Is now the right time to start an e-commerce business?
With a possible recession on the horizon and a worldwide pandemic, is now a good time to start a business? KAREN BOTTOMORE, Senior Manager in our Audit Team, argues that with less competition and a growing ecommerce industry, it's worth considering launching an online store.
The coronavirus pandemic has forced millions of companies to readjust their business model and focus their efforts on maximising efficiency. Unfortunately, the COVID-19 crisis has also led to the demise of a lot of previously thriving businesses.
But it's not all doom and gloom.
The 2008 financial crash and several other historical recessions have proven that the market will always bounce back, creating an opportunity for start-ups with a new idea that meets people's needs. As soon as confidence returns, consumer spending will be on the increase and there will be a demand for new products and services.
Although this article focuses on e-commerce, these tips are applicable to most businesses looking to launch in the midst of a financial downturn.
Before starting your e-commerce business there are a handful of things you need to consider…
- Research product ideas and competitors
It goes without saying that choosing the right product to sell is of upmost importance. Think about what you would like to sell, ideally something you know a lot about, and then establish whether there is a demand and the amount of competition. Establishing a demand might involve conducting surveys or focus groups or looking at sales figures for similar products.
One thing is certain. Your product must offer a benefit that others don't currently match. Once you have found a profitable proposition and have researched your competitors, you should create a business plan in order to properly determine what, where and to whom you are going to sell.
- Dedicate time and money to digital marketing
With a whole host of channels to distribute your product, you need to ensure that you are targeting the right platforms. Whether it's focusing on email marketing, pay-per-click or investing time in Search Engine Optimisation, doing your research into digital marketing is a must. Targeted advertising tools provided by Facebook and Instagram are incredibly useful in ensuring that you are only focusing on advertising towards the right people. Creating an online store using tools such as Shopify can be an easy way to sell your product without having to code a website from scratch.
- Analyse the data and be prepared for change
Once your marketing activities are up and running, this is only the start. In order to keep attracting new customers, you should look towards as many insights or analytics as possible and be open to changing your advertising parameters depending on how many leads each channel is generating. When you make a sale, try to get as much of an insight from your customer as possible. This might be through a survey, review or even a telephone call if appropriate. By listening to observations from customers, you should be prepared to be continually changing your product depending on what the market wants. Try to make customer insights, (whether this is data driven or gathered through reviews and word-of-mouth) as the main focal point of your business.
Potential benefits to starting out in a recession…
During a recession, there is likely to be a change in demand for products and services. This isn't always a reduced demand and companies that are well matched with market expectations have a high chance of success. For example, if your product or service offers a saving in the expenditure for small businesses or consumers, this is likely to be a very viable proposition, as it is in a period where many people are looking to save money.
A great example of this could be AirBnB, which saw the demand for low-cost accommodation increase after the 2008 crash. When the market starts to recover and people are looking to spend or grow their business, marketing your product as something that will create growth for a company might be well matched to the market.
Similarly, selling consumer goods such as clothing or technology, is much more likely to succeed during a period of growth than a recession. However, if those consumer goods offer a saving compared to competitors, then this product or service is likely to do well during a recession.
- Much easier to attract top talent
With typically higher levels of unemployment during recessions, you might find you are helped significantly in your bid to recruit the right people. With a wider range of the workforce looking for a new challenge, having the right people to support you in your new venture will prove to be one of the make-or-break aspects of any start-up.
Starting a business during an economic downturn will be scary and potentially create a lot of setbacks. However, if your company can come out the other side, you will be in an excellent place to deal with a downturn in the future. Often, recessions force you to problem-solve and deliver your product in the most efficient way possible, only focusing on the features and benefits that your customer truly wants.
Despite the economic difficulties that the coronavirus pandemic had caused us, there might be light at the end of the tunnel for those looking to innovate a solution to a problem. If you require any advice on setting up a business, creating financial reports or any other form of business advisory or accounting services, please do not hesitate to contact a member of the team by calling on 0115 955 5500 or emailing enquiries@pagekirk.co.uk.