These days, starting an ecommerce business is more accessible, and potentially more lucrative, than it’s ever been. Understanding how to navigate the world of online shopping is the key to turning your idea for an ecommerce business into a reality – and in this guide, I’ll explain how you can do this in 10 steps.
Laying down all the groundwork for starting an ecommerce business can initially seem like an overwhelming task. However, having launched a few small ecommerce businesses of my own, I can assure you that once you’re familiar with the steps involved, it’s not nearly as complicated as it seems.
Whether you’re looking to expand your brick-and-mortar business into ecommerce or you're starting out from scratch, I'm here to help. In this guide, I’ll walk you through everything you need to know to start your own ecommerce business, from coming up with ideas to accepting online payments.
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What Is an Ecommerce Business?
The term ‘ecommerce’ refers to the buying and selling of any goods and services on the internet, and the exchange of money needed to make these transactions happen. It isn’t necessarily just desktop traffic – a growing part of ecommerce traffic is accounted for by mobile commerce.
Businesses that sell their products or services online are ecommerce businesses. It’s worth noting that ecommerce businesses don’t necessarily operate solely through one website, or even solely online. Many businesses use multichannel retailing, which means that they're available on different platforms or in a brick-and-mortar store.
Not all ecommerce businesses operate in the same way; there are several different models that you can use. These are the four most commonly used ecommerce business models:
- Business-to-business (B2B): The B2B commerce model is when your business is primarily selling its products or services to other businesses. Online wholesalers are an example of this, as they typically sell their products in bulk to other businesses that repurpose them and sell them for a profit – Alibaba is one such example.
- Business-to-consumer (B2C): The B2C commerce model is when your business is selling largely to consumers. If you want to open an online store aimed at individual customers, your business will fall into the B2C commerce model. ASOS and FreshDirect are two examples of large ecommerce businesses that use a B2C model.
- Consumer-to-consumer (C2C): C2C is an ecommerce business model that involves running an online platform that lets your customers trade with each other. Online marketplaces, such as Etsy or eBay, are an example of this. There are also companies that allow C2C payments, such as PayPal and Venmo.
- Consumer-to-business (C2B): C2B reverses the traditional flow of things and makes it so that consumers are able to sell their services to businesses. An example of this is Upwork.
Ecommerce businesses have boomed in recent decades, and with good reason. They changed the landscape of the retail consumer experience, to the extent that online shopping is now simply a normal part of everyday life for a lot of people.
Here are a few of the benefits of ecommerce that have contributed to its rise in popularity, from both a consumer and business perspective:
- Around-the-clock shopping: One of the major benefits of running an online business for both you and the customer is that your shop is always open. This significantly boosts your opportunities to make sales.
- Ease of access: From the point of view of many customers, an online store is more convenient and easily available. They could even buy from you on their smartphone without having to get out of bed.
- Reduced running costs: As an ecommerce business, you won’t need to employ sales staff or pay to rent a space, making the cost to run your business substantially lower than at a physical store.
- Wider market reach: If you decide to offer nationwide or international shipping, you can expand your business’s reach beyond just your town or region and serve a wider area instead.
10 Steps to Start an Ecommerce Business
The best way to ensure you’re successful in your journey toward launching your ecommerce business is to develop and follow a clear plan. I’ve simplified the process into 10 steps to help you get started.
1. Research and Identify a Market Niche
Many great businesses started off with some well-thought-out research, so it's never a bad idea for you to do the same. Now is a good time to start gathering information and learning about the market you’re about to enter so that you can make better-informed decisions for your business down the road.
This will help you flesh out your vision and strengthen your starting point. This is sure to come in handy when you get around to locking in some details and writing out your business plan.
If you already run a physical store and are expanding it into the world of ecommerce, then you likely already have an answer to some of these questions, so you can skip this step and read on. However, if you're just starting your business, then doing some thorough research will help guide your decisions going forward.
The first step to take toward building your ecommerce business is asking yourself the following questions:
- Which of the four ecommerce business models are you going to use?
- Who are your customers going to be?
- What exactly do you want to sell, be it a product or a service?
- How will you source your products? Are you going to be producing them yourself, or will you be working with a manufacturer or a supplier?
- How will you deliver the products or services to your customers? Will you be shipping to them directly or using a dropshipping model?
Once you’ve figured these things out, you can start doing your market research. A good starting point for your research could be diving into Google Trends or Facebook Analytics data for similar products to what you plan on selling and for similar demographics of your target audience.
Gaining some insight into things like current industry trends, typical price points for similar products or services, and what products are missing from the industry will help you identify your niche in the market.
