In past shows, we have talked a lot about how to start up your online store and have given you some great tips from several experts. But today we are going to focus on some of the common pitfalls for eCommerce startups. Of course, at the same time, we’ll give you ideas for how to avoid them.
No one can tell you more about this than someone who has worked with eCommerce sites of all sizes and understands beyond just the structure of putting a site together. To hear what he has seen over and over again, we are having Scott Buscemi, founder of Lumen Foundry, to join us.
had a great time talking with Scott about the importance of your USP, budgeting, marketing plans and more. So if you are working with or starting up an eCommerce site, join us as we listen to what Scott has heard from startups and hear his insights to get you on the right path.
We chatted about:
- Why startups need to focus more on their USP (unique selling point)
- The elements that are often are missing when they start putting together their budgets
- Some of the mistakes e-Commerce startups make with their marketing plans
- What automation for logistics are— and whether it’s a good approach
- The misunderstood perception of marketplaces and how startups can fail there
Bob Dunn: Hey Scott, welcome to the show.
Scott Buscemi: Thanks for having me.
Bob: Now, before we get into these questions, tell us a bit about yourself.
Meet Scott Buscemi, founder of Lumen Foundry
Scott: Well, my name is Scott Buscemi. I am the founder of Lumen Foundry. We are a Los Angeles based e-commerce website development agency. We help out a lot of e-commerce websites that are looking to either build out for the first time, or build new features, or convert more people that are already on their site into customers.
Bob: Cool. Let's dive into this now. We're talking about those pitfalls around e-commerce startups. Let's start with this. When it comes to e-commerce sites, you have a focus on planning and creating your site. Now that focus should include messaging and product USP, which for people who don't know that acronym, your unique selling point.
That's not always the case, though. We get distracted by other things. Can you tell us what startups tend to focus on besides their USP and why that is a mistake?
What do startups tend to focus on and why is that a mistake?
Scott: A lot of contact form submissions that I get on my website are 5,000 characters, 10,000 characters. Pages and pages and pages of features they want to see on their websites. So it'll be unique subscription systems, or unique fulfillment systems, or unique ways of displaying the content on their site, or something that takes a lot of time to develop out. For companies that have done the research and know why they're making those decisions, that maybe they have current data— customers have told them that they want that specific feature and in particular paying customers that say they want that specific feature.
For those people, that totally makes sense. They are creating a spec. They're creating a feature set and they're saying, "This is what we're looking to build on our site, and here's where we're going from here."
But for a lot of those submissions that I get, it's companies that are just starting out and are taking a mishmash of a lot of other features that they've seen before, or even just taking a stab at it in terms of what they see could work the best. A lot of the time that's not what the main focus of an e-Commerce business should be.
So a lot of e-commerce business owners want to focus more on how their site is gonna operate, how fulfillment is gonna work, how each person is gonna flow from one page to another, but in reality you're hiring a web consultant, right? I mean you can hire a web developer who really is just your hands and you tell them what to do and then they're gonna build it out and write the code for you, but the better choice would be to hire a web consultant who's seen it all, has opinions, has advice and can really say, “Hey, instead of building up this feature, why don't we just do a prototype of it, see if people use that, see if they care about it, test it and then start fandangling a greater and bigger version of it, rather than just building this great big version from version one."
Bob: Right. So it's not the assembly line. Here's everything I want and you as a developer or, like you said a website consultant, just sit at the assembly line and put it all together. You want to stop and say, "Hey wait a minute." Or even question, why are we doing this? Can you clarify this a bit more because we may have a better route to go. I do think e-Commerce sites get so focused on is this gonna work? Is a shopping cart gonna work? Is this piece gonna flow exactly and have all these little features popped into it? And they get buried in that and they don't start thinking of the other things, which you pointed out are really a lot more important.
What questions should we ask ourselves when thinking about the features of an e-Commerce site?
Scott: A lot of what I do when I a prospect comes in the door is to anti-sell them on a lot of things hey want to do. A lot of times somebody will say that they have a budget for something wild, and their budget is really healthy. But you asked the right question, which is ,why? Is there backing and data behind the idea? What is the reasoning behind this elaborate feature set, and is it viable?
Bob: Now you just mentioned budget, which is great because that is my next question. And another thing that again, they think of maybe mechanics, they think of how much does this cost? How much does this cost? When they're putting a budget together, these startups, what do you find that they overlook as far as actually creating an effective budget that they can approach you or someone else with?
