{"id":329,"date":"2023-04-17T13:37:16","date_gmt":"2023-04-17T13:37:16","guid":{"rendered":"https:\/\/www.smallbizgenius.net\/?p=329"},"modified":"2024-02-06T07:22:34","modified_gmt":"2024-02-06T07:22:34","slug":"how-to-start-an-ecommerce-business","status":"publish","type":"post","link":"https:\/\/www.smallbizgenius.net\/knowledge-base\/how-to-start-an-ecommerce-business\/","title":{"rendered":"How to Start an eCommerce Business"},"content":{"rendered":"\n
The standard 9-5 work schedule definitely isn\u2019t a good fit for everyone, so those who are brave enough to take the leap might be tempted to become their own boss and start something of their own. If you\u2019re an entrepreneur at heart, you\u2019ll probably enjoy the process immensely. Now, thanks to the internet and some specialist software designed to make our lives easier, running your own business definitely isn\u2019t a far-fetched dream. <\/p>\n\n\n\n
Depending on what kind of business you\u2019d like to start, you might want to consider eCommerce as a vehicle for success. eCommerce is a rapidly growing market in which online stores sell goods and services globally. It\u2019s estimated that by 2023, eCommerce revenue is expected to reach $740 billion in the US. If your business does manage to become the next Amazon or Etsy, you\u2019ll be taking home a significant portion of that. <\/p>\n\n\n\n
Of course, getting started is never easy, mainly because you have so much to think about. You need to plan and organize yourself before you dive in if you want your store to be a success.<\/p>\n\n\n\n
For all these reasons, we\u2019ve prepared this detailed guide on how to start an eCommerce business. After reading it, you\u2019ll likely have at least the first couple of steps of your action plan pinned down. So, without further ado, let\u2019s get started. <\/p>\n\n\n\n
People who are looking into starting an eCommerce business typically already know what they\u2019d like to sell. Some are interested in turning their hobby into a living, while others already have a brick-and-mortar store and are looking to expand, or move entirely online.<\/p>\n\n\n\n
However, if you\u2019re unsure what to sell, here is some food for thought. Typically, there are three categories of products you can sell online: physical goods, digital downloads, and services. <\/p>\n\n\n\n
Physical goods are an excellent choice if you can manufacture or source things people are looking to buy. Of course, you can always resell physical goods – you just have to buy them from a wholesale provider first or set up a dropshipping store. These processes include their own set of challenges. For example, you need to find out which wholesale provider<\/a> you want to go with, how you\u2019re going to store the items, and which shipping method won\u2019t cost you an arm and a leg.<\/p>\n\n\n\n Selling digital downloads is an excellent way to open an eCommerce website if you don\u2019t want the hassle of handling, storing, and shipping physical products. These could be anything that your customers can download on their devices: online courses, artistic designs, eBooks, printables, plugins, and templates, among other things. Depending on your skillset and the type of digital product you want to sell, your profit margins can vary greatly. While selling digital products doesn\u2019t always entail the considerable initial investment you would need to provide for physical products, you might also not earn as much. <\/p>\n\n\n\n Selling services can also be an excellent choice for your eCommerce store. This solution allows you to get started with minimum investments and earn profits fast. Still, the main thing you\u2019re selling is your time, and you only have so many hours in a day. Expanding beyond what you can accomplish (and earn) on your own typically requires that you hire someone else. They can take on some of the workload, but that in itself carries its own set of costs and responsibilities.<\/p>\n\n\n\n Once you decide what type of product or service you\u2019ll be selling, you should assess the viability of your idea. In other words, you want to be sure the result will be worth the effort. How can you determine that? By doing your market research first. Let\u2019s take a quick look at how to perform that properly. <\/p>\n\n\n\n Just as you would when opening any other type of online business, you need to do your research before starting an eCommerce website. You need to find out what kind of products perform well, how much competition there is in the niche, and what type of business model can most effectively bring your eCommerce business ideas to life. <\/p>\n\n\n\n Since you\u2019ll be selling online, doing a bit of Google research might help you pinpoint what type of product will work. By analyzing Google\u2019s results for a particular keyword and its relative terms, you\u2019ll be able to gauge how popular certain options are. Look for the type of product popping up on the first page and which companies are selling it. The autofill option might also give you a couple of online business ideas. \u201cPeople also ask\u201d is another excellent section that could be helpful. <\/p>\n\n\n\n You probably already have an idea in your mind of what you\u2019re going to sell, so it\u2019s time to work out whether or not that idea is plausible. You can do so by evaluating product viability. Here are a couple of things you should ask yourself about the product or service