By Jaime Dunaway | Lemke Newsroom
The rise of online shopping has made it easier for student entrepreneurs to create their own businesses and sell products on social media. That convenience also has prompted some students to delay college or even drop out to work on establishing their businesses.
Hannah Morehart, a UA junior apparel studies major, started her own business during her freshman year with the hope of getting a summer internship at a boutique in her hometown, Fort Smith.
After talking with several boutique owners and deciding to forgo an internship, she started recreating high-waisted jean shorts she had seen on international fashion blogs.
“The first pair was awful, just awful,” Morehart said. “It was so embarrassing, and I was just like ‘I can’t do this,’ but I kept going and going.”
She advertised her shorts on social media, and her first pair sold instantly on Facebook for $20, she said. Her business continued to grow through word of mouth, and nearly two years later, Morehart’s clothes are sold in boutiques across the country and she plans to launch a website in the coming months.
Creating a social media presence is becoming an increasingly important part of establishing a business because it allows students to establish their own brands, promote products and interact with customers in personal ways, according to a report conducted by the Harvard Business Review Analytic Services.
Half of business owners said social media increased awareness about their products or services; 30 percent said it increased traffic to their website and more than 25 percent said it created a more favorable image of the company, according to the report.
“I never realized how awesome Instagram, Facebook and free advertising were until I started trying to sell a product,” Morehart said.
Morehart primarily uses Instagram for social media sales, she said. She has more than 1,500 followers, some of whom include fashion bloggers who promote her products on their blogs.
Fayettechill Clothing Company, an outdoor apparel store founded in 2009 by UA graduates, also uses Instagram, said Devin O’Dea, vice president of development.
“I focus on Instagram because it’s the most reflective of what we are as a group,” he said. “It’s very visual, and it allows us to communicate a lot with just a picture and a couple words. Social media is crucial, and it’s probably our No. 1 marketing tool.”
As of May, 72 percent of adults in the U.S. used networking sites, an increase of 5 percentage points from last year, according to a study by the Pew Internet and American Life Project. In 2005, when the survey was conducted, 8 percent of adults used social media.
More than 70 percent of people who used social networks shopped online, according to the 2011 State of Social Media report conducted by Nielsen. Additionally, 53 percent of users followed brands on social media, and 60 percent wrote reviews about products and shared them with friends, according to the report.
Websites with low start-up costs are popular among students who want to start businesses. Students can become sellers on Etsy, an e-commerce site where handmade products are bought and sold, for 20 cents, and the online platform allows them to reach thousands of customers worldwide in less than 24 hours.
Online sales, which make up 8 percent of total retail sales, are expected to increase 13 percent to $262 billion this year, according to Forrester Research, a technology and market research company. In the next five years, online sales are expected to reach $360 billion and account for 10 percent of total sales, according to Forrester.
At Fayettechill, O’Dea said online sales have consistently increased during the nearly three years he’s worked there. Hiring more people has allowed other employees to dedicate time on improving the site and boosting online sales, he said.
Mark Zweig, a Walton College executive-in-residence who teaches undergraduate entrepreneurship, said he wants to make students aware of the opportunity they have to start their own business.
Zweig started his business endeavors by selling bicycles on the street corner near his house.
“It’s been shown that many successful entrepreneurs started at a very young age,” Zweig said. “Students can learn so much from their own business whether it’s a success or a failure. It’s a great learning experience. It’s as valuable as anything else they could do and maybe more so.”
Zweig has ownership in five national and international companies, including Zweig White, a consulting and publishing media firm for architecture and engineering companies, and Mark Zweig Inc., a construction company that focuses on high-quality housing in downtown Fayetteville.
“I want to help students understand that they have this option of doing their own thing,” he said. “They don’t have to sell their soul to the corporate Devil, whoever it is that pays the highest starting salary. They can start their own business and perhaps ultimately have a life they find more satisfying.”
Helping launch a business has certainly been a life-changing experience for O’Dea, who decided to continue working at Fayettechill instead of going to medical school.
“Things were really talking off for the first time in a huge way right when I had gotten into medical school,” he said. “There were two months when I went back and forth, and I think I told them a couple times I was leaving and then the next day tell them I was back. We were going on all these fun trips and getting to explore our creativity with a lot of resources, and I was just thinking if I’m going to be in med school and have to watch all of this roll across my Facebook feed, it would kill me. I went with my gut, and I’m pretty happy with my decision.”
The students who started Fayettechill sold mostly stickers and a small number of T-shirts during their first year, but today the company has expanded its product line and sells merchandise throughout Arkansas, Missouri, Texas, Oklahoma, Kansas and Louisiana, O’Dea said. Fayettechill sells T-shirts, tank tops, hats and jackets and plans to include button up shirts, board shorts and rain jackets in the next line. The company also partners with other businesses to produce consumable products like beer and coffee.
“We’re not trying to create a traditional business that they would explain in college,” O’Dea said. “We’re trying to make a new age type of business that’s a little bit more symbiotic with the community.”
O’Dea majored in biochemistry and philosophy at the UofA and hadn’t taken any business classes before working at Fayettechill.
“I think I’m probably not like a typical businessman, and I don’t really think of myself as one,” O’Dea said. “I’m more interested in culture and community. Sometimes I joke that I’m a terrible businessman, and I’d give all the shirts away for free if I could.”
With easy accessibility to the technological tools needed to create a business, some students may decide to drop out or take time off of school to work on their businesses. Increasing college costs and the sluggish job market are two factors students may consider when deciding to take time away from school.
Furthermore, at 7.3 percent, the unemployment rate is still about 2 percentage points higher than the rate recommended by the Federal Reserve, according to the Bureau of Labor Statistics. Nearly 12 percent of 20- to 24-year-olds, and nearly 8 percent of 25- to 29-year-olds, were unemployed in October, according to the BLS. Another 10,000 in the same age groups are not included in the labor force because they are not looking for jobs, according to the BLS.
The rationale among students is that college is to help them get a job, and a job is to make money. If college is expensive and they are unlikely to get a job after graduation, why not take time to establish a business where they already have a job and a source of income?
A handful of college students who established businesses while in college dropped out and went on to become CEOs at successful companies. At the top of the list are Mark Zuckerberg and Bill Gates who both dropped out of Harvard and are now multibillionaires. Steve Jobs and SnapChat founder Evan Spiegel also dropped out.
But for every successful college dropout, there are still more who fail.
Nearly 50 percent of all businesses fail after the first five years, according to the BLS. Half of small business owners said they do not anticipate opportunities for growth, according to the 2012 Year-End Economic Report compiled by the National Small Business Association. Forty-five percent said net profits decreased in 2012, and nearly 30 percent said they expect profits to decrease in 2013, according to the report.
Zweig, who had multiple businesses while he was in school, said he advises his students to stay in school instead of taking time off to work on their businesses.
“I think it teaches you to be a good time manager,” Zweig said. “I don’t see them in conflict, I see them enhancing each other. The education hopefully you’re learning stuff you can apply to your business. In your business hopefully you’re learning stuff that makes your education more relevant. They complement each other.”
The hands-on experience of running a business has been beneficial for Morehart’s career and her education, she said, but it was difficult trying to balance school and work responsibilities.
“It’s been a lot of planning, time management and prayer,” she said. “I’m hoping once I graduate and finish school I’ll have this to keep building and keep having fun with, but if not, I definitely need a degree to back up and help me find a job if need be.”