MBA2571 Why I Quit My E-Commerce Business

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I'm your host Omar Zenholm, where I show you how to start, grow and scale a business with our practical business lessons three days a week. Monday, Wednesday, Friday. In today's lesson, I'm going to share with you why I quit my e commerce business even when it looked successful. From the outside, E commerce can look like a dream business. The sales, the products, the growth potential. But my journey with Zenob Design taught me some hard truths about low margins, endless headaches, and why e commerce isn't as scalable as it seems. Let's dive into the lessons Right now. The first thing I want to do is share with you what was the reality of my e commerce business When I started Zenim design back in 2009, I was excited. I was so Happy that I have a product that people love, that people are knocking down my virtual online store doors to buy. It was high quality. It was the market leader. People were talking about it with their friends and family. Just a bit of background. We sold custom tailored clothing for men. And the reason why I got into it is because I'm 6 5, it's very hard for me to find clothes that fit me perfectly. And I was creating these products for myself, so I started to sell it for other people just like me. The website traffic was incredible. The sales were flowing in effortlessly, and at one point we had three warehouse locations delivering to over 30 countries around the world. It looked like a dream on the outside, but behind the scenes, it was a nightmare. Here's a little secret. Sales doesn't mean success. Profit does. So why did I quit? Here are the reasons why I decided just to walk away from this business. Number one, low margins. Now, if you've been following my work for some time and listening to this podcast for years, are a member of the 100 MBA. You know how much I talk about how important margins are. And the reason why I do that is because I learned that the hard way through this business. Okay? The cost of materials, manufacturing, shipping, warehousing, picking and packing, the amount of money it costs to just run the business was absolutely insane. And I had a fairly simple e commerce business. And when you have high costs, it eats up most of your revenue. I was selling a lot, but I wasn't keeping much. For example, I remember the day when I actually ran the numbers and did the math and it was kind of the moment I realized, I don't want to do this anymore. And I broke it down and found out that for every hundred dollars my customer would spend, I would keep $10. I mean, I'm laughing at it, but who would take that deal? It's not sustainable. When you factor in time, effort, resources to run the business. 10% profit margin, that's really bad. You know, if I made $100,000 in sales and I only got to keep $10,000, that's just really sad. The second reason why I quit this business was lots of, lots of headaches. Running an e commerce business seems simple. It seems pretty easy because we buy products all the time, so we think selling them won't be that hard. But there are a lot of headaches that people don't talk about. I'm talking about things like juggling inventory and making sure that you have enough inventory but not too much inventory so that you're wasting money. We're talking about dealing with suppliers that really don't care about your margins or your business or your customers. They're just trying to make sure that they're staying ahead of their business, right? Logistics, customer, customer service. I can go on and on, but I'm starting to get heartburn. One mistake that happens, like a shipment delay or a defective product because the person that's manufacturing your product, you know, skipped the beat or something like that, it could wipe out weeks of profit for you. One small mistake. The third reason why I quit my e commerce business was that it was hard to scale. Scaling meant investing more inventory, more warehouse space, more staff, more. But here's the kicker. The upfront costs are massive when it comes to these things. The risks are multiplied every time I add a layer. And when you factor in you're making 10% net profit margin, you don't have enough money to reinvest. By the way, net margin and gross margin are different. Gross margin is how much money you make off the cost of the actual good to fulfill that product or fulfill that product to the customer. So, for example, if it cost me, you know, $10 to make this notebook and I sold it for 15, margin is $5. But that's just the gross margin for selling this one notebook. Okay, but it's not factoring in all the other operating costs to run your business, like your warehouse costs, your staff costs, your Internet bill for your office, whatever it is, right? That's net margin. Fourth reason why I quit on this business. Too many things can go wrong. Listen, when you're selling a physical product, there are so many things that are out of your realm of influence, and therefore, so many things can go wrong. We're talking about manufacturing errors, we're talking about supply chain issues, even things that you don't even consider, like tariffs and shipping delays. They constantly disrupt your business and constantly disrupt your quality or your consistent quality that you want to offer the customer. At this point, when I was starting to realize these things in my E commerce business, I realized I was working harder and harder for smaller and smaller returns. I love the saying, don't let a good crisis go to waste. So I learned a ton from this business. I absolutely hated. So much that I'm sharing it with you here publicly on this podcast. And here's the thing. Walking away from Zenum Design wasn't easy, but it was the best decision I ever made. Here's what I learned. First thing I learned is that profit margins are not the most important thing. They are everything. Okay? A business without healthy margins is like a car without gas. If you don't have it, you're going nowhere.