you\u2019re thinking of selling:<\/p>\n\n\n\n The third question leads us to competitor research, which is a crucial component of starting a successful business. Finding out who the key players are is just the first step. The most important one is putting their business model under the magnifying glass. <\/p>\n\n\n\n Look for anything they\u2019re doing well and make a note of how you could emulate it. More importantly, look for any ways you\u2019d improve on their business model; you might be able to find a gap your business could fill. At the very least, you could identify that special factor that could help you set your business apart from the competition in your niche, which is crucial when starting an eCommerce site. Remember, just because someone else is already doing it doesn\u2019t mean you can\u2019t do it better. <\/p>\n\n\n\n If you want to make sure your business will be successful, you also need to target the right audience. This means figuring out who your ideal buyers will be, which will significantly influence the steps you take.<\/p>\n\n\n\n For starters, you need to be where your target audience is and speak their language. To ensure this, you should look into your customers\u2019 demographics and psychographics. Start with their essential characteristics; you want to know their age, gender, and income. Once you have a good picture of that, you should then try to find out more about their opinions and beliefs. <\/p>\n\n\n\n Why is this important? Well, once you have these terms pinned down, you can clarify the approach of your eCommerce business. For example, if you want to appeal to environmentally conscious customers, you wouldn\u2019t want to sell items packaged in lots of plastic. By the same token, Instagram isn\u2019t the ideal platform for promoting bingo games to senior citizens.<\/p>\n\n\n\n Getting this approach right will significantly improve your eCommerce website and your overall online presence. If you\u2019re selling software for accountants and bankers, you might consider adjusting the tone of voice on your website to avoid the slang the kids use these days. To target a younger audience, having a flashy, highly responsive website might be the most effective thing you can do. Pinning these details down will help you figure out your marketing strategy later. <\/p>\n\n\n\n Now that you know what you\u2019ll be selling and to whom, you should create a business plan. It sounds daunting, but this is an excellent way to ensure you stay on track while you\u2019re setting up an eCommerce business. Don\u2019t overthink it – you don\u2019t have to show that first version to anybody. It can serve as a to-do list for you as you plan each step in more detail.<\/p>\n\n\n\n However, if you need a business loan, an advisor, or a partner to help run your new business, you really need to create a thorough and professional business plan. Here are some things it should include:<\/p>\n\n\n\n Since this business plan will also serve as marketing material, you should keep your target audience in mind while writing it. If you\u2019re going to show it to your potential employees, the business plan could help them see your vision and why it might or might not work for them. Before showing it to investors, you\u2019ll need to have every aspect of your financials and operating model pinned down. After all, you want to maximize your chances of getting their approval and funds for your new online eCommerce business. <\/p>\n\n\n\n If you aren\u2019t creating the plan for yourself, it\u2019s advisable to look at some online templates first. These will help you keep your business plan consistent, thorough, and as detailed as possible, and will make sure you keep your goal and target audience in mind. If this is too troublesome for you, you can also consider hiring someone to write the business plan for you. <\/p>\n\n\n\n Lastly, it\u2019s important to stick to the 20-page rule. You want to be informative enough, but you don\u2019t want anyone to spend too much time trying to wrap their head around your concept. <\/p>\n\n\n\n You might now have a business plan, but you still don\u2019t have a business. This next section of our guide is about formally establishing your company.<\/p>\n\n\n\n You\u2019re probably wondering how to start an eCommerce business step by step. First things first, you\u2019ll need a name, a defined legal structure, all the necessary licenses, and an employer identification number (EIN). Let\u2019s go through those steps one by one.<\/p>\n\n\n\n Picking the right name can be difficult, and there are many things to keep in mind when doing so. You need a name that is distinctive, easy to remember, and clearly shows what your eCommerce business sells or does. On top of that, the name needs to be available, both with the US Patent and Trademarks Office and on websites that sell domain names.<\/p>\n\n\n\n Even if you haven\u2019t started working on your website, it\u2019s worth registering a domain for your business as soon as you decide on a name. After all, the availability of a domain name can heavily influence the name you choose for your business. By acquiring a domain as soon as possible, you\u2019re preventing someone else from taking it. <\/p>\n\n\n\n Putting in place a defined legal structure is one of the most important steps to start a business, and it requires your time and attention. Consulting with a lawyer at this point is a good idea. After all, the type of entity you choose to establish will have important legal implications for your business.