The current pandemic has accelerated ecommerce by five years.
Customers have swapped shopping malls for Amazon and online retailers. JCPenney, Century 21, and Forever 21 have all filed for bankruptcy.
2020 saw a 27% growth in ecommerce, which is expected to grow by another 14% this year.
In short, there’s never been a better time to start an ecommerce business.
But the question is, how do you start an ecommerce business from scratch?
This QuickSprout guide will help you get from 0 to a fully functional ecommerce business, and we’ll cover all of the nuances to ensure you avoid any missteps.
The Easy Parts of Starting an Ecommerce Business
Starting an ecommerce business makes the world your oyster.
You don’t have to limit yourself to a small audience or be restricted by your store location and can sell to the world at large. Moreover, there are tons of tools that you can use to launch your ecommerce website.
For instance, BigCommerce makes building your ecommerce store super simple. It lets you sell to customers across platforms like Amazon, Facebook, and Instagram and has partnerships with popular payment solutions like PayPal and Square.
Plus, unlike a traditional brick-and-mortar store, starting an ecommerce business involves lower startup costs. No huge rent costs or any other substantial expenses to worry about!
The Difficult Parts of Starting an Ecommerce Business
Starting an ecommerce business comes with its share of obligations.
You’re responsible for maintaining product quality, talking with wholesalers, accountants, couriers, and solving customer queries. Even marketing and advertising your business falls on your shoulders.
Security and credit card fraud are also massive risks you must deal with.
You also have to be prepared for the highly competitive ecommerce landscape.
There are a growing number of online stores and businesses, which makes it harder to stand out from your competitors. Yes, you can employ different tactics like SEO and paid ads, but it’s still hard.
But that’s not to say it isn’t worth it.
Step 1: Do Your Research
Thorough and accurate market research is a critical step for any business. You absolutely cannot operate off of a hunch.
Every decision has its share of pros and cons. You need to ensure your decision works best for your business after weighing all your options.
Choose Your Niche
To start any successful online business, you need the right niche. Going too broad will make it more difficult to market your business and pick the products that will speak to your audience.
What type of products do you want to sell? What is your area of expertise? What knowledge or skills do you possess? Where do these skills fit in your market?
Answering these questions will give you a sense of the kind of business you want to run. Alternatively, you can also look at other companies in your chosen sector and what they are doing right or wrong. Think about the following:
- How are your competitors reaching customers?
- What do you like about their website?
- What is their business model—B2B, B2C, C2C, or C2B?
Figuring out logistics is another crucial aspect. Here’s a list of a few logistical questions you need to answer:
- What type of products do you want to sell—physical or digital?
- If it’s a digital product, how do you plan to source it?
- Can you handle production yourself, or will you need help (a manufacturer, employees, etc.)?
- How do you want to base your business? One-time orders, bundles, or do you prefer a subscription model?
Considering the highly competitive ecommerce landscape, you want to do some serious thinking about what sets you and your business apart before you start your business.
Any expertise you may have, capitalize on it. You don’t need to restrict yourself to goods. You can offer services, such as content writing, website design, or paid online courses.
Conduct Thorough Market Research
In addition to your competition, you also need to identify the different barriers to entry in your field.
How can you overcome them? Will you need to invest in ads or buy ecommerce software? If you do need to invest but don’t have the money, what are the workarounds? What can you do with what you’ve already got?
It’s okay to start small and scale, so a shortage of money shouldn’t stop you from starting your entrepreneurial journey. Plus, you can always apply for small business loans.
Next, you should identify any gaps in the market you think your product or service can fill.
If your product or service is something that already exists, don’t be discouraged. Focus on providing that in a way that nobody else can. Create excitement and interest, and find ways to set yourself apart. Research your competitors and their reviews to see where you can fill gaps in the market.
The idea here is to understand your place in the market and what value you can bring to the customer. Then conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) to identify potential obstacles and plan for the future of your business.
Step 2: Choose Your Products and Define Your Target Market
You need an excellent product to excel in the ecommerce market.
Luckily, there are several tried-and-tested strategies to choose from—something that solves a common customer pain point, something that appeals to a small niche market like hobbyists, or something that leans into your passion.
Define Your Target Market
Who is your ideal customer? What characteristics do they have?
An excellent way to answer these questions is by creating customer personas.
Personas are fictionalized versions of your ideal customers that make it easier to predict customer behavior. Using them, you can create a picture of the person you think would be best served by your product or service. Then you can figure out how to appeal to that person.
