This article has been contributed by Nupur Thakkar, Founder & Director, Fugeno.
In today’s digital age, e-commerce platforms appear to be the major visibility for startups aiming to launch their businesses successfully and generate revenue. With promises of vast reach, customer engagement, and exponential growth, many entrepreneurs rush to list their products on these platforms, expecting quick results. However, the reality is the opposite. For startups with limited budgets, e-commerce platforms often become an endless money pit without having returns.
1. Pay to Play – Without Money, No Visibility
E-commerce platforms are designed to prioritize businesses that spend extensively on their internal advertising and promotional campaigns. If you don’t allocate a substantial budget towards their paid marketing, your products will hardly get noticed. Organic visibility is almost non-existent, and even when your product is listed, it gets buried under a sea of competitors who are willing to spend more. Simply put, if you don’t pay, you don’t get seen. For startups, it has to be free for some months until they get good visibility as that’s the only option helping the economy of startups.
2. High Spending, Low Returns
Many startups enter the e-commerce space with a limited budget, expecting to generate some organic traction before scaling up. However, they soon realize that despite spending a significant amount on ads, they aren’t generating enough leads or conversions. The customer acquisition cost (CAC) is so high that even if they make sales, their profit margins shrink drastically, making it difficult to sustain in the long run. ROAS for startups are like 0.44 with no gross profit even! What will be the solution for this?
3. No Guarantee of ROI
Spending money on an e-commerce platform doesn’t guarantee a return on investment (ROI). Many businesses pour funds into advertising, only to see little to no increase in orders. The platforms encourage higher spending with the promise of better exposure, but often, the returns are not proportional to the investment. This harsh reality leaves startups struggling to recover even their marketing expenses, let alone make profits.
Dev Gupta
4. Competitive Saturation
E-commerce platforms are flooded with thousands of sellers offering similar products. As a startup, unless you have a highly unique product or an exceptionally strong brand identity, competing against established sellers with deeper pockets becomes almost impossible. Larger brands dominate the space due to their ability to outspend on promotions, leaving small businesses struggling to make an impact. However, you’re having good and unique product range, you are not able to make your space because you don’t have that money. There is no point starting any startup if you do not have money from scratch.
5. Platform Fees and Hidden Costs
Apart from advertising expenses, startups also have to bear platform commissions, transaction fees, and logistical costs. These hidden expenses further eat into the already-thin profit margins. Many new businesses assume that selling online is cost-effective, but when all these additional costs pile up, they end up making little to no profit. The only way to cut this down is to have your brand stall in some fest or event and sell your product where you see good footfall of people, that will generate your net profits too along with discounts.
6. Limited Control Over Customer Data
Unlike running an independent online store, selling on e-commerce platforms means you have little to no access to customer data. This restricts your ability to build direct relationships, retarget customers, or create personalized marketing strategies. The platforms own the customer base, making startups dependent on their system, which is already stacked against them. You will get some orders from selected cities like Karnataka, Hyderabad, Karnal and some places you have never heard of! It’s like they generating orders because you have put money on their campaigns so that you feel it is working. It doesn’t seem like genuine people orders. Nowadays, fake review services are also there and even Amazon does it for their brand. It’s all fake made out of money.
Conclusion: Is E-commerce Worth It for Startups?
While e-commerce platforms provide access to a huge marketplace, they are not as startup-friendly as they seem. Without a substantial advertising budget, visibility is minimal, and even with heavy spending, there’s no assurance of success. Startups need to carefully evaluate their options and consider alternative strategies such as building their own website, focusing on social media marketing, creating their own people community or exploring niche marketplaces where competition isn’t as fierce.
For those looking to enter the e-commerce space, understanding these harsh realities beforehand can save them from financial strain and disappointment. Instead of blindly investing in major e-commerce platforms, startups should focus on sustainable growth strategies that allow them to build a brand without burning through their budget with little to no returns. Start building your community from your friends, family, colleagues, etc. you have to make real people community which re-buys your products.
Building community and leads from online or E-com platforms are bullshit now a days.
Arbaz Sayed
