Why 80% of Shopify Brands Fail in the First Year

Eight out of 10 businesses fail within their first year.

While starting an ecommerce brand has never been so accessible — platforms like Shopify have lowered the barriers to entry, enabling more entrepreneurs than ever to launch businesses — many Shopify brands struggle to survive beyond their first year. The allure of quick success can blind new brand owners to the harsh realities of building a sustainable business. And many also struggle to understand why their brands are failing, which leads people who run ecommerce brands to misjudge their businesses and mismanage their resources.

When people start a business, they often focus on finding new customers. But new customers don't grow businesses. Profitable customers do.

Focusing solely on growth metrics like ad spend and revenue can be misleading. Profitability and customer satisfaction are the real keys to sustainable success for ecommerce brands. To avoid becoming a statistic, you need the right knowledge — and tools — to help your brand grow. Keep reading to find out how to stay among the 20% who succeed.

Revenue is vanity; profit is sanity

It's easy to be dazzled by impressive revenue figures, but revenue alone doesn't equate to business health. Profitability is the true measure of success. Many brands have scaled rapidly in terms of revenue, only to collapse because they weren't profitable. High operational costs, poor customer retention, and inefficiencies can erode margins, turning apparent success into failure.

Consider two brands: one that aggressively invests in customer acquisition through ads, and another that focuses on customer satisfaction and operational efficiency. The first might see quick revenue spikes but struggle with high churn rates and low margins. The second grows more steadily but builds a loyal customer base and maintains healthy profits. Over time, the second business outperforms the first because it's sustainable and profitable.

One great example of this is Zappos.

When you look at an ecommerce company like Zappos, you might see a massive catalog of inventory and tons of spend on search engine optimization (SEO) or affiliate marketing. But we see the 75% repeat customer rate they achieved because they cracked the customer experience code.

Shopify brand owners can learn from Zappos by prioritizing customer satisfaction. Happy customers are more likely to make repeat purchases and refer others, creating a compounding effect that fuels growth.

Why so many ecommerce businesses fail: The domino effect of bad experiences

Imagine your brand processes 50 orders per month at an average of $100 per order, generating $5,000 in monthly revenue. You're excited about the progress and looking forward to scaling up.

However, if 10% of those orders result in customer issues — say, five customers facing problems — you'll start to see negative effects. These dissatisfied customers might return their products, request refunds, or leave negative reviews.

A 10% error rate isn't damning. In fact, it's pretty good. Most business owners would conclude that they got 45 out of 50 things right and they're doing really well. Maybe an "A" instead of an "A+."

But let's look at what even just a few bad experiences do to a business.

Remember, those 50 orders, at $100 per order, will net you $5,000 in monthly revenue — but that's only without any bad experiences.

If you have five customers with issues, you're going to lose revenue because they will return their orders or not come back. Those five customers mean a 10% loss in revenue. You might think you can stomach a 10% loss. You still get 90% of your $5,000 a month! But there's a compounding factor to take into account.

Let’s say for every 50 things you sell, you have a 5% referral rate. Without any bad experiences, that would mean two new customers per month. If you solved all your customers' problems without any bad reviews, you'd start with 50 customers and experience compounding growth. Within a year, you'd have 86 customers and $80,000 in revenue.

Now, let's go back to those five customers with issues. If you maintain that 10% error rate — which is higher than your 5% referral rate — you'll experience a net loss of customers month-over-month. At the end of the year, you'll only have 30 customers and $50,000 in revenue.

And this is why most brands experience declining revenue over time.

Here's the problem though: Most business owners don't realize why their revenue is declining. They try to solve the issue by sinking money into marketing when they actually just need to solve their customers’ problems.

Pro tip: Unlock the true value of customer support

Let's go back to those less-than-positive messages in your customer support inbox.

Customers who reach out constantly provide you with data and insights about your business: how it's performing and where you need to invest your time and resources.

The customers who reach out with complaints and issues aren't just sending messages. They also aren't just giving you one-off chores to solve. They're creating a roadmap for your business — problems that need to be solved and the potential financial impact of solving them.

By analyzing customer support messages, you can identify patterns that point to systemic issues. For example, say you get multiple complaints about a discount code not working. This could indicate a problem that, once fixed, can improve customer satisfaction and conversion rates.

OpenDesk: Turning customer "noise" into a roadmap for your brand's success

Many brand owners consider customer service software a luxury or something to adopt when the business scales. But implementing it from the beginning can provide invaluable insights that drive growth. Early adoption allows you to proactively identify and address issues before they escalate, improving customer satisfaction and retention.

OpenDesk helps you convert the "noise" of customer feedback into a clear roadmap for improvement. It quantifies issues to help you prioritize the actions that will have the greatest impact on your business. OpenDesk provides immediate visibility into customer issues, allowing you to act swiftly to resolve them. It also provides:

• All your inboxes in one place — sorted, labeled, and prioritized
• Faster responses with auto-drafts and auto-ticket categorization
• Insights to help you pinpoint and fix root causes of issues that lead to unhappy customers
• Data-informed decisions to optimize your support and business

OpenDesk helps you recontextualize messages from customers with less-than-positive experiences — not as a percentage of tickets, but as a percentage of orders. A higher ratio indicates more customer issues per order, signaling potential problems in your operations. For example, if you receive three complaints about discount codes across all your inboxes, it can seem like a minor issue. But OpenDesk will tell you that three complaints out of 50 orders equals a 6% tickets-per-order rate — a significant issue affecting nearly one in 15 customers.

OpenDesk turns this problem into a tool. It converts this noise into a roadmap that tells you how to operate effectively.

The true value of customer support: Aligning experience with your business success

Customer satisfaction and business profitability are two sides of the same coin. Satisfied customers are more likely to make repeat purchases, refer others, and contribute to a positive brand image.

So here is the true value of customer support: The customer is giving you a roadmap to grow your business. Be smart about listening to customers. Look at tickets per order. Solve your customers' problems. And turn support into retention.