What are some of the things startups overlook when putting together a budget for their site?
Scott: Building an e-Commerce store is not just building a store. It’s building a business, and a lot of people who are just starting out really just think, "Okay, I'll get a quote from my developer on how much it'll cost to build out my features and that's the only expense that I'll be seeing."
And that's not true. As any business, with any company, the cost of goods sold is not where your expenses end, right? You have everything that goes with running your business: the accounting side, everything to do with marketing, which is huge, and, of course, sales. Every expense that comes into building a business. A lot of e-Eommerce stores forget about that, and marketing is the one that most people forget where they really just don't have a marketing budget, and so when they launch, suddenly they have zero visitors.
The other thing is that a lot of people build a budget for version one of their website, but they don't budget for version 1.1, or 1.2, or building on new features beyond just what comes out the first time. I see that a lot. A lot of companies just budget for that first version. From what I can see, their expectation is that once they do that, the money's gonna start coming in and they're gonna be able to use that fund to just grow and grow and kind of bootstrap it.
But a lot of times that doesn't happen. You build out version one and you find out that it's not converting people, or people aren't receptive, or there was no marketing in the first place, so version one not successful. You have to say, "My budget includes version one and beyond."
Bob: Again, you mentioned something within that, which is what you've got to plan for and that is your marketing plan. And, of course,most people should know how critical that is. What are the mistakes e-Commerce startups are making when it comes to pulling together that marketing plan?
What mistakes are e-Commerce startups making when pulling together their marketing plan?
Scott: There are quite a few things that I see that go awry when it comes to a marketing plan. The first is not having one. A lot of people who are unfamiliar with building e-Commerce websites, or websites in general, have some assumptions on how the web works. I've seen a lot of times a lot of people expect foot traffic. They expect the people to just stumble upon their website, or that on day one they're gonna show up on Google and suddenly they'll be getting lots of traffic because people are gonna search for their product on Google.
All of that doesn't exist so I always like to say, I have a little presentation about these kinds of things as well, and I always say that the traffic fairy does not exist. There is no magic wand to bring you traffic, so there has to be a plan. That's the first thing.
The other thing that I've seen are companies that, once they build out the site, they spam. They find people on Facebook, they find other companies and just send them messages via email or Facebook and tell them all about their website. That's what we call spam. It doesn't work. Nobody wants it, and nobody's gonna look at it and appreciate it. You want to make it so that you're doing a marketing plan that has a more healthy approach to how people are discovering who you are.
Also, I have heard countless times where people want to build out sites and then make it so that there's a builtin affiliate or referral system, so once you buy one, then you can refer other people and get like $10 off your next one, or even a $10 gift card. Now, that doesn't work right out the gate. A lot of people think that their customers are gonna love them and so they're gonna be able to build this gift certificate program right away. But it doesn't work that way because in order for referral marketing to work, people have to be insanely loyal and love your stuff.
If you think about it, referral marketing is somebody saying, "I love this company so much that I'm gonna market for them. I'm gonna tell my friends about them. That's how much I care about this company's existence." And your marketing, your USPs, have to be so solid in order for you to get that right out of the gate. That's something that takes nurturing and care, and that's where I see another pitfall is where a lot of people depend on that and that alone. It can be part of a marketing plan, but I've seen it countless times where that's just the plan.
Bob: Yeah and that's really good point. Because in the affiliate world whether it's referring or whatever, I get tons of people asking me, “Would you be a referrer? Would you partner up? Do you want to…?" And I don't know these people from Adam. Unfortunately, I ignore a lot of them because it'd take all my time to respond to them. But some of them, I might take the time and say, "Hey, you know, we’ve got to kind of build this relationship. I've got to have actually used your product. I've got to be comfortable with it."
It's amazing. This would be called cold calling in the old days, where you just call people out of the blue and if somebody's still telling them that kind of thing works, it’s crazy.
Scott: It's gotta work for somebody, but it's not worth your effort, you know?
Bob: Right. And it can leave a bad taste with some people. They think, "Yeah, not even gonna bother with this ever again because after five emails I'm a little tired of it."
Scott: I've actually seen where new start ups, new companies, will Tweet at me and tell me to check their site out or something like that. Not even as a consultant, they just want me to go buy their product. I'll block them. I'll just be like, "All right, well, that's fine." And that means from now on, the rest of their existence, they are blocked completely from my Twitter. They will never reach me via Twitter ever.
