How To Start an eCommerce Business [Complete Guide]

Starting an eCommerce business from scratch is quite a broad topic; however, in this guide, we tried to sum up the basics of establishing an online store in six simple steps.

 
 

Step 1: Research the market and pick a niche.

 

 

For those wondering how to start an eCommerce business, choosing the right niche is as important as picking the location for the brick and mortar store. The interesting trick here is that the niche you are aiming for should be competitive: if there’s no competition on the market, then there may be no market at all.

 

However, the opposite is also true — a market already filled with big brand names leaves little room for new players. Thus, the two aspects — competition and market density — should always be balanced.

 

Another reason for examining the market is the ability to acquire vital insights regarding your future positioning and business strategy. By investigating current competition and market state, you can figure out the most appropriate ways to reach potential customers, define your business model (will you be selling single items, packages, or go with wholesale), and ‘shoulder’ niches that you can work with too. 

 
 

Step 2: Pick your product and validate it.

Here you need to define what your e-commerce business will actually offer to the target audience. There are several basic techniques you can use to choose a product: run brainstorms with your team, monitor trends, customer reviews, research keywords, etc.

 

Once you’ve chosen a product, you need to determine its potential and make sure that the product is viable enough. In order to do that, examine it using the following criteria:

 

  • Market-based — factors defined by a market that influence product or business model: profit margin potential, seasonality, product turnover, etc. 
  • Product-based — factors defined by product (or competition): selling price, local availability, consumability, scalability, etc. 

 

It should be noted that at the beginning it’s better to keep the focus on a single product or category of products because if you don’t have the budget of Amazon or Walmart (which is probably the case) filling your new store with thousands of products and dozens of categories will dissipate or thin your efforts and marketing budgets.

 
 

Step 3: Define where the products will be sourced from.

If you decide to start selling products, you need to figure out where to get all the merchandise in the first place. There are a few tactics on how to start eCommerce business and get your own product: you can make it yourself, find a manufacturer with relevant expertise who could make it for you, purchase it from a supplier, or dropship it.

 

 

Making a product from scratch would make sense if you can get all the ingredients or raw materials for it. Be aware that in the early stages you will be dealing mostly with small batches — until you’re able to make enough profit to reinvest into increasing production.

 

The two other options — manufacturing or sourcing a product — would allow you to work with larger numbers right away, but the initial investments here will have to be higher since vendors normally work with bulk orders only. You can find the manufacturer or product supplier by simply googling them. Here are a few initial suggestions to help you out: Alibaba, ThomasNet, SaleHoo, Beauty Joint, Maker’s Row, DHGate, Ek Wholesale.

 

With dropshipping the situation is opposite — you don’t need to purchase any inventory, and all your expenses will be connected mostly with marketing and eCommerce store maintenance. 

 

One of the key limitations that come with manufacturing, dropshipping, or product sourcing is that you can’t influence the profit margin that much, and will be dependent on the prices set by a manufacturer or wholesaler. Depending on the location of the vendor, shipping and returns can also be issues of concern. 

 
 

Step 4: Register your business and obtain all the required licenses. 

Even though eCommerce businesses have less paperwork to do and permits to get, it’s better to do it right from the very beginning. We advise you to check in advance the legal regulations for eCommerce businesses in your country or region, and also those that you may be dealing with. 

 

 

If you are in the US, you’ll need to get a business operation license, an Employer Identification Number, sales tax license, seller’s permit, etc. For those entrepreneurs running their businesses out of their homes, they also need to apply for home occupation permits.

 

In the EU the process of establishing a new business may seem complicated to the uninitiated because each country has its own procedures. However, most of the necessary information can be obtained via government portals (PSCs — Points of Single Contact). The same goes for the UK. In some countries, the involvement of a notary may be required as well.

 
 

Step 5: Choose an eCommerce platform.

Opting for an end-to-end solution is cheaper than creating your own website from scratch. With an eCommerce platform, you get all the functionality necessary to set up and manage an online shop right away. 

 

There are dozens of solutions offered by the market today which can be confusing. So, when exploring them, try to determine and understand how it fits your needs regarding hosting, frontend, catalog management, security, back office operations, etc.

 

In order not to get overwhelmed with the number of options, we always advise narrowing down the selection to the three most popular platforms — Shopify, Magento, WooCommerce — and deciding which one of those would fit your business model best.

 
 

Step 6: Promote your eCommerce store.

Once you have your website set up, products sourced and listed you can proceed to promote your business. Based on your prior market analysis, you should get a picture of your target audience and from there you can select the advertising techniques that would work best for your prospects — Google Ads, SMM, SEO, Email marketing campaign. 

 

 

We recommend not limiting yourself to one specific tactic but rather using a multi-channel approach that allows for communication with your audience in different mediums. At the same time, you want to make sure you know exactly how effectively your campaigns perform. Tools like Google Ads, AdWords Performance Grader, Heap Analytics, Cyfe, etc. can help you extract all the necessary insights about your marketing performance.

 
 

How Much Does it Cost to Start an Ecommerce Website?

It’s hard to identify precisely the cost of an eCommerce website since each eCommerce project is unique and all depends on the requirements set by the business owner. However, some basic components that influence the potential expenses can be predicted with some accuracy. These are:

 

  • Ecommerce software costs — Many vendors offer free access to the limited versions of their platforms. When it comes to paid packages, however, shop owners can expect to pay anywhere from $16 per month for basic plans, to $2,000 or more for Enterprise accounts per month for more sophisticated functionalities.
  • Licenses and permits — These expenses are subject to region/location, the legal structure of your business, type of products, etc. Depending on the country, the costs of setting up a company may vary from tens of dollars to a few hundred.
  • Payment processing fees — This is the commission paid by the online shop owner to the vendor (PayPal, Stripe, Square, etc.) for using their payment gateways. Here, the fees may range from 2% to 3.5% per transaction.
  • Marketing — The advertising budget is basically a percentage of your gross revenue. Some eCommerce businesses spend 2-5% on their marketing efforts, but in some cases, the numbers can go as high as 25%. Staying within the 5-10% range is considered a safe range for newly established businesses.

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