Story Of An Ecommerce Merchant's Failure

Interesting commentary here:

http://www.scribd.com/doc/137629166/Ecomom-Post-Mortem

Some of the information would apply to many Zenners, especially this:

"A classic business school question for any new business is: what is your competitive advantage? It's a good question. Ecomom sought to establish itself as a niche player catering to eco-conscious moms. Not a bad idea at all. But once you get your brand you have to protect it, and here Ecomom was failing miserably. The Ecomom brand existed only at the website level and did not extend to the product level. Customers could easily buy the exact same item at Whole Foods or any of the other dozen or so internet retailers targeting the exact same market. And with comparison shopping as easy as clicking the mouse button, we became slaves to the lowest price. For diapers and baby food our contribution margin was close to negative 100%. For toys, our best product, contribution margin was almost zero, but here too we faced intense competition. Our own suppliers would list the exact same items on their own website. What value, then, was Ecomom providing to our customers? We became simply a middleman, and one that incurred double freight."

This was a great story and lesson. When I started down this road I promised myself that I wasn't going to get emotionally attached to my websites. I needed to always remember that it was first and foremost a business. I started many websites and shut them down when the competition made it all about price. I've experienced the same thing where my suppliers couldn't manufacture the product for the price websites were selling it for. If you're just reselling products then it's hard to add value. Now when I look for a source of products I look first at whether they sell directly to the public at a discounted price. That a no win situation unless you can add some value. I also look at the competition. If big box stores like Sears or Walmart are selling the same catalog, why would somebody buy from me. Remember it's a business and the reason you're doing it is to make a profit. Most have to learn this the hard way.

Sad story indeed.. I read other articles about Jody Sherman..

Looks like Ecomom will be making a comeback.. http://www.ecomom.com/

Will be curious to see how they do things differently this time..

Last year I read Four Hour Week by Tim Ferriss, an early and successful adoptee of drop-shipping and outsourcing business models, who also maintains a blog. Despite all of his positive commentry, including how to compete with cheaper suppliers, I sense the drop-shipping business model reached maturity a few years back when every man and his dog jumped on the bandwagon in search of quick and easy profits. Since the GFC, business conditions have been tough for all but a few, and are likely to remain tough for many many years to come. We have already witnessed a decline of retail, manufacturing and mining sectors. Someone on the blogosphere is now predicting two billion (yes, you read that right) unemployed by 2030 as new technologies begin to decimate education, energy, transport and several other sectors. My only advice is stay liquid and flexible, reign in expenditure and avoid debt, and work as hard as you can to be good at what you do. I see Zen Cart, and open-source software generally, as essential ingredients for survival.

Cheers