So it kind of goes to show that with the tools we have nowadays to be able to just completely remove someone or a company from our existence, or our social existence, or social media existence, that's where you want to be careful and make sure that you're connecting well with the right people.
Bob: Yeah, it's crazy. Yeah, they just reach out and again, I think some of them must really seriously be thinking it's a numbers game. If I do this enough, I'm going to get enough of a return as long as I put them out, but I think that's becoming less and less effective. The good old numbers game.
Scott: Of course. And there's much better ways to do things instead of spending your time that way, you know?
Bob: Exactly. Now when we talked about some of the ideas for this show, you had mentioned to me automation for your logistics. I'm gonna kind of let you tell us what you mean by that and whether it's a good idea or not.
What role should automation play in marketing and managing your e-Commerce business?
Scott: Automation is tempting, and when it comes to marketing automation—sending out auto responders, or sending out a chain of thank-yous after somebody has purchased the product, or a thank- you and asking for feedback— those are awesome. When it comes to automation for logistics, things like sending out invoices to vendors, or sending out packing lists, or creating complex CSVs with all the inventory data and all the recent purchase data, all these things that can really simplify things, those are things that come later. Those are things that you have your business process down, after you know exactly how your site is going to operate. Like I said before, it's not just a site. It's a business. You know how the business will operate, and then you can invest in building that infrastructure.
Some companies that are just starting out want to spend a gazillion dollars to build out a whole entire component system, but they don't even know if that is the fulfillment system they want to do. That's where I'm at with automation. There are certain kinds of automation that are really good to build out in the beginning, and you'll even find a an awesomely solid ROI for them, but when it comes to logistical automation, that's something that you want to make sure you have downpacked.
Bob: I never really thought of that. It's should be part of your startup: those things you need to work out and put in place. Great stuff. Now, last question. I'm gonna leave it up to you to tell me your ending tip to share with our listeners around these pitfalls.
What tip would you end with to help e-Commerce startups avoid the pitfalls?
Scott: The last one I wanted to bring up is about marketplaces. This isn't something we touched on today, but there are lots of people trying to build the next XE, or the next Envato, or anything related to that, or that has that same kind of structure. Now when you're just starting out as a marketplace, it's tempting to want to cater to every single vendor or buyer that comes in, vendors especially.
When you're just starting out, you want to really fill out the site and make sure that when somebody goes on there, it shows that you have plenty of products available for purchase. But the one thing you want to make sure is that before you even launch your version one, or even your prototype, you should know exactly what your structure is, how payments work, how shipping works, how everything works from beginning to end for vendors and for buyers. And when somebody comes up and says, "I love your marketplace, I totally want to be a buyer, but I just want this one feature..." Don't do it unless it's something that you know 100% that it's not gonna cost that much money, or you know it was already part of your plan and this will expedite your plan.
If it's something that you didn't envision in your original plan, don't do it. I've seen countless marketplaces that try to cater to every single vendor, every single buyer, and they end up just stretching themselves so thin that they fail. This whole entire talk I might have sounded a little stern, and frustrated in some ways, but there's definitely a lot of things that e-Commerce stores can be doing better to make sure that they're really succeeding.
I can't even tell you how many e-Commerce stores fail because of all the same common pitfalls that happen to every single person. E-Commerce sounds tempting and easy to get into because you just press a button and you have a Shopify store, or you just call somebody and say, "I want a WordPress e-Commerce store." And suddenly you have one, but there's a lot that goes into it. You're building a business.
Bob: That's huge. That's why I wanted you on here because sure, we want to share the success stories and we want to talk about the good side of things. But there are things that people need to be aware of and it's tips like this that can help prepare us for what lies ahead. Hopefully they listen, especially people who are just starting up, or we might even catch them before, when they're in the idea phase. These kinds of things will save them tons of headaches. That's one of the main reasons I do this podcast is I not only want to help people grow their revenue, but when they're at that point of starting, I want them to also be aware of what they're getting into and listen to people like you who have worked with numerous e-Commerce stores, online shops, and seen what have been the big mistakes. So this is all very good stuff, Scott.
Now, before we leave, where can people find you? Your website? Where else do you hang out on the web?
Where can we find Scott on the web?
Bob: Cool. I appreciate you taking the time, and have an excellent day.
Scott: You as well. Thank you.