sales annually, a number that is projected to double over the next three years as more and more people dive right in.
At the same time, the e-commerce industry – particularly with smaller to midsized companies – is dealing with its fair share of growing pains as entrepreneurs face a number of challenges that threaten the success and financial future of their e-commerce companies.
Funding is one of the biggest challenges e-commerce entrepreneurs have to contend with in 2020 (and beyond). To better understand these challenges and learn how to overcome them we spoke to the CEO of Velvet Caviar, Michelle Aranbayev. She’s transformed this e-commerce company into a mobile accessory giant and understands what it takes to succeed today.
What Do You See as the Biggest Challenges for E-Commerce in 2020?
Michelle Aranbayev (MA): Obviously, priority one for e-commerce companies today has to revolve around securing the kind of funding necessary to not only compete but thrive in today’s hyper competitive e-commerce space.
On top of that, though, entrepreneurs getting into the world of e-commerce are also going to need to handle the omnidirectional approach to business that this 100% online model leverages. It’s a world apart from the traditional “singular” customer experience that most brick and mortar businesses are used to, especially when your customers can interface or contact your business through so many different channels online.
The last challenge I want to touch on briefly is one I think a lot of e-commerce entrepreneurs really struggle with, and that’s sticking to the “old approach” to selling online today. Data driven decisions need to be taken advantage of far more frequently today than they probably are, and customer segmentation is a huge piece of the success puzzle as well.
What Do Smaller Brands Have to Do Well to Compete with Bottomless Budget Big Companies?
MA: Competing with major corporations that are getting into the e-commerce (we’re not just talking about Amazon here, either) is one of the day-to-day challenges that I have to contend with as CEO at Velvet Caviar.
We recognize that some of our competitors are going to have nearly bottomless marketing budgets, can throw almost infinite amounts of cash at problems to solve them, and are always going to take advantage of their size and scale to crush smaller competitors whenever possible.
Our competitive advantage at Velvet Caviar is not only intelligent positioning and smart marketing but also taking advantage of intelligent funding solutions that allow us to pivot quickly on new opportunities as they become available.
Those giant corporations aren’t able to move anywhere near as swiftly as we can. We can jump on top of new opportunities, rollout new products, and pivot marketing campaigns as necessary to get the most bang for our buck.
This is all made possible by remaining lightweight and agile, but it’s also only possible with funding sources set up that we can capitalize on as necessary without long, drawnout application and approval processes slowing us down.
Should All E-Commerce Operations Start Looking for External Funding to Compete?
MA: I definitely think there is still room in the world of e-commerce to “bootstrap” your operation from the ground up with next to no money at all, but eventually you are going to need external funding if you’re going to build the kind of e-commerce business that can succeed in today’s hyper competitive space.
This doesn’t necessarily mean you have to take on a mountain of debt right out of the gate just to compete. I don’t think that’s the reality of e-commerce today.
At the same time, the odds of being able to scale rapidly, to capitalize on new opportunities, to secure more favorable pricing with your suppliers, and just to sort of not have to worry about cash flow issues anymore without having external funding is going to be a real challenge.
What Are the Biggest Challenges Facing E-Commerce Entrepreneurs That Need Financing?
MA: Right out of the gate, the biggest challenge that e-commerce entrepreneurs are going to face (especially those brand-new the game) is the fact that a lot of traditional lenders aren’t all that excited about handing out lines of credit or big loans to businesses that aren’t proven and entrepreneurs that do not have a track record of success under their belt already.
There are a lot of nontraditional lenders out there willing to extend financing to e-commerce entrepreneurs that are brand-new, though, and these kinds of opportunities are definitely well worth looking into if this is your first time building and e-commerce platform.
Another big challenge that I see a lot of e-commerce entrepreneurs dealing with these days is not having their finger on the pulse of their company’s financials on a day-to-day basis. You don’t necessarily need to have a degree in accounting or economics to understand your cash flow situation, and all the financing in the world isn’t going to be able to help you if you aren’t strategic with your finances.
Any Tips for Helping Entrepreneurs Find the Right Financing Options?
MA: For starters, you only ever want to find yourself moving forward with 100% legitimate and 100% reputable e-commerce financing organizations.
There are a decent amount of less than ethical financiers out there promising the moon and the stars when it comes to financing packages and options for those in the e-commerce world with no intention on delivering on those expectations, the kinds of operations that are almost predatory in nature.
These are not the kinds of financing companies you want to get caught up with.
You really want to do your due diligence, really research your options, and understand exactly how you are going to leverage the cash and capital you are getting through these financing services before you get started.
Never take on any more debt than absolutely necessary (especially when you are just getting started) but don’t be afraid to take on a little bit of debt if it allows you to capitalize on opportunities that can transform your e-commerce business and your financial future, either.