Why Did Some .coms Fail?

Challenges in Building Profitable Online Businesses

Right now, some ".com" companies are profitable. This means that most are not, excluding those that have already disappeared! There have been numerous catastrophes in this area. Why? What was the mistake?

The fact that most new ventures in the business sector fail is a well-known axiom. E-commerce is no exception. So before you delve into the online aspect of your business, make sure the non-digital aspect is working well.

Classic examples of failures are always the same: running out of funds, changing circumstances and investor appetites, new competitors emerging, market shifts, and societal morals changing. Sometimes the reason is even simpler: "Lack of demand!" If no one wants your product or service, you are doomed to fail. Technology sometimes creates many "amazing" concepts, but can they meet needs more than other similar products? For more on business failures, see this article.

Failure partly reflects success, and the reasons for failure, as well as success, are reflections of each other. Use this criteria checklist: if your idea doesn't fully match this list, your business will likely fail. It's not even worth starting!

• Unsuccessful idea; if there's no genuine market need, you failed to create a niche. Product-centric rather than consumer-centric (plus poor production or delivery).
• Lack of marketing expertise (vague value proposition for consumers and lack of distribution).
• Inexperienced or inflexible management.
• Isolation of e-commerce (from value networks).
• Focus on stock markets, funds, floating rates, and share values.
• Investor panic.
• Lack of support from the founding company.
• Low morale.
• Unfavorable market entry timing.

Let's look at the first five reasons separately.

An unsuccessful idea, lack of real consumer demand - failure is typically directly linked to the product or service. Was your idea fundamentally flawed? Sometimes market voids exist because there is actually no demand in those areas! If e-commerce can't focus on real consumer needs, business failure is guaranteed. It's quite easy, in the excitement of a new idea, to forget to ask yourself: does anyone really need this product? Moreover, good ideas often perish due to a lack of general management skills, affecting poor performance, delivery, or service (for tips on evaluating a business idea correctly, read here).

Product-centric focus - in many business sectors, there is a need to sell more while spending less. This requires skills in sales. The majority of e-commerce organizations do one thing: open European offices and develop new technologies without trying to figure out why there's no profit. Finding new consumers is much more important than looking for new representatives. Good customers can help develop technologies as they can explain what is truly needed.

Lack of marketing expertise - brilliant technologies, discoveries, and innovations rarely benefit marketers mainly because they can never present good marketing lessons. Clive Sinclair - a genius, he invented many amazing products. Perhaps his biggest failure was the C5 car. Unfortunately, it was mistakenly positioned as a vehicle for transporting passengers, housewives, and children instead of being promoted as a leisure vehicle. The failed idea of the C5 car was eventually bought out, repositioned (as a recreational vehicle), and offered to consumers as a new leisure vehicle. These cars eventually sold at a higher price. Weak marketing is reflected in poor offers, incorrect positioning, and misidentifying target markets.

Lack of management experience - "Old experts needed!" is a comment often heard regarding new endeavors. E-commerce bosses are usually six years younger than leaders of traditional companies. They may lack experience in key areas of operation. Similarly, traditional managers often struggle with emerging e-businesses because they lack the flexibility needed to react to trend changes and revise plans quickly. Sometimes investors are their own worst enemies. The lack of financial control at "boo.com" - whose mistake was it?

Isolation in e-commerce - consumers need to see the product as a whole, no pieces or fragments. They won't buy your brilliant idea if they can't get the complete product. They won't buy what you can't produce, sell, deliver, and service, so mistakes steer you away from internet-applicable schemes. One solution is to study issues in value networks: should a new e-commerce business aim to create its network or rely on partners and allies who are experts in specific segments? Maybe it's even worth bringing suppliers on board as partners?

In conclusion regarding the five reasons listed above: failed foundational ideas, lack of market, marketing inexperience, absence of value networks, absence of leadership - this is not trivial, as it concerns people's work, life, and careers.