7 Reasons why Businesses Fail when Switching to Online. This is the Solution!

In fact, as many as 90% of online stores fail within just 120 days of the store being built. Of course you don’t want this to happen to your business, right?

That’s why you must prepare an umbrella before it rains. The way is find out the various problems that could potentially arise when your business switches to online.

Reasons why Businesses Fail

The good news, in this article we will not only discuss the problems that often haunt online businesses, but also the solutions to each problem. Curious? Let’s watch to the end!

Examples of Failed Businesses in the Digital World

In Indonesia, many online businesses have sprung up. But not a few have fallen. Not only small brands, but also businesses that already have big names.

Some examples of them are the three brands below. Although most of them have been online since their inception, at least their actions in the digital world can be used as lessons for businesses who are interested in switching to the online realm.

Let’s discuss them one by one!

1. MatahariMall.com

Who doesn’t know the Sun? This department store which has hundreds of outlets has a long history in the Indonesian retail industry.

After decades of selling their products offline, Matahari finally launched its online store on February 25, 2015 under the name MatahariMall.com.

In the first time, MatahariMall’s future looked promising. Because, in just six months they have been able to serve around 200 thousand customers per day.

Not only that, even MatahariMall’s parent company, Lippo Group, has prepared funds of six trillion rupiah to develop this platform.

However, unfortunately the story of MatahariMall did not end perfectly. At the end of 2018, this online store officially closed and was later merged with Matahari.com.

What caused the failure of MatahariMall.com?

The founder of the Lippo Group, Mochtar Riady revealed the main reason that caused MatahariMall’s fall, namely the failure to position the business.

“MatahariMall.com forgot to position itself, whether you want to open a shop on the internet (as an online retailer) or build a market (online marketplace) on the internet. This must be clear,” he said.

Mochtar Riady also regrets that MatahariMall is too focused on developing its platform rather than segmenting the market. In fact, according to him the market should be the main thing.

2. Qlapa

Qlapa is a marketplace platform that sells various Indonesian handicrafts. This start-up was founded in November 2015.

Many admire Qlapa. Because this platform not only sells products, but also helps craftsmen throughout the archipelago to expand their market.

The achievements achieved by Qlapa are not small. In 2017, they managed to get a series A funding from Aavishkaar, a funding company from India. In addition, any Qlapa app was awarded as one of the “Hidden Gems” apps by Google Play.

However, in 2019 Qlapa had to swallow the harsh reality. The business must stop operating. This is because the management of Qlapa admitted that they “couldn’t make Qlapa a profitable and sustainable business”.

There is a lot of speculation about the cause of Qlapa’s closure. However, the most popular reason is that they are unable to compete with giant marketplaces such as Tokopedia and Bukalapak.

Why is that? Because Qlapa only focuses on craft products. Meanwhile, handicraft products are also available on a larger-scale marketplace. Practically, the value that Qlapa offers is only the quality and authenticity of the product.

Meanwhile, in terms of price and product variety, giant marketplaces are still far superior. Of course this is important to note, because these two aspects could be the reason why potential buyers leave Qlapa.

3. Blanja.com

Some of you may not be so familiar with Blanja.com. Naturally, because this one online store is not as popular as its competitors, such as Tokopedia, Shopee, and Bukalapak.

In fact, Blanja.com is the only e-commerce platform with the status of a BUMN (State-Owned Enterprise). Not only that, this online shop under the auspices of the Telkom Group also has a pretty prospective start.

Because, from the start, Blanja.com has collaborated with eBay, one of the most popular e-commerce platforms from the United States. So, Blanja.com users can buy products from eBay without having to worry about paying taxes, customs duties, and shipping procedures.

Unfortunately, the big names Telkom and eBay were not able to raise the prestige of Blanja.com. Although it experienced rapid growth in 2015, the growth of this platform looks stagnant in the following years.

As a result, they become less competitive with other e-commerce platforms. While many online stores experienced a surge in visitors at the beginning of the pandemic, Blanja.com did not feel it.