<\/p>\n\n\n\n The most common types of business entities used for startups are sole proprietorship, LLC, general partnership, and corporation. Let\u2019s give these categories a brief overview.<\/p>\n\n\n\n With a sole proprietorship, there isn\u2019t a legal distinction between the business and its sole owner. That means you are personally liable and taxed for owning this type of business. <\/p>\n\n\n\n If you\u2019re not starting an online business on your own, you might consider a general partnership. These are typically conducted between two or more owners. Everyone in the partnership is equally liable, and this partnership is treated as a pass-through entity for tax purposes. <\/p>\n\n\n\n LLC is one of the most common types of businesses out there. With an LLC<\/a>, you and any other members have only limited liability and are typically taxed as a pass-through entity.<\/p>\n\n\n\n As an entity, a corporation is entirely separate from those who run it. That\u2019s because a corporation is considered a legal person, meaning that the people controlling it have no liability. It\u2019s owned by its shareholders and governed by its directors. Corporations aren\u2019t the right choice for single entrepreneurs, but this legal structure works perfectly for large businesses. <\/p>\n\n\n\n If you\u2019re still not sure which business structure is right for you, consulting with an experienced professional<\/a> might be the best course of action. Once you decide on a suitable business model, they\u2019ll help you file the necessary papers. <\/p>\n\n\n\n The next step is to apply for your EIN. Depending on what type of business entity you opt to establish, this nine-digit number may or may not be required. Regardless, it\u2019s a great way to help you separate your business and personal finances. For this reason, getting an EIN is highly recommended for everyone looking to start an online business.<\/p>\n\n\n\n You can apply for an EIN for free online or via mail, fax, or phone. If you choose the online route, you\u2019ll likely receive your number immediately. <\/p>\n\n\n\n Every business, whether online or offline, needs a business license. Depending on the state your business is located in, you might need to get yours sooner than later. Some regions allow you to sell up to a certain threshold before getting your license, while others require you to have it beforehand. All this information is neatly listed on the SBA website, together with which licenses are required in your state. You\u2019ll likely be able to obtain your license online, although again that can vary by state.<\/p>\n\n\n\n Once you\u2019ve done everything required to set up your online eCommerce business, it\u2019s time to stock up on your product. If you\u2019re selling digital products created by someone else, stocking up might be relatively simple. However, if you want to sell something you create yourself, you\u2019ll need to do much more preparation for your launch, as the production process will probably involve a lot of work. When prepping for your grand opening, make sure you don\u2019t compromise on the quality of what you\u2019re offering. <\/p>\n\n\n\n If you plan to resell, you should contact wholesalers to work out how you can put together your inventory efficiently and cost-effectively. You need to select your inventory carefully and make sure you\u2019re satisfied with what\u2019s on offer in your store, taking industry trends into account. If you\u2019re considering dropshipping, now\u2019s the time to make the appropriate deals with suppliers and manufacturers. <\/p>\n\n\n\n Now that you have all the data, products, and paperwork figured out, it\u2019s time to start working on your eCommerce website. <\/p>\n\n\n\n Your website is your online storefront, and you should dedicate the same amount of time and effort to building it as you would to setting up a brick-and-mortar store. After all, this is what your customers will see, browse through, and use to have your products delivered to their doorstep. It\u2019s up to you to make that experience as pleasant and convenient as possible. <\/p>\n\n\n\n We\u2019re assuming that by this stage, you\u2019ve already selected and purchased your domain name. The next step would typically be finding a hosting provider, but that doesn\u2019t really apply here; you\u2019ll have to decide which eCommerce platform<\/a> to use, and you\u2019ll get hosting as part of that package. Here\u2019s a quick overview of some of the popular eCommerce software options out there:<\/p>\n\n\n\n Probably the world\u2019s most popular eCommerce platform, Shopify is an excellent choice for anyone looking to open their own online store. Shopify accounts start at $29 per month and allow you to create and customize your store to an impressive extent. <\/p>\n\n\n\n If you decide to create your website on WordPress, you should definitely opt for WooCommerce as your eCommerce provider. With its most basic package, this plugin allows you to create an online store for free; all you have to do is download it and enjoy its multitude of features. Just be aware that if you\u2019re not familiar with WordPress, WooCommerce might present a bit of a learning curve.