To create a persona, ask questions like:
- Where does this person live?
- How old are they?
- How much money do they make?
- What matters most to them?
This knowledge will help you understand where your target customers are likely to be online and what messages they are likely to respond to. This will help you market your product effectively when it’s time to launch your ecommerce store.
Brainstorm Products to Sell
Think about your personal experience. Have you worked in a specific industry that gives you insights others don’t have?
Keeping an eye on trends is equally important. Is there any opening in the market for a product or service that people will soon need based on industry trends? If you successfully recognize a relevant trend, you can establish yourself as a leader in the market early on.
Here are a few tips to spot trends:
- Browse Ecommerce Websites and Aggregator Sites: Use pages like Trend Hunter or assorted subreddits in your niche to clue into developing trends before they get bigger.
- Analyze Social Media: Go through the different social media channels frequented by your target audience, and see what they say and do. Also, browse through trending hashtags and use social listening tools to gather information and valuable insights.
- Follow Search Trends: Google Trends is a great place to see what trending products and solutions audiences are looking for. You can also use it to identify commonly used keywords in search.
Customer reviews are another goldmine for collecting data. Go through reviews of products similar to the one(s) you have in mind to see what people are saying. Try to identify what similar products lack and ensure your product or service has them.
Step 3: Validate Your Product Idea
At this stage, you already have a product idea and know your general target audience.
Next, you need to figure out whether you can execute your idea and understand if your business is actually viable. To evaluate your product’s viability, you can have two evaluation categories: market-based and product-based. Here’s how to go about it.
Several market factors influence your product and business model, which is why you must consider the following aspects:
- Market size and demand for your product/service
- Your competitors
- Whether it’s a growing market or flat market
- Whether there’s any trend or fad
- Whether customers can get this product or service locally
- Your target customers
After looking at market factors, you’ll know where the market is going and who you’re marketing to. Your next focus would be your product. For this, you’ll have to examine the following:
- Your potential selling price
- The potential market for your product or service
- The number of styles or types of products you will stock
- Whether you’ll offer a subscription
- Whether you are likely to experience seasonal buying fluctuations
- Product size, weight, and durability—provided you’re planning to sell physical products
- Whether your product or service solves a pain point
- Whether your product is consumable, perishable, or disposable
- Any relevant restrictions or regulations around your product
Analyze Evaluation Results
You should now have an idea of how much you’ll need to get your ecommerce business up and running.
For instance, if you plan to sell digital products, they are considerably cheaper to create and can be priced more according to the value they provide. On the other hand, if you want to offer a physical product with a low price point, you’ll need to sell more of them to turn a profit than a product with a higher premium.
Regardless, you should have a fair idea of your products or services’ potential and be able to avoid common mistakes that ecommerce sellers make. Only proceed with your product idea when you’re completely sure there’s enough of a market for your product or service.
Step 4: Plan Your Ecommerce Business
Your next focus should be on sourcing the product and managing inventory, and executing your business.
While you can make a digital product from anywhere, if you’re selling physical products, you must know how to obtain them. Additionally, you’ll also need a roadmap to keep a business on track, which is where a business plan comes into play.
Determine Your Revenue Model
When selling physical products, you have to figure out how you’ll obtain and ship orders to your customers. Luckily, there are quite a few models you can explore and choose based on your convenience.
In this case, you make the product and ship it to the customer yourself.
This is the recommended option if your product is on the affordable side of the spectrum, such as pottery or homemade soap. You can purchase ingredients in smaller batches to start, and while this would mean your profit margin would be smaller, you’ll have full control over the cost and risk.
Plus, you can scale up when you have more resources.
Partnering Up With a Manufacturer/Supplier
If you don’t have the expertise or resources to produce the product yourself, you can consider partnering with a manufacturer or other supplier.
That said, this option is only feasible if you have a product you plan to see (or purchase) in large numbers, as manufacturers usually require you to order in bulk. This may be a customer making large purchases or you purchasing inventory in bulk and filling orders from home. Also, you’ll have to figure out how you’ll cover the cost of large orders.
Some manufacturers will fulfill smaller orders and ship them for you to the customer, but you’ll need to speak with multiple manufacturers and compare what they can do to determine if it’s a good fit for your needs.
Dropshipping is an excellent option if you don’t want to deal with carrying inventory yourself.
