MBA2571 Why I Quit My E-Commerce Business

0:00Did you know the average profit margin in e-commerce is only 10 %? And that's if everything goes smoothly. In 2009, I started an e-commerce business called Zenom Design, selling custom tailored clothing for men. I had a ton of monthly sales, three warehouse locations, and one of the most visited websites in the industry. But you know what I didn't have? Profit. Today, I'm going to share why I walked away from a seemingly successful business and what I learned that changed the way I approach entrepreneurship forever.

0:34Welcome back to the$100 MBA show. I'm your host, Omar Zinhome, 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 Zinima 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.

1:11The first thing I want to do is share with you what was the reality of my e-commerce business. When I started Zinima 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.

1:47so 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 or a member of the$100 MBA, you know how much I talk about how important margins are.

2:32And the reason why I do that is because I learned that the hard way through this business. The cost of materials, manufacturing, shipping, warehousing, picking and packing, the amount of money it cost 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$100 my customer would spend, I would keep$10.

3:20I 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. 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, 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.

4:05We'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 service, I can go on and on, but I'm starting to get Harper. One mistake that happens, like a shipment delay or a defective product because the person that's manufacturing your product 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.

4:46But 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 costs me$10 to make this notebook and I sold it for$15, my 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?

5:33That'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 started to realized these things in my e-commerce business, I realized I was working harder and harder for smaller and smaller returns.

6:15I 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 Zinom Design wasn't easy, but it was the best decision I ever made. Here's what I learned. The first thing I learned is that profit margins are not the most important thing. They are everything. A business without healthy margins is like a car without gas. If you don't have it, you're going nowhere. Number two, scalability matters. I want a business that grows without needing exponential increase in resources.

7:00And when I say resources, I'm also talking about not just money, 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$100 MBA, everything changed.

7:48No 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?

8:30Why are you a big believer in this? Why won't you back an 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 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.

9:10So 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 e-book or your course or your software subscription, the cost doesn't skyrocket. 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 the cost it would be if it was a physical product that you have to deliver to a customer.

9:54Number three, less stress, more freedom. Digital products allow you to focus on building value for your customers and not fixing annoying logistical nightmares. 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, for you to improve yourself, to read a book, to contemplate, to reflect, to come up with creative solutions to your customers' 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.

10:39Let me tie this up in a bow for you. Walking away from Zinnum 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 it 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 it scalable? Are the margins healthy? Will it give me the life I want? Be honest. Thanks for tuning into the$100 MBA show.

11:21If 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 wanna 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.

12:00I'm Omar Zanom, and I'll see you in the next episode.