Common E-Commerce Challenges Businesses Face

The e-commerce industry has grown exponentially, with total e-commerce sales for Q3 alone reaching $284 billion and expectations of sales passing $1 trillion in total for 2023. As an e-commerce business owner, you have unique challenges compared to brick-and-mortar shop owners. E-commerce businesses have unique rules and regulations to follow, and cybersecurity is a top priority to ensure all data stored online is protected.

Editor’s note: Looking for the right tools to help build your business website? Fill out the below questionnaire to have our vendor partners contact you about your needs.

We spoke with industry experts about the challenges e-commerce small businesses must contend with and how to overcome these hurdles. Here are 12 of the most prevalent challenges e-commerce business owners face today.

What are the top e-commerce challenges for SMBs?

All aspects of e-commerce businesses face hurdles and difficulties. Here’s a look at some top issues and what to do about them.

1. Cybersecurity

Victor Congionti, chief information officer and co-founder of Proven Data, knows that small e-commerce sites need the proper cybersecurity practices and tools in place. 

“Small businesses that focus their attention in the e-commerce space need policies and procedures to create a solid cybersecurity framework for the organization,” Congionti said. “In the case of a cyberattack, a small business cannot afford to have downtime in operations and sales, because every transaction is a marginal financial success that the business depends on.” 

Because a small business depends on that income, Congionti said business owners need the proper cybersecurity framework to keep data safe and secure while helping employees feel empowered to implement policies and tech to combat cyberattacks. Measures such as tighter access control and data security software can shore up defenses against vulnerabilities and improve a small business’s cybersecurity risks. 

Businesses must have an incident response plan that establishes what to do in the event of a cyberattack, added Congionti. 

“In the case of a ransomware attack, the organization might not be able to access files and data that is necessary [for] providing service to customers, such as inventory reports,” he said. “Having a response plan can help the business reduce downtime in operations and continue providing service to clients through other means, such as phone sales.” 

Your offices shouldn’t be your only cybersecurity focus. Cybersecurity while traveling is also a concern, as traveling with connected devices could open you up to data breaches or cyberattacks.

2. Competition

Competition comes in many forms for small businesses, especially in the e-commerce space. You have to keep up with competitive pricing, products and services – all competing for your target customer. 

“As a small business, you can overcome price competition by having a very clear company value proposition that consumers can’t get elsewhere,” said Calloway Cook, founder of Illuminate Labs. 

The e-commerce space has become so saturated that standing out from other e-commerce businesses is challenging, through no fault of your own. 

“Distinguishing yourself from your competitors is crucial to standing out and attracting new customers for your business,” said Harsha Reddy, co-founder of Small Biz Genius. “This can be accomplished by making sure your website looks professional and is optimized correctly to suit today’s Google algorithm. Also, by providing a unique product or service, you can focus on a smaller demographic, making it easier for you to increase your domain authority.”

Conduct a competitive analysis to gain a deeper understanding of your competitors and understand how your business can improve.

3. Order fulfillment

Not everything has to fall on the small business owner’s back. You could be inundated with more orders than you are prepared to handle on your own. In this case, outsourcing order fulfillment and e-commerce shipping can ease your workload and streamline the customer experience. 

“Order fulfillment should be outsourced to a third-party fulfillment company whenever possible for increased efficiency,” Cook said.

If you sell large and heavy products, consider using dropshippers and other third-party logistics providers (3PLs) to boost shipping volume without investing in additional warehouse space.

4. Customer experience

As a primarily e-commerce business or a business that conducts some selling online, you might find it a challenge to offer your customers the same experience level they would get in a brick-and-mortar store. 

“One of the most overlooked areas of the customer experience in moving to e-commerce is pricing and customer segmentation,” said George Dunham, CEO of epaCUBE. “Customer experience is especially important when launching an e-commerce initiative, because customers expect to be treated as well or better online as they are face to face.” 

Dunham said that companies struggle to meet these new demands because doing so requires precise handling of pricing, analytics and customer segmentation. Successful experiences in the e-commerce space require the same, if not greater, clarity in product offerings, pricing, loyalty programs and more, as is required in a face-to-face buying process. 

“In a world where everything is happening online, your customers expect more, and they also know more about your products, prices and competition,” Dunham said. “They expect to be treated the same way online as offline, so if they can get a certain price in person but can’t get that price online, they get frustrated and purchase somewhere else.” 

Customer retention strategies – online and in person – include focusing on customer expectations, receiving and reacting to customer feedback, and being open to improvement.

5. Quality website traffic and visitor conversion

Building, designing, and running an e-commerce website is complex, but generating quality conversions is even more challenging, according to Lisa Chu, owner of Black N Bianco. 

“To turn your traffic into converting customers, you must have a website that is modern, clean, user-friendly, trustworthy and virus-free,” Chu said. “Every industry is different, so understanding your audience is crucial to designing a website that resonates with your audience.”

Designing an effective business website is just the beginning, though. Maximizing the content on your website through SEO is the next – and perhaps most important – step. 

Phillip McCluskey, commercial director of One Erth, said that average conversion rates globally are less than 3%, making driving relevant traffic to your site a sticking point. 

“Extensive short-tail keyword research should be conducted to ensure you are optimizing your pages for relevant search terms,” he said. “It is likely that the competition for these terms when [they are] just starting out will not realize immediate web traffic; therefore, long-tail keyword research should be conducted to understand the relevant ‘what,’ ‘how,’ ‘who’ and ‘where’ within your niche.”

Shirley Tan, developer partnership manager at Yahoo Small Business, said many businesses used to take the “if I build my online store, customers will somehow discover it” approach. “Today, that is no longer the case. When there were fewer e-commerce stores, they may have been able to rely on a stumble-upon effect, but now the internet is too crowded and noisy. Therefore, engaging the customer and getting their attention has to be more meaningful and impactful.”