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Number two scalability matters. I want a business that grows without needing exponential increase in resources. And when I say resources, I'm also talking about not just money but but energy and attention and time. E commerce is way too resource heavy to scale effectively. Number three, Digital products are king. They are absolutely one of my favorite business models selling digital products. Products like courses, software, memberships, coaching programs. They have low overhead and high margins and they're easy to scale and can scale infinitely. When I started to focus on digital products like Webinar Ninja, my software product that I built for 10 years for over 30,000 users and recently got acquired. And this business, the Hundred Dollar mba, everything changed. No warehouses, no shipping delays, just value delivered instantly at high profit margins. It's a win win for me and the customer. So why am I a big believer of digital product businesses? Why do I teach other people to build businesses around digital products? The answer is pretty simple. They are a high value business that increases the likelihood of success for you and your customer. So let me break that down. Today I only start or invest in or work on or coach people to build businesses around digital products. That's it. Well, you might be asking why Omar? Why are you so passionate about this? Why you are a big believer in this? Why won't you back a E commerce business, invest in one. And I'm going to break it down for you. Digital products are just superior and we talked about High margins. That's the first reason why I really believe in these products. Because once you create a digital product, every sale is almost pure profit. I have a friend of mine, Michael Maidens, who's one of the best people when it comes to product launches, and he says once you create your product and sell it it once every customer, after that you're basically selling logins, okay? You're selling the ability for them to log into your community, to your course, to your product, to your software, whatever it might be. So it's pure profit. This is not the case in most businesses. This is not the case with physical product businesses. Every time you want to sell a product, there's a cost involved. Number two, scalability. Whether you sell 10 or 10,000 copies of your ebook or your course or your software subscription, the cost doesn't skyrocket, right? You're not going to have to pay that much more to have thousands and thousands of customers versus hundreds of customers. There will be some costs, especially for infrastructure on software products and things like that, but it's nowhere near as much as this cost it would be if it was a physical product that you have to deliver to a customer. Number three, less stress, more freedom. Digital products allow you to focus on building value for your customers and not fixing annoying logistical nightmares. Okay? What I love about digital businesses is because there's less headaches and less problems. It gives you time to think creatively. It gives you time to think, period, okay? For you to improve yourself, to read a book, to contemplate, to reflect, to come up with creative solutions to your customer's problems and deliver that solution to them in a beautiful way that makes their life easier. And you don't have the bandwidth to do that when you're spinning so many plates with a physical product business like an E commerce business, let me tie this up in a bow for you. Walking away from Zenum Design taught me a valuable lesson. Just because a business is growing doesn't mean it's worth keeping. The goal isn't just sales, it's profit. It's scalability, it's freedom. That's why I've dedicated my career to digital products. If you're thinking about starting a business, ask yourself, Is this scalable? Are the margins healthy? Will this give me a life I want? Three important questions, so important I'm going to repeat them. Is this scalable? Are the margins healthy? Will it give me the life I want? Be honest. Thanks for tuning into the $100 MBA show. If you found this episode helpful and you want more practical business lessons to help you start, grow and scale your business. Just hit subscribe on whatever podcast app you're listening to like Spotify or Apple. Just hit subscribe or follow. And if you are watching on YouTube, go ahead and subscribe as well. And if you're on YouTube right now and you're watching this video, pop in the comments below what your number one takeaway was. I want to hear from you so that way I can make sure I deliver high quality lessons that help you on your journey. As an entrepreneur. I learned the hard way. It's about working smarter, not harder. I'm Omar Zenom and I'll see you in the next episode.

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