Can you make a successful business selling online only?

Q: Dear Jane,
I have a quick question about my marketing strategy.
Do you think it’s possible for me to succeed by selling completely online, without pursuing retail accounts?  I wonder because of the current lack of competition in my niche – maybe it could work? I have worked in the Apparel Industry for 9 years and have spent a lot of time chasing stores for “net 30” money that’s overdue. It would be much nicer to get paid per order!

We’re still working on the site, but programming will change depending on our wholesale/retail strategy. I would really appreciate some advice!

Sincerely, Kelly

 A: Before I could answer this question, I needed more information about what Kelly wants to sell. I called her up and we discussed her product and found out that her business is tied in with a cause. She wants to get customers who relate to the cause as well as customers who just like the merchandise because it’s cool. Products include T-shirts, mugs and hats.

Now that I know what market she’s in – and at what pricepoint – I can give her a better answer.

The short answer to Kelly’s question is yes, it can work. There are a few things for her to think about.

Shipping costs. It’s very tough to compete with Zappos and Amazon Prime when it comes to freight charges. They offer free shipping and Kelly can NOT afford that. When a product, like a mug, is only $8 to begin with, the customer does not want pay another $8 to ship it. I suggest Kelly thinks about how to get the average order up to $40 – $50 by “bundling” items together. For instance, buy a T-shirt and 2 mugs at $____________– this great price. Consumers are less apt to complain about shipping when it’s a smaller percentage of their total bill.

Understand how much you need to sell to make an online business work. How much does she need to sell? If each order is approximately $40, at what point will she break even and at what point be profitable? Also, a lot of entrepreneurs are surprised by how much time and effort it takes to sell a $40 item online. Marketing is a commitment that requires consistency and a true understanding of your customer. .Packing and shipping items takes more time than most designers think it will. As does answering customer emails. While most of these tasks don’t require a large cash outlay, you pay a lot in time and energy.

Figure out how much traffic your site needs to get and your conversion rate. Let’s say you expect 2% of those who land on your site to make a $40 purchase. If you get 50,000 hits to your site this year (around 4200 per month) and 2% buy, that’s 1000 people buying. Multiply that by the average sale of $40 and your annual sales will be $40,000. Will this be enough? If not, how will you increase traffic or increase conversion rate? Or increase the average sale?

So YES it’s possible to make a business selling only online. It takes time to build and it can definitely work. I see designers selling very well online – supporting themselves and their families. Like many things, what you’ll get from your online business is related to what you put into it.

In my experience, an online business goes like this:

• You put more effort into it in the beginning for very little reward.
• After a while, much less effort is required to get WAY more reward.

Think of it this way:

• Beginning: 8 units of effort in = 1 unit of sales
• 2 years in: 3 units of effort in = 3 units of sales
• Later: 2 units of effort in = 8 units of sales.

Kelly, I hope this helps with your decision and I’m wishing you loads of success with your business!

Sincerely, Jane

P.S. Readers! What do you think? Am I giving Kelly good advice? What can you tell her to watch out for? What’s worked for you and what hasn’t? Let me know in the comments below, will you please?