Online Stores That Failed (and Why)
Miguel Nicolás
08/10/2024
-
Today we are going to learn about eCommerce by going through lessons learned from online stores that failed.
-
-
We often talk about eCommerce success stories. It is natural to be drawn to businesses that have found the perfect product or winning strategy, as these stories inspire and open our minds to new ideas for our own ventures.But what about “failure stories”? I believe they can teach us just as much, if not more, than those that have succeeded.That is what this post is about: online stores that failed and why they did.
-
Fail Fast and Fail Cheap
-
This phrase has become practically an axiom among entrepreneurs. Anyone who has tried starting a business will quickly understand its meaning. It is incredibly difficult to get everything right on the first try, so if the project is going to fail, it is better not to have invested a lot of money, resources, or time (as you will see from the examples below, this was not the case).The phrase is quite graphic, but I would add a little twist: “Fail fast, cheap, and learn from it.” The best lessons, the ones we really internalize to avoid repeating mistakes, come from failure. And if we can learn from others’ failures, even better.
-
3 Online Stores That Failed and Why
-
Strategic mistakes, miscalculations, poor planning, overly optimistic forecasts, market conditions... there is so much to try to control and prepare for.Below, you can dive into these cases and examples. Let’s get right to it.
-
#1 – Fab
-
In 2011, eCommerce was just beginning to show the revolution it would be for online stores. Then came Fab, which started as a gay dating app and became an online store offering (very) aggressive flash sales of fashion products for men and women.It is also important to highlight another aspect of their business model: initially, you had to subscribe to access private sales.This idea and model had many positives. For example, they were among the first to push for the integration of eCommerce with social media (strongly focusing on Facebook and Twitter from the start).In a record time, Fab gained one million subscribers in six months and was valued at nearly $1 billion. And yet... it failed.Reasons for Fab’s failure:
- They failed to protect themselves from blatant copies of their business model or at least keep a unique value over competitors.
- Unsustainable growth, as they acquired several companies to expand, particularly internationally, without a clear plan.
- Huge investment in customer acquisition (over $35 million) with little focus on retention.
-
Conclusion: Even successful businesses must continue evolving to minimize risks. If you cannot retain your audience with an attractive value proposition (price, exclusivity, convenience…), someone else can take your place in customers’ preferences.
-
#2 – Juicero
-
Juicero ticked many boxes for success: offering an electronic gadget with good design and a healthy product… but it did not work.Basically, they sold pre-packaged bags of washed and cut fruits, designed to make juice using a smart, Wi-Fi-connected juicer, which could also be purchased in their online store.In some way, they tried to replicate the business model behind the highly successful capsule coffee machines.Reasons for Juicero’s failure:
- The idea of selling pre-prepared fruit was good, but it only worked with a juicer that cost nearly $700—a steep initial barrier.
- The juicer only worked if connected to Wi-Fi and scanned a QR code on each packet. In other words, it did not work offline.
- Each packet of pre-prepared fruit cost between $4 and $7 and was only compatible with the Juicero juicer (or so they claimed, but it was demonstrated that you could get the same juice by squeezing the packet with your hands).
-
-
Conclusion: On paper, a project where you sell a device (high one-time purchase price) and the consumables (recurring purchases that foster loyalty) is a good idea. But make sure you are offering something that truly justifies its price and value because customers are more discerning than some may think, and they will do the math quickly—especially when a less “sophisticated” juicer costs one-seventh of the price on the market.
-
#3 – Spoonrocket
-
Healthy food, prepared by chefs, delivered to your door, ordered through their online store or app, and delivered in special packaging to maintain temperature, all within 20 minutes. This was essentially Spoonrocket’s offering.We are talking about 2013, so it is not exactly a revolutionary business model. Plenty of companies were offering food delivery, from local restaurants doing it independently to those partnering with delivery platforms.Reasons for Spoonrocket’s failure:
- The main issue was competition. They did not adequately assess the level and number of competitors they were facing. While their business model may have been somewhat innovative, there were others competing for the same customers through different channels.
- They neglected service and prioritized customer acquisition at any cost. Given the complicated logistics and too many customers, delivery times started to increase, and the food arrived in less-than-ideal conditions.
- They did not have a sufficiently competitive unique selling point—they were simply one of many.
-
Conclusion: Businesses like this are built on two pillars: food quality and delivery speed. If you compromise on those pillars to scale your business, not only will you fail to grow, but you will also jeopardize what you already have.
-
Do you find these stories of failed online stores interesting? Would you like a second part of this post? Just let me know!