To combat the noisy e-commerce space, Tan said e-commerce SMBs need to understand who they are targeting to create a customer base who will be their constant source of revenue and loyal shoppers.

To better serve your customer base, use analytics to identify demographic trends that give you more insights on your audience, such as what social media platforms they use.

6. Visibility

How are you supposed to get quality traffic to your site and turn visitors into customers if people can’t find your site? It’s a significant issue for e-commerce businesses and one that could make or break a business. 

“If the company doesn’t show up on the first page of Google’s search results for relevant keywords, then it’s unlikely that prospective customers will find them,” said Michael Anderson, marketing and SEO specialist at GeoJango Maps. “The best way to overcome this challenge is to invest in SEO. E-commerce companies should conduct keyword research, implement on-page SEO best practices, and work on building high-authority links to their website.” 

Anderson said if all of the above is done correctly, it will lead to higher search visibility and optimized lead generation. 

“For clothing businesses, influencer marketing works very well, but if your e-commerce business is based around a product that solves a problem, getting your website to rank on Google for keywords related to that problem through SEO efforts might be your best bet,” said Nicholas Rubright, digital marketing specialist at e-commerce market research firm Zik Analytics. “Understanding your audience is key to figuring out which marketing channel will generate traffic that actually converts into sales.”

To improve your SEO ranking with Google, be sure to optimize your website for mobile devices. Google sees mobile page load as a critical metric.

7. Return and refund policies

A good return and refund policy could be the difference between success and failure. That sounds extreme, but it’s true. 

“If you want your brand to stand tall, then customer satisfaction should be the first priority, and whatever you’re selling should be the same as what’s advertised,” said Syed Ali Hasan, digital marketing manager at Film Jackets. 

In an ideal world, yes, there would never be an issue with the product you’re selling, but that’s not always the case. Sometimes the purchaser has buyer’s remorse, or it wasn’t what they thought it would be. 

“Be transparent and create a smooth, fast and easy return policy,” Hasan said. “Make it easy to understand and not too strict, so the customer won’t have to go through hassles [to return an item].” 

Rubright said that if you don’t have a good return and refund policy, people are less likely to trust you’re selling something worth the money. “When a site says ‘no returns or refunds,’ it makes the customer much more likely to think it’s a risky purchase or, worse, a scam, since online businesses can be less known.”

8. Finding the right market

“The first step of any business is to find product-market fit, and e-commerce is no different,” Rubright said. “Product-market fit is the degree to which a product satisfies market demand. The easiest way to find that fit quickly is to build a product that solves a problem you have.” 

However, finding the right market for your product isn’t the easiest task. Rubright offered some insights on how to make it more straightforward.

“If you haven’t figured out your ideal customer yet, I recommend making some assumptions as to what your target market is and running Facebook ads to this audience. When you finally do make a sale, try and understand everything you can about who bought your product, and find more of those people by any means necessary. Once you have product-market fit figured out, then you can figure out the best way to reach your ideal customers.”

In addition to Facebook ads, Facebook business tools include a Facebook Page where you can engage with customers and Facebook Groups to foster communication.

9. Making and increasing sales

Once you figure out your products, get your website set up, and have your small business marketing plan in place, the next step is making sales. Making a sales plan and selling your products and services seems like a no-brainer; however, it’s not always that straightforward. 

“To increase sales, e-commerce SMBs need to have the right product at the right price and ensure they are top of mind when the customer is ready to make a purchase,” Tan said. “This traffic can be hard to get; to drive sales, it’s important a brand endears themselves to their customers.” 

Aside from customers already having you in mind when they need something and feeling positive about your product, your website plays a big part in how many sales you’ll make. 

Tan suggested asking yourself the following questions to determine your website’s efficiency:

  • Is the website layout easy to navigate?
  • Is the checkout experience simple and easy?
  • Are there coupons that can be applied when customers spend a certain amount to get a discount? 

“Website functionalities like these can greatly increase conversions and make the customer experience more enjoyable,” Tan said.

10. Borderless e-commerce

Because of the increase in e-commerce websites available worldwide, shopping has become borderless. Consumers can easily purchase from companies outside of their own countries. As a result, e-commerce businesses must accommodate customers of all backgrounds. 

Supporting a diverse customer base means providing information in various languages. According to CSA Research, 76% of online shoppers prefer to purchase products with information in their own language, 92% would prefer shopping in their local currency, and 33% might abandon the cart if pricing is only in U.S. dollars. 

To maximize your chances of having a successful e-commerce business, use thought and consideration when accommodating other languages and cultures.

11. Augmented reality

The augmented reality (AR) market is expected to reach $198 billion by 2025. AR allows e-commerce businesses to show consumers what a product would look like in their space. For instance, if someone is purchasing a couch for their living room, AR can help them visualize the sofa in that very room. 

This visualization tool often solidifies their decision to make a purchase, as consumers can have more confidence it will look good in their home. 

If the AR model would work with your products, perhaps you should incorporate this technology with your e-commerce store.

To create an AR experience for your customers, consider investing in product information management (PIM) software.

12. IoT commerce

Internet of Things (IoT) commerce has been a popular way for consumers to make digital purchases through IoT devices, such as smart speakers, cars, appliances and other smart devices. In the current API economy, business owners can accelerate product delivery to new channels. To accommodate this new way of shopping, e-commerce businesses must focus on their PIM, so they are ready to respond to API requests and sell in unconventional channels.

Sean Peek contributed to the writing and research in this article. Source interviews were conducted for a previous version of this article.