<\/p>\n\n\n\n Magento allows you to customize your new eCommerce site to the fullest. It\u2019s free to download and offers many more options than any other solution on the market. The potential problem is that you need to be quite tech-savvy to get the most out of it. <\/p>\n\n\n\n As such, it\u2019s not the best option for new eCommerce entrepreneurs with a DIY approach. However, if you can find the money to hire a developer, you can use Magento to open up a world-class shop that will put your competitors to shame. <\/p>\n\n\n\n Squarespace is another excellent solution for making an eCommerce website, especially for beginners. It\u2019s famous for its easy-to-use shop templates that will get you started in no time. As is the case with Shopify, Squarespace allows you to set up shop without having to know how to write a single line of code. It\u2019s also relatively cheap – the basic plan that includes eCommerce capabilities starts at $18 per month. Still, Squarespace is more of a website builder than a full-blown eCommerce platform. As such, it\u2019s somewhat limited in terms of the tools, features, and add-ons it offers. <\/p>\n\n\n\n Some eCommerce website builders<\/a> will offer hosting packages that cater to your needs adequately, but there\u2019s also a chance you\u2019ll have to figure out hosting by yourself. If this is the case, you should consider cloud hosting, which is widely considered one of the best solutions for an eCommerce site. <\/p>\n\n\n\n You\u2019ll also see many other options, such as shared hosting or even dedicated server hosting<\/a>. Both of these are good options when you\u2019re just starting your own eCommerce business, so it\u2019s not something to stress too much about. Still, you should be aware that these options can be much more difficult to scale than cloud hosting. <\/p>\n\n\n\n Whether or not you\u2019re ready to scale depends on how well your eCommerce site is performing. You need to think about the features, usability, and customization options you need as your business grows. More importantly, you need to be conscious of the system you\u2019ll be using to manage your day-to-day business online. For example, if integrating payment systems into your eCommerce site is as complex as brain surgery, you might not be able to scale that quickly. <\/p>\n\n\n\n If your customers can\u2019t navigate your site or find what they\u2019re looking for effortlessly, it could be a dealbreaker for them. Consider hiring a UX design agency<\/a> to help you create an online store and set up the basics. <\/p>\n\n\n\n Another reason why you might not be able to scale as extensively as you’d like to is failing to attract and keep customers. For this reason, you need to pin down your brand building strategy. This starts with your eCommerce website and goes on to include your marketing efforts later. But the most important place for your brand to thrive is in your customers\u2019 heads, so that it\u2019s your company that comes to mind when they think about a specific product.<\/p>\n\n\n\n With all this in mind, you can see why branding is crucial when you\u2019re building a business. After all, there\u2019s a fair chance that when someone mentions coffee, a green Starbucks sign pops into your head. Your ultimate aim is to create that kind of instant association for the products or services you\u2019re selling.<\/p>\n\n\n\n One of the most important aspects of branding is thinking about the design of your website, your logo, and your visuals in general. Unfortunately, selecting colors, typography, and other elements for your website is more difficult than you might expect. Don\u2019t overthink it too much right now; you can always rebrand down the road. Finding a logo maker<\/a> is one of the best ways to consolidate your brand identity when starting your own business. <\/p>\n\n\n\n Testing everything before you go live is non-negotiable. You want to be sure that every inch of your website functions as intended. One way of doing this is to ask your friends to help you test the site, or if budget allows, hire a QA specialist to test it professionally. You want to make sure the website looks good on all devices, every button works, and you don\u2019t have a single broken link. <\/p>\n\n\n\n Once you\u2019ve done everything to set up your eCommerce store, the last step is to add your inventory. When doing so, pay close attention to categories and the overall organization of your site; you want your customers to find what they need quickly. <\/p>\n\n\n\n Once they find the product they want, the customer will likely dwell on its description and image. For this reason, you need to provide them with high-quality visuals and accurate and detailed product descriptions. Think about what they\u2019d like to know about each product. Excellent visuals and precise descriptions are key to unlocking more sales. <\/p>\n\n\n\n You don\u2019t want your store to open to the sound of crickets; you need customers lined up in front of your virtual door and stampeding towards your \u201cbuy now\u201d button. That doesn\u2019t happen on its own; you need to put effort into marketing your new business on the internet.