Strengths
Ecommerce enterprises are able to be established relatively quickly and at a relatively low cost. The ability to establish a website after a domain name is acquired is a relatively straightforward process. Most importantly, e-commerce businesses can be run as owner operator enterprises at the onset of operations and this substantially reduces the cost associated with establishing a new online sales platform. The startup cost for a new e-commerce website can vary greatly. These businesses can be started for as little as $1,000 all the way to $1 million depending on the initial scope and scale of the business. These days, most entrepreneurs are able to source inventory on a dropship basis. This allows a new e-commerce entrepreneur to drive their sales without having to spend an exorbitant amount of capital on inventory.
As these businesses expand, they are typically able to then purchase inventory on their own in order to increase their contribution margins. As it relates to availability of capital, financial institutions are willing to provide a modest degree of capital support for a new e-commerce enterprise. In most instances, individuals that are engaged in this industry will acquire a revolving line of credit in order to support their development and launch costs. Additionally, some financial institutions are willing to provide credit based on the amount of inventory that will be carried. As these companies expand and become profitable, the opportunities to source capital for grow growth will continue to increase.
Weaknesses
The primary weakness for a new e-commerce venture is that there are numerous competitors for every industry selling products or services. The initial startup phase of any e-commerce enterprise is fraught with a substantial amount of complexity and difficulty as these businesses use targeted social media, pay per click marketing, and search engine optimization to drive there early sales. Additionally, as a new e-commerce business, many individuals will struggle to develop a trustworthy profile so that people will ultimately make purchases through their website. This could be remedied in a number of ways, especially as verified reviews are established. Additionally, one of the primary weaknesses of an e-commerce startup is that they must spend a substantial amount of capital and marketing in order to create brand visibility. In many cases, 50% to 70% of all operating costs can be allocated towards marketing during the early years of the business. For an entrepreneur that is starting off with a small budget, this can place financial strain on the business as it develops its operations. Additionally, these businesses can be impacted by economic recession which will be touched on in more depth below.
Opportunities
There are numerous ways that an e-commerce website can expand their operations through unique opportunities. Foremost, as the business begins to generate revenue a greater amount of profit can be allocated into expanded marketing efforts. This includes targeted social media as well as specialized search engine marketing that will bring the attention of the business to a number of potential buyers. For product-based businesses, many e-commerce entrepreneurs will develop affiliate marketing programs that will provide a commission each time a successful sale is made. this can drastically increase the amount of traffic that is received to any e-commerce website. Furthermore, there’s also the opportunity to acquire existing e-commerce platforms that provide similar products and services. In these instances, financial institutions are willing to provide a greater degree of support as these are established enterprises that are already producing a profit. These websites can then be seamlessly integrated into the parent company’s ecosystem.
Threats
Beyond competitive issues, the primary threat faced by most e-commerce enterprises is delirious changes in the economy. In the event of a major economic perception, people tend to pull back on non-essential expenditures. This is especially true for e-commerce entrepreneurs that operate with a specialized niche. However, these issues can be addressed by keeping a highly lean operating infrastructure that allows for a greater amount of to be allocated towards marketing as well as acquiring new products that will find demand even during challenging economic climate.