By Hugho Deogratius

What Are the Challenges of an Online Business?

The advantages of having a small online business range from lower start-up costs than brick-and-mortar operations to more streamlined administration. But successfully running an online business is far from easy. In fact, according to Business Matters magazine, 90 percent of online businesses fail. By completing a few fundamental aspects of business planning, you can boost the chances that your venture ends up in the successful 10 percent.

Finding a Niche

The Internet is a competitive marketplace, where only some ideas enjoy long-term success. Competing with Internet giants such as Amazon and eBay in certain sectors or entering markets where your potential consumers still prefer to try-on or sample items in person requires identifying a viable niche and positioning the product well. Online hair accessory retailer Stone Bridge, for example, targeted a specific and lucrative luxury market and chose a product that, unlike woman's clothing, many consumers feel comfortable buying based on online images and descriptions.

Technology

Just as customers are unlikely to frequent a bakery with a leaky roof or awkward business hours, online consumers will avoid websites that experience frequent outages or don't provide adequate security for purchasing. Investing in reliable servers and security options -- as well as continuously updating your technology to address the newest threats -- is vital to establishing a strong online brand and maintaining consumer confidence. Online security breaches can wipe out a small company, with cleanup and lost business representing an average loss of "more than $200 per compromised record,"

Logistics

Even if your business exists in cyberspace, your customers will expect real, tangible goods and services and you will want real, usable money in return. Making your digital business valuable for you and your customers in the real world requires that you think through and invest in ways to transfer payments easily, receive and ship goods; provide customer service; and stay on the right side of legal issues such as taxes, copyright restrictions and import tariffs. Returning to the example of Stone Bridge, the site's owner, Melisa Hill, told The Telegraph newspaper in 2009 that one of her first and most difficult problems was lining up suppliers.

Marketing

Internet marketing, including everything from email blitzes and social media campaigns to website copy, is a highly technical and competitive space. The Internet offers the possibility of reaching a huge, global customer-base, but also the danger of wasting your content and budget on people with no real interest in your product. Particularly as the Internet marketing space grows year by year -- up 16 percent to represent nearly 20 percent of global advertising spending in 2012 according to Group M -- crafting a cost-effective and targeted Internet media campaign proves vital to the success of small online businesses.