<\/p>\n\n\n\n Of course, marketing something properly is no small feat, and there\u2019s a lot to think about. Newsletter? Social media marketing? Paid promotions? <\/p>\n\n\n\n In an ideal world you\u2019ll employ all of those strategies. But which will be your top priority – the one that will bring you the most customers with the least effort? To answer this, you should backtrack a couple of steps in this eCommerce startup guide to the section where we talk about analyzing your target audience. Do they use social media? If so, which social platform might they be on, and what type of groups would they be active in? Think of any correspondence you might have with your audience and the tone that would best speak to those potential customers. <\/p>\n\n\n\n Promo codes, giveaways, and free goodies are also an excellent way to create interest and buzz about your store opening. If you\u2019re offering services, free consultations may be the best way to get customers through the door. A free download each month could work for digital products. Listen to your audience\u2019s feedback and you\u2019ll quickly realize what works.<\/p>\n\n\n\n Once you launch and sell all of your initial inventory, it\u2019s time to grow further. Most aspects of running your business will remain the same, but on a larger scale. It could be beneficial to invest in some tools, hire someone to help, and draw from the experience you\u2019ve gained while building an eCommerce business to find room for potential improvement in the future.<\/p>\n\n\n\n You\u2019ll want to consider upping your current eCommerce marketing efforts. This could mean creating a lengthy email marketing list, collaborating with influencers in your niche, and focusing on SEO. <\/p>\n\n\n\n As you gain new customers, you might consider investing in good customer relationship management (CRM) software.<\/a> This kind of program is bound to upgrade your customers\u2019 experience at your eCommerce store. CRMs do a solid job of replacing the face-to-face experience people have at brick-and-mortar stores. <\/p>\n\n\n\n As your customer base grows, you\u2019ll also likely have more inventory to handle and warehousing problems to solve. Thankfully, there are plenty of software options that can help you with inventory management<\/a>. On top of that, you should keep an eye out for other things you can do to help you further optimize your processes.<\/p>\n\n\n\n As always, the best way to improve your business is to listen to your customers. You should also look out for ways to improve your back-office processes when you notice that something is unnecessarily complicated. Any improvements you make will surely help your profits down the line!<\/p>\n\n\n\n This is a difficult question to answer, as there are many unknowns at play. Creating an eCommerce website can be expensive, but you might have friends who are willing to lend their expertise for a percentage of your profits. On the other hand, you might have to pay for someone to help with marketing, or you might need to splash out more to get special inventory in. <\/p>\n\n\n\n With all that in mind, we\u2019ll try to answer this question: how much money does it take to start an eCommerce business? If you need just the basics – domain, platform, and hosting – it could cost you as little as $40 per month. On top of that, creating your business and acquiring all the permits you need can cost anywhere from $30 to a few hundred dollars, depending on your location. And while it doesn\u2019t seem like much, this minimum investment will mean you have to do a lot of heavy lifting yourself. <\/p>\n\n\n\n From there, hiring a website designer could cost anything from $300 to several thousand. On top of that, hiring a graphic designer to come up with a beautiful logo will likely cost you anywhere from $15 to $300. A warehouse typically costs $4 to $7 per square foot per month, and if we\u2019re not even going to get started on the costs of marketing – there\u2019s really no limit to how much you could spend getting your company\u2019s name out there. Social media marketing starts off being quite affordable, but if you\u2019re trying to reach a broader audience, you\u2019ll also need to consider expanding your budget. <\/p>\n\n\n\n Any additional software or service will create extra dents in your budget. Keep in mind that $5 might not sound like much, but if you have to pay that amount every month for multiple apps, it will soon add up. Still, many of those services are well worth their price, so it\u2019s up to you to figure out what you can handle yourself and what you need help with when starting an eCommerce website. Overall, excluding your inventory purchases, you could be looking at an initial investment of around $700 to $3,000.<\/p>\n\n\n\nResearch Your Products and Markets<\/h2>\n\n\n\n
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Work Out Who Your Ideal Customer Is<\/h2>\n\n\n\n
Create a Business Plan<\/h2>\n\n\n\n
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Decide on Your Business Name and Structure<\/h2>\n\n\n\n
Picking a Name<\/h3>\n\n\n\n
Defining Your Legal Structure<\/h3>\n\n\n\n
Sole Proprietorship<\/h4>\n\n\n\n
General Partnership<\/h4>\n\n\n\n
Limited Liability Company (LLC)<\/h4>\n\n\n\n
Corporation <\/h4>\n\n\n\n
Applying for an EIN<\/h3>\n\n\n\n
Getting a Business License<\/h3>\n\n\n\n
Find or Create the Products You\u2019re Going to Sell<\/h2>\n\n\n\n
Create Your Website<\/h2>\n\n\n\n
Shopify<\/h4>\n\n\n\n
WooCommerce<\/h4>\n\n\n\n
Magento<\/h4>\n\n\n\n
Squarespace<\/h4>\n\n\n\n
Define Your Brand<\/h2>\n\n\n\n
Add Your Products to the Site<\/h2>\n\n\n\n
It\u2019s Time for Marketing<\/h2>\n\n\n\n
Grow Your Business <\/h2>\n\n\n\n
How Much Does it Cost to Start an eCommerce Business?<\/h2>\n\n\n\n
So, Is eCommerce the Right Business for You to Start?<\/h2>\n\n\n\n