How I Built an Unsuccessful Online Business
This is part 1 of what will be a series of About Me essays describing my past, and current business experiences. This first entry will be about how I built an unsuccessful online clothing business.
I feel like these days you hear a lot about new tech companies springing out of nowhere and making it big. These kids, not even out of college and some dropping out only to code their way into fortunes reaching the millions.
I wanted a part of that, and this was my first attempt.
I had always loved tinkering with computers. I’d built websites before, I knew html. I even helped the high school computer teacher teach his class. It couldn’t be that hard right? I thought so.
I was doing a study abroad in Taiwan. Keep in mind, I call it a study abroad- but it was more like a get-out-of-school-but-not-really vacation for over a year. Anyways, I loved Taiwan. I had family there, and cost of living was cheaper than in the U.S., so why not?
It was there that I learned about clothing, and markups. There was a great ‘fashion’ district where you could go to get fashionable clothing at a cheap price. Not only that, but the quality of many of the clothes could rival, or even best that of some larger U.S. retailers.
I didn’t know very much about business, but I did know that if you wanted to sell, or resell, you had to have a supplier who could get you a product at a good cost. If I had that, then I could provide clothes at a slightly higher price and BOOM! Profit. At least, that’s how it worked out in my head.
I went through my year-long study abroad, keeping this idea in the back of my mind. Once I got back to Ohio, I set about learning all I could about business by seeking advice from exactly zero real live entrepreneurs. Google was my mentor, and decade old website building skills would finally be put to good use. On paper my business plan looked sound. I would know since I had a small business banker look it over. He told me it looked good, the numbers ‘matched up’ and that he’d call me.
He never did. Though, in retrospect it might’ve been because I had just graduated and hadn’t accumulated any of the assets or collateral that you want to have when asking for a loan. In my defense, I really only asked him to review my business plan, and said I did not want to apply for a loan. Whatever, I was going to be an entrepreneur, and no one would stop me now.
I filed my business licenses through the Secretary of State and tucked away my certificates. This was some precious stuff, and was my proof that I now owned a real business. I had my website built, and my LLC established. Now it was time to get some inventory from across the pond.
So, here’s where it got exciting. I went ahead and placed an order for inventory that I thought people would want to buy. Since it was an online business, people from all over the U.S. would have access to what I was offering, so there was definitely an audience waiting to buy.
I had done my marketing research exclusively through google. Friends and family had always told me that I had great fashion sense, so I figured for the most part, I knew what people would want to buy. I was primarily offering fashions that were popular in Asia (Japan, Taiwan, Korea, China etc). As such, I decided that my market in the states would be people who were interested in Asian pop-culture.
I did a marketing stunt that I thought was very clever. Since my logo was a penguin, I made hundreds of origami penguins and placed them all over the local university campus. A large portion of the students there were within my target market, so they’d probably see some, and then check out the website. The results were meh.
I also felt it would be a great idea to sponsor some events from the Asian American student population. Some of them were quite taken with the idea, but again, my only assets were the clothes that I’d ordered. I was still more or less bootstrapping this thing, so I offered to provide costumes and props for shows they might have. One group took me up on the offer, but then didn’t actually request any clothing. I still got my logo and name in the event flier though. Win.
Next, I went after Facebook ads. I’d seen ads for other websites offering their clothes, so I should get to making better ads than the competition. I enlisted the help of some talented art students (who are doing amazing things now), and put together some Facebook ads for my business. The ads came out great, and boosted hits to my website by thousands in just a day. Win number two.
Being the super entrepreneur that I was, I felt like this would be enough marketing. Plus, it had been about one year since conception by this point, and I had to get a ‘real job’ to keep my startup funds coming in. Besides, the sales should start coming in any time now.
All told I could count the number of sales that were made on my fingers. Not the amount of sales from the days when I was running ads. I mean total sales. It probably didn’t help that once my job started, I was only devoting a few hours on the weekends to thinking of marketing ideas and ways to increase exposure. And by thinking of ideas, I mean just that. I’d think of ideas, and maybe implement one or two, but nothing major. When I decided to really face the status of my company, the results were, for obvious reasons, quite dismal. I’d had a grand total of 4 sales in the previous year, two of which were from a friend and a family member.
Not. a. win.
While the inventory was inexpensive, I had still sunk thousands of dollars into these clothes that nobody was buying. I had this website, a mountain of clothes, and virtually no sales. That just didn’t add up. Maybe my audience needed more selection from the website, so I’d order different inventory. Maybe they needed different display photos. I had been using clothes against a white backdrop, then got mannequins, and finally tried using good-looking live human models. No dice.
