Why Our Online Business Almost Failed And How We Recovered

In a previous article entitled mistakes we made early on with our online store, we outlined 5 early decisions that hindered the growth of our business. While those mistakes slowed us down, none of them were showstoppers by any means.

In this article, I’d like to talk about decisions that nearly put us out of business. Sadly, most of these early choices were made due to greed and human nature. Many of our actions were downright stupid and I’m quite ashamed to even share them with you. I’ll try and start with the dumbest ones first and work my way up.

We Didn’t Accept Credit Cards Directly

frustrated

Photo By Zach Klein

Have you ever heard of an ecommerce shop that didn’t accept credit cards? Early on, we tried to save money by using Paypal as our sole payment processor.

Paypal basically offers 2 different account types. The first one is their normal Paypal account which is free. They also offer a business account which allows you to process credit cards directly from your website. The business account carries a monthly fee of 30 dollars.

With a free Paypal account, you can also accept credit cards, but customers are first diverted from your website to the Paypal website where they enter in their payment information. After providing their credit card data, they are then redirected back to your site. All of this redirection confuses customers.

We lost a ton of potential sales early on because no one respected our store. They were all probably thinking “Why am I being taken away from the website to a completely different one just to process my payment?”

We even had a few customers complain. One of the most memorable emails we received was “Why is it so hard to make a purchase here? How am I supposed to pay?”.

We Pissed Off Big Ticket Customers

Before we found quality vendors to supply us with product, we used to receive a ton of unsellable merchandise. For example, we would often receive fabric that was irregularly shaped or stained with dirt. The bad linens were always mixed in with the good so it was extremely hard to find the bad ones without thoroughly going through the merchandise.

Early on, we put way too much trust in our vendors’ products and we shipped orders out without even inspecting the goods. I remember the first big order we received was from a wedding planner in Texas. We shipped her three large boxes of linens of which probably 30% were defective in some shape or form. At this point in time, this was by far our largest order.

Normally when you receive defective products, you simply return the items right? But one of our policies early on was that “All Sales Were Final” and we never let anyone make returns. So this wedding planner received bad linens and we refused to take the merchandise back. What the heck were we thinking? This one transaction alone probably ruined our reputation and lost us a ton of potential business in her region. The main problem was that mentally, we needed the profit from this order to justify our existence.

We Stopped Innovating

After the store was up and running, my wife and I took a long break from working on the website and the business. Basically, we just sat there twiddling our thumbs waiting for customers to buy our products. After working non stop for many weekends, we both felt that we needed to distance ourselves from it all as we both were completely burnt out.

Because we weren’t actively tweaking our store, we didn’t catch and fix crucial website and business issues in a very timely manner. We made the mistake of assuming that most of our work was done when in reality the bulk of the work was ahead of us. For example, we didn’t fix our credit card issue until well over 3 weeks had passed.

As a result, our store didn’t give a good impression at launch. First impressions are extremely important, and many businesses thrive on word of mouth marketing. We probably turned away hundreds of customers in the first month alone. Who knows how many negative comments those hundreds of customers made to their friends?

We Wanted To Quit

Because of the myriad of problems we faced early on, my wife and I were extremely discouraged. Two months after the launch of the store, I think we made only 800 dollars. This was especially discouraging considering that we had to pay 300 dollars of this in Adwords fees. If you think that 500 dollars isn’t all that bad, consider that this only equals about 250 dollars a month or less than 10 dollars a day. This was hardly a sum worth sacrificing our time for.

I remember wasting a lot of my time stalking customers with our shopping cart software. A typical stalking session went as follows.

“Hey Honey! This guy put something in his shopping cart!”
“Cmon baby…that’s right. Keep on shopping.”
“All right…click on the checkout button. It’s right there on the lower right….easy…easy…”
“Hey! I think he’s headed to checkout!”
“He’s creating an account!”
“He’s on the payment page!!”
**silence**
“Wait, we lost him…where did he go?”
“What the heck happened?”
“What kind of a customer places items in his cart and then abandons it in the middle of the store?” “People have absolutely no store etiquette.”
“This store sucks. Why didn’t he check out?”
“Sorry honey, you’re never going to be able to quit your job”

The Road To Recovery

In hindsight, it’s easy for us to talk a big game about perseverance and not giving up. But back then, I can’t even describe how close we were to throwing in the towel. We ended up pressing on with the store because one, we had already purchased a ton of inventory and two, it didn’t cost much to keep the store going anyways. If any of those 2 things were not true, we might have folded and called it a day.