2. Validate Your Idea and Analyze Your Competition
You now have a clear idea of the market need that your business is going to try to meet. However, it’s important that your potential customers do, in fact, feel that need.
A good way to find out could be to create an online survey aimed at people that fall into your selected target audience. To encourage people to answer the survey, you could offer them a discount code for their first order at your online store when you open it. Alternatively, you could use a service like Prolific to run a paid study.
You can use this opportunity to get a feel for the amount these potential customers might be willing to pay for your service or products. Pay close attention here: some of their feedback may offer a fresh perspective and help you improve upon your idea in ways that you hadn’t thought of before.
After that, it's worth doing some research into other online businesses that are trying to fill a similar niche in the market. Look into the range of products they’re selling, their price points, their social media presence, and their marketing strategies.
Analyzing how your competition does business can help you understand the market you’re about to enter.
You can learn from the things your competition is doing, see what you can improve upon, and work all these things into your ecommerce business. This will help you launch with a good chance of gaining some of their market share.
3. Create a Business Plan
To maximize your business’s chance at success, it’s a good idea to summarize all the research and analysis you’ve done up to this point, and write out your business plan. Your business plan will form your ecommerce business’s roadmap and will guide the decisions you make for it moving forward.
To make your business plan as thorough as possible, make sure you cover several important aspects, such as:
- An executive summary of your business
- An analysis of the market and your competition
- How you plan to source your inventory
- Where are you going to sell your products or services
- Your plan for marketing your business
- How you’re going to fulfill customer orders
- How much it’s going to cost you to get started, and whether you’ll need funding to do so
- Financial projections for your first few years
If you’re going to seek out funding, either before you launch or in the future when you’re trying to expand your business, your business plan might come in handy.
Remember that while your business plan is an important document that will guide your business’s identity and direction, you can and should adapt it whenever you feel it’s needed. If you're starting out small, you don't need to make it all that formal.
4. Name and Register Your Business
Next, it’s time to choose a name and register your new ecommerce business. When you’re deciding on a name, make sure you choose something simple and memorable, but also make sure that it still tells the story you want it to. Ideally, it'd be something closely related to what you're selling.
Once you’ve chosen a name, it’s important you check that the domain name is available, and register it as soon as you can. Making sure your brand and domain name are similar goes a long way for an ecommerce business, and this way, you’re ready to start building your website when you reach that stage of the process.
The exact process of registering your business varies by state, but in general, you register it on your local Secretary of State's website. You should also double-check with the U.S. Patent and Trademark Office to make sure your chosen business name isn’t already in use.
You’ll also need to choose a legal structure for your business, meaning the type of company you're setting up. Typically, ecommerce businesses that start out small opt to register as a Limited Liability Corporation (LLC). If you’re unsure about which choice is right for your business, consider consulting a legal professional.
4. Apply for an EIN and Obtain Business Licenses
After you've registered your company, you’ll need to apply for an employer identification number (EIN) for your ecommerce business. If you’re going to be selling to consumers, you’ll need an EIN for tax purposes before you can start accepting payments from them, even if you start out without any employees.
As an added bonus, this will allow you to purchase from wholesalers and keep your business finances separate from your personal finances.
Once you’ve applied for your EIN, think about any business permits or licenses you need to operate legally in your region. For most business entity types, you’ll need a general operating license, and depending on your location, you may also need a local operating license.
In general, since a lot of ecommerce businesses are home-based, most don’t require as many licenses and permits as physical stores. However, these requirements can vary depending on your area – it’s best to look this information up on your local state website to err on the side of caution.
5. Create Your Ecommerce Website
Having finished with the bulk of the planning and preparation needed to legally set up your venture, it’s now time to start looking into creating your ecommerce website. As an ecommerce business, your website will serve as your storefront, so it's important to get it right.
Choose a Website Builder
To start building your online store, you’ll need to choose the website-building platform that best suits your needs. There’s a huge variety of website builders out there today, many of which don’t require any coding experience, so creating your site can be as simple a process as you’d like.
Some other factors to consider when you’re choosing a website builder are the pages it will have available in its ecommerce website templates, and how well its templates are optimized for mobile devices. Many platforms offer a free domain with their paid plans as well – if you go with one of these, you won’t need to register one separately.
Start Building Your Website
Once you’ve chosen a website builder, you’re ready to start building your online store.
There are certain pages where customers tend to decide whether or not to buy from a business, so it’s important for you to optimize these and make them easy to navigate. Make sure to pay extra attention when you’re building these pages:
- Homepage
- Product listing pages
- Product detail pages
- Shopping cart page
- Pages that clearly state your business’ terms and policies.
You want to turn as many of your visitors as possible into customers, and optimizing these pages will help you toward that. Ultimately, it might help you boost your sales revenue.
