Why do 90% of Online Businesses in South Africa Fail?

It is estimated that over 90% of new websites fail within the first year of existence. Interestingly enough, the same can be said for the restaurant industry, as only 1 out of each 10 new restaurants experience real rewards.

With such negative odds it seems that many are taking a foolish gamble for a shot at success. Yet, there are certain individuals who are able to launch successful restaurants and online businesses time and time again with amazing success rates.

Why is this? Almost all of these entrepreneurs failed multiple times before they succeeded, but, the key to their success is a winning formula derived from trial and error.

The Internet is no different. Through the Dot-Bomb era, millions of websites failed and through this collective information, it was possible to develop a successful formula. A formula used by R.O.I Media to ensure the success of their websites and their clients websites.

Highlighted below are some of the modern principles for online success. It is guaranteed that if businesses actually adhered to these principles, 90% of them would be smiling rather than crying.

1. The 5 Ps (Prior Planning Prevents Poor Performance)

The key to launching a successful online business is down to proper planning. Before launching any online business you need identify your potential target market and demand. Online Businesses have distinct advantage over traditional brick and mortar businesses due to the fact that we can identify demand for any industry based on the daily demand indicated in search volume.

For instance, the keyword cape town accommodation is searched for ? 350 times a day. Therefore its feasible to launch a site that offers bookings for accommodation in Cape Town. The demand is visible in the searches done by users.

2. Competitor Analysis

Its surprising how many new online businesses launch and when asked the question, name your top 5 competitors? few can give you a direct answer. By identifying your competitors, you gain valuable competitor intelligence which can help mould your business model. Its important to see:

How much competition is in your industry? More competition makes it harder to compete. Sometimes the better angle is to target segments with less competitor saturation.

Price Comparison Customers in this day and age are becoming more and more price sensitive. With the internet, customers are able to shop around for the lowest price within minutes and most of the time they are drawn by a low price. Its sometimes better to make less profit as opposed to no profit.

Dont be caught off guard. Identify all your competitors prices and position yourself to be competitive and make sure you are able to make enough profit to sustain your business expenses, including marketing.

USP  Unique Selling Proposition This is a vital question that few business owners can answer. What is your unique selling proposition? Simply put, what do you offer that your competitors dont offer or what do you do better than your competitors. By launching a product range that is not unique in any way, will not give you a distinct advantage in the marketplace and will set you up for failure.

3. Build it and they will come (Traffic)

Many new websites spend far too much time and money on launching a website. Once the site is launched, they do far too little to promote the website and as a result few people come to the website. Being out there is not enough; you need to actively promote your website online in order to get traffic to the website. Traffic can be generated through SEO (Search Engine Optimisation) and PPC (Pay per Click services).

Interestingly, 88% of all internet users use search engines to find what they are looking for. In February 2008, there were nearly 10 billion core searches done in the US alone. Search Engine Optimisation is the process of bringing a website to as high a position as possible in the search results when a user types in a search term in the search engine.

In Laymans terms, you go to Google and type in Blue Widgets, and a website comes up number 1 selling blue widgets, this is due to an effective SEO strategy.

4. Leading the Horse to water (Conversion)

You can lead a horse to water, but you cannot make it drink. The same can be said online. All the traffic in the world will not guarantee sales. More traffic does not always correlate to more sales.

Website effectiveness is measured using a simple metric called Conversion or a website Conversion Rate. To calculate your sites conversion rate, you divide the total amount of unique visitors (NOT hits) by the total amount of sales.

For Example: 100 unique people visit your site, 2 people buy out of that 100, you have a 2% conversion rate. Conversion Rate = Desired Action/Total Number of Unique Visitors The average global conversion rate is 2.4%.

The average South African website conversion rate is under 1%. What does this mean? If you are spending an average of R10 per Click (PPC), driving 100 people to your site will cost you R1000. If only 1 in 100 purchase, that sale (cost per acquisition) has cost you R1000. Lets hope that you made more than R1000 profit or you will generate no return whatsoever. The reality is that most websites suffer from terrible conversion rates. Usually, their sites generate zero returns and actually lose money as their advertising costs exceed their profits.

Did you know that 75% of people back out of a shopping cart? Its even got its own term, called shopping cart abandonment. People enter the shopping cart, and something freaks them out to the point that 3 out of 4 run away. Was your delivery cost too high? Did they think your site was a fly by night? Was the return policy not clear? Were they worried about submitting their credit card details? These are some of the reasons that can lead to this.

5. A website is a website, or is it?

The first step before spending vast amounts on marketing is to refine your sites conversion ratio. There are websites and then there are online selling machines. The difference is linked to the conversion ratio, one sells and makes money, and one does not.

By effectively increasing a websites conversion rate, you generate more sales, and more profit without spending more on marketing.

Conclusion:

By following these key guidelines and contacting an expert company with a great track record, online success should not be contributed to luck. Proper planning and execution will ensure long term sustainable success.

Allen is the Managing Director of R.O.I. Media and has been involved in eCommerce, online start-ups and search engine marketing for the past 10 years.