We started our path to recovery by trying to salvage our reputation. Roughly 1 week after the fact, we contacted the Texas wedding planner and gave her a big discount in addition to sending her new product. We took a loss on the deal but ultimately, I think we managed to salvage some of our reputation.

We also made an active effort to fix the store and improve upon it on a constant steady basis. After fixing the many mistakes we made early on, business started picking up a bit. With each sale, we gained more and more energy and zeal. We finally found vendors that were reliable and sold good product. We finally resolved most of our website and payment issues. We improved our packaging and extended our product line.

Looking back,we were on the verge of collapse because we were impatient, greedy and desperate. The important takeaway is that it’s never too late to recover. If you screw up your reputation, fix it and move on. If you see problems, resolve them immediately and don’t be cheap about it. Your business doesn’t end with the launch, it begins with the launch and you should never just sit there and rest.

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18 thoughts on “Why Our Online Business Almost Failed And How We Recovered”

  1. Bleu Panda says:

    Steve,

    You’re right on with that last statement, “business doesn’t end with the launch, it begins with the launch”. After all, what else does “launch” mean but to take-off?! I appreciate your example with the Texas vendor about making (or how not to make) first impressions. Unfortunately, you learned the hard way, but I am positive that it’s very common. I don’t have an online store, but I have sold things on eBay and Amazon. Because I wanted to get rid of my “junk”, I didn’t offer the type of customer service that one should with a business to build. Oftentimes, mistakes provide the most enriching lessons.

    In addition to greed, I think it’s natural to feel like every transaction is your last and that refunds are a customer’s goodbyes. However, when a business is being cheap with or tries to “nickel-and-dime” a customer, it may be saving money in the short-run, but paying with its reputation, which is always a higher currency. For newly established businesses, instead of having the mentality of “making the sale”, they should have the attitude of “establishing the relationship”. The ironic thing is that the vast impersonal world of cyberspace has somehow rendered us to try and find connections. And I am sure that some of this mentality crosses over to the consumer world of the online user.

    From my perspective as a consumer, reputation and relationship is what I look for when I purchase something from a business. I like to think that I am not only buying a product from a company, but also making an investment in its founders. And my recommendation carries farther and has much more weight than any ad or promotion, especially with the convenience of communication for the masses these days.

    Thanks for generously sharing your personal experience – it is encouraging. I’m going to search for a wedding now so I can purchase some linens! Also, I really enjoy the customer relationship insights you have given. Some of them are hilarious, like the lady who was too nice.

    Best,

    - Bleu

  2. Thank you for sharing your experience with us. I have only been launched for a little over a month and starting to feel the sting of discouragement for I have yet to make a sale. I am still working on driving traffic to my site so I know my SEO is part of the problem. Another issue I had was my website itself. I just had it “remolded” so it’s much easier to navigate now. The new site is about 30 minutes old and I’m still tweaking it. I really needed your post today!

    As a customer, Paypay definitely confused me when checking out. Sometimes I wanted the package to go to a different address (different than the one on my Paypal accounts) and sometimes the confirmation information didn’t match the shipping information I put on the website where I was making the actual purchase from. It would sometimes go with my Paypal shipping address. When I called the vendor, they would tell me they had the address I wanted it to go to in the first place. That was a waste of time.

  3. It takes time to build up trust and authority for a website, which also applies for an online store. You too mentioned earlier about how the store and stuff were started with greed and that it turned out unsuccessful. I’d wouldn’t call that greed, but more towards saying that its a starting experience which eventually will allow you to mature more in the business and now going to the point (or probably you have already reached this stage) where you are used to receiving results beyond your expectations – consistently. :)

    Your post is an encouragement to readers who are looking to start their own online business, and with your tip on having PayPal to receive credit cards will be a valuable lesson for all of us.

    Way to go! :D

    Daniel

  4. Bleu, you’re killing me. You’re killing me because you are such an eloquent writer and you don’t have a blog or journal. If you ever start one, let me know because I’ll be the first subscriber.