For your product pages, in particular, using concise, informative, and well-written item descriptions, along with great photos, can go a long way in making a customer want to buy them. Additionally, you’ll want to have a good display of related products on your product detail pages as these could lead customers to purchase purchase additional items.
Create a Great Checkout Experience
Abandoned carts are a common woe of ecommerce, and ensuring your customers enjoy a smooth, simple checkout experience is vital to preventing it. The two key pages to keep in mind for this step are your checkout page and your thank you pages – the latter of which is often neglected, but can be a very useful tool.
Some things to remember to include when you create your checkout page are to allow guest checkout, make sure your design is mobile-friendly, and reassure your customers that your website is secure with trust badges.
Additionally, offering a variety of payment options will lead more of your customers to complete their purchases. With Pay.com, you can create a smooth, customized checkout page, as well as offer your customers all the most commonly used online payment options.
Finally, creating a great thank you page is important for a few reasons.
For one, it’s there to reassure customers they’ve put in the right details and bought the right thing. It’s also a chance for you to provide them with any extra information such as tracking information, to ask them to share feedback about their experience, or to recommend related items for them to purchase.
7. Price Your Products
If it’s your first time pricing products, it can be easy to get lost. However, it’s important to remember that the price you use when you launch is just that – a start. You’re free to adjust your pricing in the future.
Pricing your products is about striking a fine balance between the total cost and a price point that your customers will be willing to pay. You can use the competitor research you’ve performed and your surveys to help give you an idea of how much your customers may be willing to pay.
One simple and effective strategy you can use is to set your first price is called cost-plus pricing. To do this, you calculate all the costs involved in procuring each of your products – don’t forget to add all your fixed costs as well. Then, you set your profit margin on top of these costs, and that gives you your starting price.
Once you’ve launched, don’t forget to keep yourself informed about your competitors’ pricing, your sales figures, and consumer trends – and adjust your prices as you go.
8. Set Up Your Ecommerce Fulfillment Strategy
Setting up how you’ll process your orders, how you’ll pack and ship them to your customers, and how you’ll deal with returns are all important aspects of your ecommerce business.
If you’re going to be selling services or digital products, or are going to use a dropshipping model, packing and shipping are less of a concern. However, if you’re selling physical products, you need to consider how you’re going to get your products to your customers.
Starting out small is always a good strategy; you can likely just use a place in your home to store and ship products from. As you grow your business, you may need to rent out some space and hire some extra help to take care of storage, shipping, and returns. You don't have to stress about this now, but it's good to look to the future sometimes!
Alternatively, you can work with an ecommerce fulfillment service which can take care of the entire process for you for a fee. You don't have to stress about this now, but it's good to look to the future sometimes!
Having an effective and quick fulfillment process will help you offer a great online shopping experience from start to finish. This may, in turn, help you grow your company and attract more customers in the long run.
9. Set Up Your Payment Framework
Before your ecommerce business can start accepting payments, you’ll need to set up an account with a payment service provider. Here’s an easy way for you to do this.
Pay.com is a quick and seamless way to start accepting a wide range of payment methods, with one of the most straightforward onboarding processes in the industry. Even for a first-time business owner, it’s a very approachable setup process – you can be up and running in no time.
In addition to letting you accept a variety of payment methods, Pay.com gives you the ability to create a custom checkout page that matches your brand and the rest of your store, providing a seamless checkout experience for your customers.
Finally, once you’re all set up, the Pay Dashboard can help give you a clear overview of all your transactions. It lets you track all the fees you’re paying – such as credit card processing fees – and is always transparent about the rates you’re being charged.
Don’t wait till the last minute – click here to find out how you can get started now!
10. Market Your Business
Congrats! You’ve now successfully launched your new ecommerce business, and are on your way to making your first few sales. Now, you can shift your focus to marketing your business and trying to bring in more customers.
There are a lot of marketing strategies out there that you could use, and this will vary depending on the type of product or service you’re selling as well as the budget you’ve allocated toward a possible marketing campaign. Don't worry if you can't fund a whole campaign, though – a lot of marketing can be done for free.
Here are a few ways in which you can market your business:
- Search Engine Optimization (SEO) – As your business is primarily online, making sure your website is search-engine-optimized is key to being easily found by potential customers.
- Social media marketing – Having a strong presence on social media platforms can help you build your brand image and market your company for free.
- Paid social media and search engine advertising – A good way to catch the eye of new potential customers.
- Email marketing – A great way to stay in touch with your past customers, especially when paired with discount offers to incentivize them to come back to buy from you again.
