How much growth should you expect when starting an e-commerce brand? How much money can a new e-commerce store make? If you are planning to open a business, these are the questions that pop up regarding the expectations you should have.
You create your own online store and do aggressive digital marketing to boost your online presence. But will this suffice? Is app branding as easy as it seems to be?
To get an answer, let’s take a look at the most-valued e-commerce unicorns in the U.S. as of December 2021 as per Statista.
How have these e-commerce brands succeeded? Let’s see the factors affecting the growth of an e-commerce brand and learn it with the above unicorn success stories.
How competitive is the niche?
What are the barriers to entry?
Is the niche growing?
What are the recent trends and developments in the niche? What expansion options are available?
Houzz is an online community for architecture, interior designing, decorating, landscape design, and home improvement. It was founded in 2009 with a website that contained the portfolios of a few Bay Area architects. Its intention was to give home renovators ideas for their projects. The site spread by word of mouth and it began to receive emails from homeowners and home professionals to open more categories. Today it is a comprehensive website with design ideas, sale of home products, and an exhaustive list of architects and designers for hire.
Houzz was an idea born because there was none like it in the market. It solved a customer problem. The niche is crucial to the success of your business. If your business is unique and there are no immediate competitors, you have ample time to establish yourself as the leader in the market.
Does the business sell a single or multiple products?
Where are the supplier(s) based?
Are the products unique to the business or being resold?
What agreements are in place with suppliers?
Can the existing supply chain handle more volume?
Vuori is an undisputed leader in athleisure. Founded in 2015, it focused on building relationships with supply chain partners and factories rather than attempting to scale too quickly. It also focused on organic customer acquisition through high-quality differentiated products in the overcrowded athleisure segment.
StockX and GOAT are both online sneaker and apparel selling stores. They both have grown due to the fact that the sneaker market is currently hot and Gen Z are sneaker lovers.
Here, the products are not unique. In fact, the market is competitive. But with the right strategy of tackling suppliers, they are able to position themselves strongly in the market. Your product type and sourcing also contribute to the growth of your e-commerce business.
How much of the owner's time is required to run the business?
What are the owner's responsibilities? Are there high technical requirements?
What technical knowledge is required to run or manage the business (eg, SEO)?
Are there employees/contractors in the business? How are they managed?
To what extent is there a key-man risk within the business?
Gopuff is a consumer goods and food delivery company. It started in 2013 as an on-demand hookah delivery service but expanded to delivering food and groceries in Philadelphia. Gradually it moved to other cities in the U.S. It has grown through strategic partnerships and acquisitions.
This e-commerce business concentrated on a strategized expansion growth to run its operations. Starting small, it branched to other services and cities one step at a time. The strategies and operations of your business also affect its growth to a large extent.
How has traffic been trending for the last year? The last few months?
What is the industry trend (see Google Trends)? Does the traffic to the business' site follow Google search trends?
How secure are the search rankings? What is the mix of short and long tail?
What percentage of traffic comes from search? (i.e. what percentage is potentially at risk from search engine algorithm changes?)
Has the site been affected by any Google algorithm changes or manual penalties?
Where does the referral traffic come from? Is it sustainable?
Does the website have a strong backlink profile?
Fanatics, the most-valued e-commerce unicorn, is an online retailer of licensed sportswear, merchandise, and sports equipment. It was started in 1995 as a brick-and-mortar store focused on selling the local collegiate team merchandise. It stepped into e-commerce in the year 2000. It grew through affiliate marketing, repeat customer business, and acquisitions. Its early success was by partnering with websites through quality content and domain names.
Here, Fanatics focused on building a solid online presence. The first step towards it is obviously to create your own online store. You can either get it customized or opt for any e-commerce website building platforms such as Wix, Shopify, Magento, or WooCommerce.
Next, comes traffic for your website. A large amount of traffic is critical for an e-commerce store’s success. The first year of your growth has to be towards boosting your online visibility.
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How to get traffic for your e-commerce store?
The fastest way to generate traffic to your online store is through paid marketing. But there are different marketing channels to serve your purpose.
Email marketing works great when you have a great email strategy like free informational content, giveaways, discounts, sales codes, referral coupon codes, and invites to preview new products before the rest of the world. Nurture your subscribers through personalized content because email marketing can give you returns of up to $32 on every $1 spent which is way cheaper than PPC.
2.Social media marketing
Social media is a great tool for app branding. Creative content and sharing of product images, user-generated content, short videos, and influencer posts, there are various techniques to promote your brand and products on social media.
3.Search engine optimization
Regardless of the size of the company, SEO is an optimum way to increase traffic to your website without spending much money on advertising. Search for brand-related keywords and create content based on them. Content, meta-title, and image optimization are the main on-page elements that need focus. Create a sitemap and index your website structure. Similarly, off-page SEO like link building through blogs and social media is a good way to boost your search engine rankings and get traffic to your website.
Paid marketing gets you instant visitors to your site. But if you don’t have good products on your site that people will want to buy, you will be burning a large hole in your pocket through paid campaigns. The day you stop your paid campaigns, your traffic will almost disappear. The only way to sustain traffic through paid ads is to keep paying for it. Make sure that the conversion rate through paid campaigns generates enough cash flow to pay you for the ad spend, product rate, shipping costs, and operating expenses. If the conversion rate is not high, forget it.
A solid organic growth strategy through social media and content creation has long-term residual value and keeps the traffic flowing. Try with cost-effective marketing techniques such as affiliate marketing and email campaigns.
What are the customer acquisition channels?
Is paid marketing being done? What is the customer acquisition cost?
Is it possible to re-engage existing customers? Is there a mailing list?
If you are spending hundreds of dollars each month on Google Ads or any other paid advertising just because someone told you that it will get you insane amounts of traffic to your website, you are probably being misled. Yes, you may be getting traffic, but how much? This is where the analytics sets in.
If you have built your site on any e-commerce platform such as Shopify or Wix, they provide you with data on website traffic. You can even integrate Google Analytics into your online store to get a more comprehensive data report. Make use of the statistics to analyze which of your marketing campaign is getting you results. It gives you a clear picture of the customer acquisition costs for each channel. You can also set your customer segment for retargeting ads through it.
What we observe from the top unicorn brands is that some of them really took time to scale up. Each unicorn has its own success story and no two are similar. What works for one may not work for the other. It’s all about trials, hits, and misses.
So, how much growth should you expect when starting an e-commerce brand?
There is no definite answer to this question. Some brands may grow within a year while it may take more than five years for some.
The first year is all work and may probably lead to false starts and dead ends. But it is the year of learning your audience and their preferences.
If your content creation is strong and consistent, you will start seeing traction in the next six months or a year.
By the third or the fourth year, you will start seeing repeatable processes that let you deliver value to your customers. They start paying for your products and services and this is the year when your business actually starts on the growth trajectory.
Most of the e-commerce stores run under losses for the first two years and break-even in the third or fourth year. They start making profits after five years.
Online visibility or app branding is not built in a day. Nor can you expect to create content in the hope that it will go viral. You need consistency and a good marketing strategy and only then can you steadily raise your income from a few hundred per day to thousands and more.
Like most businesses, there’s no telling the exact growth you can expect when starting an e-commerce business. You could effectively create your own online store, use social proofs, affiliate marketing, paid campaigns, and authoritative content to put the odds on your side. But you cannot predict the time it’ll take to turn a profit.