I’d invested 2+ years of my time and a few thousand dollars, into what amounted to a mediocre clothing website that beautifully displayed clothes but generated no sales.
I decided that I could either keep trudging on, or I could take a step back and re-evaluate the direction that I wanted to take moving forward.
One of the reasons I didn’t cut it off sooner, I believe, is because whenever I would talk to people about what I did, it felt really good to say I had an online business that generated money while I slept. Throughout all this I continually ate up stories of people who started their business with just a bit of money and were earning 6 and 7 figures a year. I tried to pretend I was one of those guys, living the easy life, not spending flamboyantly, but not grinding hard at a 9-5 (which I was), but coasting on the back of this awesome online company that I wished I’d had. Keeping up appearances cost me thousands of dollars. Now I’m able to say that it was a business education that I spent a few thousand on, no big deal.
It wouldn’t be for several more years that I’d learn that the business model that I was attempting is called drop shipping. I’d learn that I wouldn’t have to go to an Asian country to locate good suppliers, and that there were far, far easier and less costly ways to go about it. Also maybe not dragging the business for years while not making sales is probably a good idea.
Don’t get me wrong, at the time I was actually investing a lot of my time into research and actually developing what I thought would be a good business. I became attached to this thing that I had created, and felt that if I could only approach it differently, then things would turn around. I wasn’t making any money, but I also couldn’t bring myself to admit that it was a failed venture.
One of my biggest problems early on was that I didn’t seek out advice from any other entrepreneurs. We all stand on the shoulders of giants, people who’ve gone down the path where we want to go. It doesn’t make sense to try and rebuild the wheel when we could just ask how they built theirs. Well, I tried to build a wheel and ended up with a square cement block. Go figure.
Another point that I’d learned is that I started the company purely because I wanted to make money. Literally one of the first things I thought when I noticed the price of the clothing was “Man this is cheap, I could sell this for 3x this price and it would still be cheaper than the competition!”. I didn’t consider that maybe I wasn’t filling a need that the market wanted, and wasn’t adding value to anyones life. I was definitely adding to the clutter of other clothing sides that are already out there. I should note that the website that I had made wasn’t a whole lot different from comparative sites, I didn’t have any real unique selling propositions, and my prices were swiftly beaten by competition. I might have talked up a good story when speaking about my business, but really it was started for some pretty selfish reasons.
My market research was based on what I’d learned in marketing in college. Suffice it to say, much of what I’d learned wasn’t entirely applicable to starting a company and marketing yourself. I didn’t learn what my prospective customers wanted, and thus couldn’t give it to them. I very much incorrectly assumed that what I thought was good, was what they wanted. Wouldn’t recommend that in future endeavors.
I also didn’t have a plan to generate sales. I had never had any experience selling something. None of my prior jobs had required me to convince anyone to buy something, much less plan out how to acquire and sell inventory online. When the sales weren’t coming, I honest to goodness didn’t know what to do. I just figured ‘Hey! More marketing oughta do it!’. When that didn’t generate sales, I just spent more on inventory.
It’s a good idea to have a plan to generate sales. This plan should be contingent on your market research, learning all that you can about your audience. What they want. How they buy it. How much they spend. How often they spend. Why they spend. You should be very familiar with all or many of these before you even launch. Of course, I did none of those things, hence my awesome results.
Some things I got from that first entrepreneurial flop:
- Ask your audience what they want.
- Give them what they tell you that they want.
- Don’t reinvent the wheel. Do ask for advice and direction.
- Don’t be afraid to let go what doesn’t work.
Probably the most important thing that I learned was that a business does best when it’s designed to serve. We all have interests that could make amazing business ideas, and theres almost always a way that you can use it to genuinely benefit the lives of your customers. When you provide genuine value, it becomes a no-brainer for them to buy, and you have a win-win.
This first run did feel a bit like an embarrassment, I didn’t want to admit that it existed for a long time. But you know what else is an embarrassment? A group of cute and cuddly pandas. See? Now it feels adorable. (note: a group of pandas is called an embarrassment)
With that said, in the next About Me essay will describe how I botched my second online clothing company, but in a perhaps less intense way.
Did you like the content in this post? Tweet me @alexyounglive or shoot me a note here. I usually respond within 24 hours. Thanks for reading!