For comparison, in the second quarter of 2020, the number of monthly active users of Blanja.com was only 945 thousand people. Meanwhile, the number of active Tokopedia users reaches 90 million people per month. Far away, right?

After much consideration, Telkom finally closed Blanja.com at the end of 2020. This decision was taken because management wanted to focus on the B2B (Business-to-Business) market rather than the B2C (Business-to-Consumer) market.

According to them, the profit in the B2B market is much more potential than the B2C market. Because in the B2B market, they only need to compete with platforms that are not too large in scale, such as Bhinneka, Ralali, and Mbiz.

Meanwhile, if they persist in pursuing the B2C market, they will have to compete with e-commerce giants such as Tokopedia, Shopee, and Bukalapak.

7 Trouble That Cause the Businesses Fail to Switch Online

After seeing the three cases above, you are certainly aware of how complex and diverse the problems are that every business faces in the digital world.

Starting from unclear business goals, unattractive value proposition, to the inability to compete with competitors.

But that’s only part of it. There are still other issues that businesses interested in moving online need to be aware of. Here are some of them:

1. Have No Clear Goals

Perhaps you are thinking, where is there a business that turns to online without having a clear goal?

Well, logically, every business that switches to online must have a purpose. Examples such as reaching a wider market or maybe increasing the credibility of the business.

But, has the goal been planned in detail?

This is important, because the goals you set will affect your business decisions in the long run.

If it is not carefully planned, of course you will find it difficult to determine the direction of your online business going forward.

For example, MatahariMall. They do not set clear business goals. Thus, it is difficult to decide whether the platform will continue as an online retail platform or an online marketplace.

If it continues as an online retailer, MatahariMall will sell the exact same products as its outlets. Meanwhile, if they become an online marketplace, it means that they will become a free online market platform like Tokopedia or Shopee. Well, this is a difficult decision for MatahariMall management to make.

Solution:

So that your business doesn’t lose its way, here are some things you must plan before going online:

  • The ultimate goal of going online – For example, do you want to build the best ecommerce platform in a particular industry? Or do you just want to build a customer community?
  • Owned resources – Does your business already have the human resources and infrastructure to support the process of going online?
  • Business model – What business model will you use when you go online? Is it B2B, B2C, or some other type of business model?

After planning all these aspects, it’s a good idea to also prepare a map for the development of your digital business going forward.

That way, you can plan the steps that need to be taken so that your online platform can continue to grow.

2. Not Ready to Go Online

“Come on, going online is easy. All you have to do is just make a website and social media accounts, then you’re done!”

In fact, going online is that easy. However, building an online platform without knowing how to use it is like buying a car without learning to drive first.

The proof, based on research, 44% of business people who turn to online admit that a lack of skills and knowledge of digital science can hinder their business success.

That’s why you need to add insight before going online, especially about digital marketing. Why is that?

Because, after studying digital marketing, you will understand various methods to make your business successful in the digital world. Examples such as:

  • SEO (Search Engine Optimization) – Increase your website ranking in search engines. So that your business can be found by many people.
  • SEM (Search Engine Marketing) – Advertise your website on search engines.
  • Social Media Marketing – Promote your products and business via social media.
  • Email Marketing – Using email to promote a product or build a business reputation.

Solution:

Start exploring insights about digital marketing. Whether through blog articles, YouTube videos, or online courses.

Examples such as Niagahoster Course. This e-learning platform is provided by Niagahoster for users who want to learn more about websites and digital marketing.

Some examples of materials that you can find in the Niagahoster Course are: How to Create an Online Store with WooCommerce, SEO for Beginners, and Facebook Ads for Beginners. In addition, there are many more materials that you can enjoy.

3. Not Understanding Consumers

MatahariMall failed because it was more concerned with platform development than market segmentation.

Meanwhile, Qlapa is unable to maintain its business because consumers prefer to buy products on competitor platforms.