Keep an eye on your business metrics, like your sales and website traffic figures, and see how they progress as you add in more marketing strategies. This will help you identify which strategies are working out better for you and you can focus your efforts more on these moving forward.
How Much Does It Cost to Start an Ecommerce Business?
Starting an ecommerce business can cost anywhere from a hundred dollars to a several thousand dollar investment.
The amount of money you’ll need to get started can vary significantly depending on the type of business you’re aiming to start, and the business model you plan to use. For example, a business selling ebooks online can cost close to nothing to get started, while an online grocery business can cost thousands of dollars.
Here are some of the costs and expenses you’ll need to consider to get your ecommerce business off the ground:
- Business licensing and permits: The costs involved with your legal documents, like licensing and permits, will vary depending on your location, your business entity type, and the products you’re selling. These fees can be anywhere between $50 and a few hundred dollars.
- Inventory: Inventory can be a large upfront expense, unless you’re using a dropshipping model or selling a service as opposed to a product. Starting out with a small inventory is a good way to tackle this, and scaling up as you gain confidence that there is sufficient demand for what you're selling.
- Marketing: When you’re just starting out, using free marketing channels is a sensible way to go about this, and to scale up and invest in paid marketing options later. The U.S. Small Business Administration recommends spending 7-8 percent of your revenue on marketing, assuming your profit margins are 10-12 percent.
- Website hosting and domain name: A domain name can cost as little as $1 a year, and hosting your website can cost anywhere from a few to a few hundred dollars each month. If you opt to use an ecommerce platform to host your website, these can cost between $29 and $80 per month.
- Employees: Even if you’re starting out as a sole proprietor, you may find your business grows quickly and requires you to hire employees.
Depending on the business model you use, starting up your ecommerce business can cost anywhere from a few hundred to tens of thousands of dollars.
Even if there's an upfront cost, running an ecommerce business eliminates a lot of the high costs that running a physical store entails – such as rent and maintenance – and can potentially give you a far better return on your investment.
Tips for Starting an Ecommerce Store
Starting a successful ecommerce can be a tricky journey, with a lot of moving parts, but if you're prepared, you'll have a much easier time! Here are a few tips that can help improve your chance of success and reduce the risk you take on:
- Start small: Making a huge upfront investment is something you want to avoid unless you’re sure there’s going to be sufficient demand for what you’re selling. You could test the waters and start with a small inventory or try out a dropshipping model. Once you’re confident that you can sell in larger quantities, you can build from there.
- Optimize your customer journey: A confusing or unpleasant shopping experience can quickly put a customer off from returning to your online store. Conversely, a smooth shopping experience is likely to make them want to come back. Make your website fast, intuitive, descriptive, mobile-optimized, and display related and similar items on product pages. Make your customer support and refunds process simple and seamless, and don’t forget to set up a smooth payment experience. All of these things count toward the user experience (UX) of your website.
- Experiment with marketing: Start off using free marketing channels and add new marketing strategies one at a time. Pay attention to how they impact your sales and traffic figures, and focus more on the marketing channels that work best.
- Take advantage of multichannel retailing: List some of your best-selling products on multiple online sales channels – this will help you draw in some customers that otherwise may not have visited your online store.
The Pros and Cons of Starting an Ecommerce Business
Starting your own ecommerce business can be a rewarding endeavor that can give you a lot more autonomy than working a traditional job. However, it doesn’t come without drawbacks. Let’s look at a few pros and cons of starting an ecommerce business.
Pros
- You’re your own boss and set your own hours.
- You’re not limited to local customers, and can sell internationally if you choose to.
- It’s relatively easy to enter the market, with various selling options in addition to your own ecommerce store, for example, online marketplaces like Amazon, Etsy, and eBay.
- You can easily start your ecommerce business out of your own home.
Cons
- The competition can be fierce and it can take a while for you to develop a strong customer base and start being profitable.
- As your business grows, you may need to invest more time and money to meet your increasing demands.
- Industry trends can shift and keeping up with them can be time-consuming.
The Bottom Line: Is Starting an Ecommerce Business Right for You?
Starting an ecommerce business takes a bit of work and research, but when you break it down into a few steps, it isn’t all that complicated.
If you’re enterprising, dedicated, and willing to learn from the experience you gain along the way and adapt accordingly, starting an ecommerce business could be an exciting journey. Speaking from my own experience, I can say that while finding your footing can sometimes take time, the rewards you reap once you do make it all worth it.
With all the various sales and ecommerce tools easily available today, and with Pay.com to service all your payment-related needs, getting your ecommerce business off the ground is easier than ever.
If thinking through the steps in this article has reaffirmed for you that your idea may have legs, then I’d urge you to take the leap and give it a chance to become a reality!
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