Looking to understand why ecommerce stores fail?
It’s not marketing. It’s not lack of traffic.
Almost every ecommerce store fails because they don’t have the operational foundations they need.
SEO. Paid ads. Social media.
Everyone’s screaming about those topics. What no one’s talking about is…
The ugly backend stuff.
Processing payments. Compliance. Fraud prevention.
Here’s the problem:
You can have the greatest marketing strategy in the world.
But without operational infrastructure, your ecommerce store will likely go under.
So what do you learn today:
- Why Operational Foundations are More Important Than Marketing
- Why Payment Processing is Commonly Overlooked
- How Chargebacks Can Ruin Your Ecommerce Store
- Fraud Prevention and Compliance Best Practices
- How To Build Your Own Operational Strategy
Operational Foundations: What Matters More Than Marketing
Did you know that roughly 80% of ecommerce businesses will fail within two years of opening?
Most people blame poor marketing strategies. But ecommerce statistics reveal operational difficulties and razor thin margins are what actually kill most stores.
Think about it this way.
Traffic doesn’t matter if your ecommerce operations can’t convert that traffic into sales.
Whether it’s a broken checkout, unreliable payment processors, or the inability to provide refunds… if your ecommerce operations can’t get things done your marketing efforts are useless.
Operational foundations include topics such as:
- Payment Processing Optimization
- Chargeback Protection
- Fraud avoidance
- Compliance
- Appropriate legal structure setup
Yeah…not sexy stuff. But oh so important if you want your ecommerce store to stick around.
Payment Processing: The Problem Ecommerce Stores Often Ignore
Let’s talk about something every ecommerce store owner should care about but hardly ever does until it’s too late…
Processing payments.
Payments are the lifeline of any ecommerce business.
Without the ability to accept payments, your store doesn’t make any money.
Most ecommerce businesses tend to overlook payments and assume that it’ll “just work”. But consider this…
Your ability to process payments can be suspended at any time.
Payment processors like Stripe, PayPal, traditional merchant accounts; they all have rules.
When those rules are broken, payment processing gets suspended.
No payment processing = No sales. Game over.
When Your Merchant Account Gets Suspended…
This is especially important for new stores who don’t know how easily an ecommerce merchant account suspension can happen. Knowing What To Do If Your eCommerce Merchant Account Gets Suspended can be the difference between a temporary setback and a permanent shutdown.
Every ecommerce store needs to fully understand their payment processor’s terms and conditions. Prevention is ALWAYS better than trying to fix a suspension.
Want some examples of common merchant account suspension reasons?
- High Chargeback Rates
- Illegal Products
- Abnormal Sales Spikes
- Incomplete/Incorrect Application Documentation
Yep. They’re not fun topics to think about. But ignoring them won’t make the problem go away.
Chargebacks: How They Can Destroy Your Ecommerce Business
Speaking of chargebacks. Did you know they’re one of the scariest threats to your ecommerce operation?
Here’s why.
According to recent chargeback data, the rate of ecommerce chargebacks increased 222% from Q1 2023 to Q1 2024.
Those aren’t just arbitrary numbers. That rate increase is REAL.
And it puts your ecommerce business at risk.
Here’s what happens when your store gets chargebacks:
- Customer initiates a chargeback with their bank for a disputed transaction
- You lose the sale AND pay a chargeback fee
- If your chargeback ratio gets too high your merchant account will be flagged
- Your payment processor freezes or closes your account
Once your account is closed, your ecommerce store can’t process any payments.
No processing = No Business.
Oh and here’s another kicker…
70%+ of chargebacks are caused by friendly fraud.
That means 7 out of 10 chargebacks come from charge disputes where the customer DID receive their order. But for whatever reason, dispute the payment anyways.
Ways To Combat Chargebacks On Your Ecommerce Store
Pretty much every ecommerce store can avoid high chargebacks by following these tips:
- Display clear billing descriptors so customers know who the charge is from
- Implement simple refund/return process for customer purchases
- Send order confirmations along with shipping notifications
- Use fraud protection services to prevent invalid transactions
- Keep detailed records of all transactions for evidence
Always remember that keeping chargebacks low isn’t just ideal…your ability to processpayments truly depends on it.
Fraud Prevention & Compliance Tips for Online Stores
Fraud is coming for your store.
It’s not “if” your store will get hit with fraud. It’s “when”.
And fraud hits every ecommerce store.
The problem is, fraud can do WAY MORE than cost you sales.
Fraud leads to suspension. Preventable compliance issues. And wasted time.
Fortunately, there are actionable steps you can take to avoid fraud:
- Require AVS and CVV with every payment transaction
- Use Velocity Checking to limit rapid order purchases
- Utilise automated tools to help flag fraud in realtime
- Stay compliant with PCI standards
They say the devil is in the details.
And when running your own ecommerce store it’s important to pay attention to those small things.
Sure, compliance may seem boring and out of your control. But payment processors force these requirements… stores that fail to stay compliant WILL get penalized.
How To Build An Operational Strategy For Your Store
Ok now it’s time to wrap things up.
Here are the steps to start building your own operational strategy:
- Have multiple payment processors. If your plan A processor gets into trouble, you have plan B ready to go.
- Chargeback ratios are typically around 1%. Track your ratio monthly and keep it below that threshold.
- Invest in fraud prevention. It’s much cheaper to stop fraud before it happens.
- Document EVERYTHING. Transaction records. Communication with customers. Shipping confirmations. This is your evidence for winning chargeback disputes.
- Stay up to date on your payment processor’s terms. They’re going to change at some point. Stay aware so you don’t accidentally violate any terms.
Operational foundations can be simple. But they require your attention to details that many ecommerce business owners ignore.
Wrap Up: Why Operational Foundations Are Important
In conclusion…
Everybody loves to talk about marketing.
Website design. SEO. Social media. Newsletter strategies.
But those are the easy things.
Operational foundations are what many “overnight successes” fail to mention.
Chargebacks, fraud prevention, payment optimization.
If you want to truly succeed with your ecommerce business. You need to care about operational foundations just as much as you do about generating traffic.
They’ll keep your store open long enough to figure out what you’re selling.