Here, you partner with another company that takes up the responsibility of shipping your product to the customer. You list products on your site, and your dropshipping partner fulfills the order. As there’s no startup cost to make the product on your end, your margin is only about 20%.
This option comes with some drawbacks, such as long shipping times and not always knowing the quality of the product. Check out our in-depth guide to starting a dropshipping business to get more information.
Reselling Wholesale Products
In this case, you’ll buy commercial or independent versions of your desired product and then sell them through your store at a markup.
Keep in mind that you won’t have much control over pricing here as the manufacturer will set the purchase price while the market sets the markup.
Offer Digital Products
Digital products are the latest “it“ product in the ecommerce industry.
Anything that can be downloaded—books, PDFs, templates, videos, resources—has the potential to be a digital product. But you can also offer services like writing, graphic design, or therapy under this category.
Digital products or services are more convenient for customers and have a low overhead cost for you. I highly recommend offering products digitally when you’re starting to save money. Don’t be afraid to experiment with different products until you hit something more fitting for your audience and business.
Develop Your Business Plan
Writing a business plan will help you establish goals, as well as get into the particulars of what you’ll need to achieve them. Plus, with everything clearly outlined, you’ll have a better chance to keep your business on track.
I have also written an in-depth guide to help startup founders write a business plan. If you want more help, you can check it out here to get all the details.
Step 5: Sort Out Your Business’s Formalities
This is the more obvious step of starting an ecommerce business.
Before launching your company, you’ll have to pick a business name and a legal structure. Additionally, you’ll also need to apply for the applicable licenses and permits to stay on the right side of the law.
Name Your Business
Naming your business can be surprisingly challenging. You have to come up with something that sounds appealing, describes your ecommerce brand, and of course, hasn’t already been taken by somebody else.
To check availability, you can run a search with the U.S. Patent and Trademark office.
In the ecommerce niche, your business name and domain name should be the same. It makes it easier for customers to remember your site and also establishes brand identity.
So when selecting your name, make sure it’s also available as a domain. And check if the social media handles are available, too!
Decide Your Business Structure
You can register your business as one of the following:
- Sole proprietorship
- General partnership
- Limited liability company (LLC)
- S-Corp or C-Corp
Each of the above structures come with their own benefits and drawbacks. So it’s better to consult an attorney or any other legal expert to determine which would make the best fit for you and register your ecommerce business accordingly.
You can also use a business formation service to form your business and get an EIN and take care of everything for you. A top service we recommend is LegalNature. LegalNature assists with business formation, managing companies, and even help with HR needs. Prices start at $40 for business formation services.
Apply for Your EIN, Licenses, and Permits
Not all businesses need an employee identification number (EIN), but it helps separate your personal and business finances and is recommended. You’ll also need one if you want to open a business bank account or hire employees later on.
You also need to apply for any applicable permits or licenses your business will need to operate in your state. Of course, you won’t need the same kind of permits as a brick-and-mortar store if you run your ecommerce business from home. Still, you’ll want to cover your bases.
Check your local government’s website to see what business permits and licenses you may need. These may include sales tax permits, professional and trade licenses for specific industries, signage permits, and health, safety, and environmental permits.
Step 6: Create and Market Your Online Store
At this stage, you’re ready to launch your ecommerce business. Congratulations!
All that’s left is to choose a platform to build your online store.
There are tons of ecommerce platforms out there to choose from, so you’ll want to do some research to determine the right option for your business. After creating your store, you’ll then have to market your online business to enhance your reach.
Choose an Ecommerce Platform
The best ecommerce platforms let you do a myriad of tasks, including creating and launching your online store, customizing the design, adding (or purchasing) your domain, managing inventory, receiving payments, taking and shipping orders, and more.
I highly recommend BigCommerce for small businesses. It’s a robust all-in-one ecommerce platform that offers tons of native features, sans the higher cost. But you can also try Shopify, Zyro, and Square Online.
Market Your Business
Next, it’s time to tell the world about your ecommerce store and start selling your products.
You can apply the following digital marketing tactics to enhance your reach:
- Paid social media ads to drive more traffic
- Email marketing to inform, update, and remind your current and potential customers about the latest news related to your company and products
- Investing in SEO for more organic leads
- Writing engaging, informative, and relevant articles that answer customer questions
In my experience, it’s best to use multiple channels to market to your customer base. For instance, if you have a blog, you should promote it on your social media channels. Partnering up with affiliate marketers and using shoppable landing pages also work well.