Therefore, when you decide to go online, don’t just think about developing the platform. Make sure the platform is also really able to meet the needs of consumers.

Solution:

One of the best ways to understand consumers is to create a buyer persona. In short, a buyer persona is a profile picture of your target consumer.

After creating a persona, you can understand the various problems facing your target consumers and offer better solutions for them.

For example, Jakmall is an e-commerce platform that is quite popular among resellers and drop shippers. Because, Jakmall is aware that the majority of buyers on their platform are people who are looking for competitively priced products to resell.

Fortunately, they understand the characteristics of their consumers. That’s why they focus on offering the lowest prices. Not only that, they also often offer people to become drop shippers through their affiliate program.

Imagine if Jakmall didn’t understand what consumers wanted. They could be wrong steps in running the marketing. They may also be confused about determining the competitive advantage of the platform.

Well, after offering what consumers want, is everything done?

Of course not. You still have to keep an eye on the trends in the market. Because market demand will continue to change from time to time. And you have to be ready when things change.

So, how to check the trend development in the market? You can use Google Trends. This tool can show search trend graphs from various industries. So, you can monitor what your target consumers want.

By continuously monitoring consumer demand, you can grow your market while retaining customers. For example, as done by Shopee.

They know that their platform is more attractive to women. Thus, they become more focused on offering beauty and fashion products. As a result, a Snapcart survey in 2020 showed that 77% of women are more interested in shopping at Shopee.

In addition, so that users do not get bored, they also develop strategies so that their application users can feel more comfortable on the platform. One of them is by introducing the Shopee Tanam and Goyang Shopee features.

This strategy also reaped positive results. Because research shows that Shopee Tanam and Goyang Shopee are the most recognized and preferred e-commerce features in Indonesia.

You can apply this method to your business as well. Make sure you always identify consumer desires, and develop new strategies that can keep your customers afloat.

4. Online Marketing Is Not Well Planned And Executed

Okay, now you have a clear goal of going online, you’ve learned about digital marketing, and you also understand what consumers want.

But, your business still has not succeeded in achieving the target profit from online marketing. What’s the other problem?

As it turns out, your online marketing campaign has not been executed properly. To overcome this, you need to do more detailed planning. That way, the chances of failure will be less.

So what do you need to do to create a better online marketing plan?

Solution:

In order for your marketing campaign to be well-planned, you can follow these steps:

  1. Set your marketing goals – Do you want to increase brand awareness? Increase the number of sales? Or expand market share?
  2. Take advantage of the sales funnel – The sales funnel is a model that can explain whether consumers are still in the “not familiar with your product” or “want to buy your product” phase. This is important, because each phase requires a different marketing strategy. Click this article to learn more about the sales funnel.
  3. Choose a marketing channel – Use a marketing channel that fits the marketing objectives and sales funnel. For example, if you want to strengthen relationships with consumers who already know your brand, then the right channel is email marketing. Because, this channel allows you to connect and interact directly with them.
  4. Define the marketing period – When do you want to run the marketing campaign? Set a deadline, so that progress can be more measurable.

After that, all you have to do is execute your online marketing plan. Don’t forget to monitor the performance of your marketing campaigns from time to time.

5. Out of Funds

Well, this problem is usually experienced by businesses that from the start have set a high budget for online marketing.

In fact, an effective marketing campaign is usually the result of trial and error. It takes time to improve the effectiveness of his marketing campaigns.

Therefore, make sure you do testing first before spending a lot of money on online marketing.

Solution:

Let’s take an example. Suppose you have funds of five million rupiah for advertising costs on Google. Before releasing the ad, you need to experiment first to make sure that the targeting is correct and able to provide maximum profit.

In addition to testing, another solution that you can try is to use free marketing methods such as SEO and social media marketing.

If you are interested in learning about SEO and social media marketing, Niagahoster has what you need! Because, on Niagahoster blog you can visit a complete guide to SEO and a complete guide to social media marketing.