    It’s ironic how your point of view changes drastically once you become the seller and not the customer. When we were dealing with the Texas lady, if we had just put ourselves in her place, the decision would have been obvious. These days word of mouth and reputation is the most valuable asset that a business can have.

    BTW Bleu, whenever you are ready to get married, we’ll send you a personalized hankie on the house!

  5. Carla,

    Hang in there. We relied on Adwords for a good while(6-8 months) before Google started kicking in. It gets much easier, believe me. One day, you’ll get a flood of traffic and you’ll have no idea what happened. The customers will find you (if your SEO is done correctly). You just need to be patient.

    BTW. I didn’t mean to badmouth Paypal. We actually still use their business product for our store. It’s great and we’ve had no issues whatsoever.

  6. Hi Daniel,

    I really appreciate the comment and the stumble. I can see your point of view how it wasn’t really greed. But honestly, we acted the way we did more to obtain validation that we made the right decision to start the business. Validation and reassurance can be a hard thing to get over. Once you get past that point though, it’s smooth sailing.

  7. Hi Steve,

    I find this post refreshingly honest and I seriously don’t think there’s anything to be ashamed about. I haven’t met a successful businessman who didn’t make mistakes – what matters is that we learn from them and move on to make things right. I’d say congrats on doing the right things, and thanks for sharing!

  8. Hi Irene,

    You must be a great mom, because you are extremely supportive. You have supported this blog from the beginning as well and I really appreciate it. Please come back often.

  9. Me says:

    Nice post! You made some very good points and this is a great read for anyone starting out. Thanks for sharing your story.

  10. Rohan says:

    Hi Steve,
    This is a wonderful post and I feel its outstanding. Typically, you will find people giving generic advice like ‘Be passionate, hard-working, blah, blah’. While that is obviously important, that is way too less for a ‘sucessful enterprise’. But the ground level realities are way too different and you are actually giving a snaphshot of the ground level.

  11. Hi Rohan,

    Thanks for the kind words. There are definitely a lot of little details that are involved in running any business that are rarely mentioned in the stuff that you read. Hopefully, I’ll be able to paint an accurate portrayal of our experiences to dispel the myths.

  12. Paypal is a great service but the basic package does not include a virtual terminal feature like most internet merchant accounts have. The virtual terminal allows you to manually key orders into your internet merchant account. If you upgrade to the virtual terminal feature it’s $30 per month. You can find a cheap internet merchant account that waives the monthly minimum and you’re looking at $25 per month vs $30 with Paypal and probably a much lower discount rate than Paypal’s 2.90%.
    Michael Rupkalvis
    The Transaction Group

    1. If you are a real business, chances are you will be signed up for Paypal Payments Pro which does include a virtual terminal. I don’t see very many stores rely on Paypal basic since it takes you off of your own website. When I was looking for merchant accounts, I couldn’t find one willing to waive the monthly minimum. Perhaps I didn’t search hard enough. 25 dollars a month sounds extremely cheap to me for an internet merchant account. Would that cheap merchant account offer pay to click shipping straight from the interface for multiple orders?

  13. Good article, I so agree with the last sentence, about the launch being the beginning, my partner builds websites, and I do SEO on websites, and so few of my partners clients, actually become my clients at the beginning, they seem to think that all I’m doing is trying to get more money out of them.

    They truly believe that their great idea will make them kazillions of $$ without any more work on their part, and defiantly not paying me, just to do the basics to get their website found in searches. Then 6 months later, the are all kinds of upset cause they haven’t made a sale.

    A year later if the bother renewing their domain name, they would rather pay for google adwords, than pay me the same amount make their website show up in naturally in search engine results. Go figure.

    Ok, got to keep looking at your site, lots of interesting content…. will send a few clients here.

    Lynny

  14. This is really a great article. I agree with all your points and am taking notes! I am working on my first online store, so all your points are well taken.

    It is so easy to get wrapped up in the hype of everything and needing the money or the sale, but you do have to consider that you are in this for the long haul and as much as you can do on the frontend to make the work go smoothly, the better. I am excited about my venture and you have given me some great advice to get it started on the right foot.

  15. Great blog post and there are some awesome responses here too. When business owners skimp (in any industry imho), the consumer will almost always notice. Online shoppers are savvier than most (which is why they’re saving money buying online) and the details matter. Once you get your business off the ground there are still many lessons to learn. It surely doesn’t end there!

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