6. Less Attractive Value Proposition

Are you not familiar with the term value proposition? So, the value proposition is the value or benefits that the company offers to consumers.

Here are some examples of value propositions from various industries:

  • Travel agency – Providing an unforgettable traveling experience at an affordable price.
  • Culinary business – Serving the best taste, accompanied by an attractive view.
  • Laundry business– Making all your clothes clean and fragrant plus free delivery.

Every business must have a value proposition. However, is the value proposition offered attractive and in accordance with consumer interest?

For example, Qlapa. Initially, they had a fairly strong value proposition, namely as an online shopping center for handicrafts in Indonesia. However, as time goes by, their value appeal is fading along with the increasing dominance of competitors.

Solution:

To make your product more attractive, you need to adapt its benefits to the interests of consumers.

That’s why the best time to design a value proposition is when you create a persona.

Because, you can directly match the benefits of your product with the problems faced by consumers. For example, suppose consumers want products that are more affordable, then you can offer product options that are more economical.

Well, one of the best tools for designing a value proposition is the value proposition canvas. With this tool, you can identify the best solution to solve every consumer problem. Thus, the value offered becomes more attractive.

Well, even though you’ve found the right value proposition, make sure you continue to evaluate the value proposition you offer. Is the value still relevant to today’s consumer needs?

If not, you can readjust the value to the needs of consumers. For example, suppose you previously sold large portions of instant noodles. But since today’s consumers prefer smaller portions, you can offer smaller portions.

7. Unable to Compete

When you read the stories of MatahariMall, Qlapa, and Blanja.com, you must have found the same pattern, right? Yes, all three are equally unable to compete with their competitors.

This is natural, because when a business enters the industry, they not only face businesses of the same level, but also businesses of a larger scale.

Therefore, before turning to online, it’s a good idea to identify your business competitors first. So, you can position your business appropriately in the competitive map.

Solution:

First of all, find out who your business competitors are. For example, suppose your business is in the mineral water industry, then you must know what businesses are in the same industry.

In essence, what falls into the “competitor” category are businesses that target the same consumers as your business.

So, your competitors are not only businesses that sell mineral water, but also businesses that sell other types of beverages, such as milk, tea, or juice. Because all these products are equally sought after by consumers who want to buy beverage products.

After knowing who your business competitors are, do an analysis using the SWOT technique (Strengths, Weaknesses, Opportunities, and Threats):

So, with a SWOT analysis, you have to identify four aspects:

  1. Strengths – What internal advantages does your business/competitor have? Examples such as advanced technology to produce mineral water that contains many elements that are good for the body.
  2. Weaknesses – What are the internal weaknesses of your business/competitors? Examples such as product packaging that is less attractive in design.
  3. Opportunities – What are the external factors that can be an opportunity for your business/competitors? For example, the increasing trend of purchasing mineral water from year to year.
  4. Threats – What are the things that threaten your business/competitors externally? For example, there is a shortage of spring water sources to produce high quality drinking water.

After doing a SWOT analysis, here are examples of strategies you can practice:

  • Ensure the strength of your business remains consistent over time.
  • Exploiting competitors’ weaknesses. For example, suppose a competitor’s weakness is product packaging that is less attractive, then you must ensure that your product packaging is more attractive than theirs.
  • Take advantage of opportunities. For example, making advertisements with the theme of healthy drinking water to respond to the increasing search trend for health drinks.
  • Avoid threats. For example, when the issue of groundwater exploitation is strong, you can use it as an opportunity for branding. For example, by proving that your business complies with water resources management standards.

By designing a strategy, your business’s chances of survival will be better. This will certainly affect the sustainability of your business in the industry.

Are you ready to Go Online?

Now you know how to overcome various problems that often haunt business people when they want to switch to online.

Apart from implementing all the solutions above, you also need to make sure that your online platform is ready.

So, make sure you build a stable, fast, and secure website for your business.

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