The ecommerce business industry is exploding. Brick and mortar stores that temporarily closed may never open again.
I’ve been in retail since 2005, I’ve opened physical stores, I’ve launched profitable websites and I’ve marketed small and large brands online. The amount of interest in ecommerce right now is unprecedented.
Shopping online used to be a convenience and a luxury, now – it’s a necessity. The ecommerce businesses that I work with can’t keep enough products stocked. Ecommerce is projected to grow over 400% this decade.
A lot of folks want to know how to start an ecommerce business. If your goal is to make a quick buck – that’s all you’ll do, the goal should be a scalable, profitable business that lasts. You have to have a long-term vision for building an asset that brings true value to the market.
How To Start An Ecommerce Business In 7 Steps
Online retail is a booming business growing steady at 8%. But I’ve seen too many ecommerce businesses struggle to get traction. It’s taken me years to learn everything included in this page. Use the information here to set up your ecommerce store, protect yourself legally, get your finances in order, market and sell your product, and start building your store.
There’s nothing more rewarding starting a business from nothing and watching it grow. You build it up and no one can take it from you.
Building an ecommerce business takes more than choosing a brand name, writing product listings, and starting to sell products online. Even the best business ideas can flop if you aren’t driving enough traffic to your site. Just starting out? Check out our ecommerce learning center. Not sure how the ecommerce business works? Check out our ecommerce 101 article.
Step 1: Research Ecommerce Business Models
Beginning your research is the first critical step. Don’t operate off of a hunch. Growing any online business is an investment. Treat it as such.
There isn’t a single business model that works for everyone. Service-based business, software, digital product sales, and physical products are just the tip of the iceberg.
Before you can decide on what to sell online, you need to understand the different business models available.
It’s not rocket science, but it does impact your business structure. Lets take a brief look at each one.
Dropshipping
The dropshipping business model is the simplest way to start an online store. Dropshippers partner with manufacturers and fulfillment centers to store, pack, and ship products on their behalf. This allows entrepreneurs to run their business without inventory risk or upfront investment.
Dropshipping is a great ecommerce business model for new online entrepreneurs because it’s simple and requires little financial investment. You can also run your dropshipping business in your spare time – you don’t need to quit your job to start a successful store.
If you want to turn a profit without touching your product or investing heavily at the start, drop shipping or print on demand is a smart choice. However, the viability of dropshipping is questionable. For a sustained competitive edge, you should have your own products.
Wholesale Retail
The wholesale business model is similar to dropshipping, but there are a few key differences. Wholesalers buy products in bulk from manufacturers at a discount and then sell them online at retail prices.
This ecommerce business model is great for entrepreneurs who want to build their own brand and have more control over their product. However, it requires more time and effort than dropshipping because you’re responsible for manufacturing, packaging, and shipping your products.
Private/White Label
Typically with private labeling, you are having products specifically manufactured for your business. This ecommerce business model is great for entrepreneurs who want to build their own brand and have more control over the quality of their product.
Unlike dropshipping or wholesale, private-labeling requires a significant upfront investment. You’ll need to purchase inventory in bulk and may need to pay for warehousing space to store your products. Check out these private label products to kickstart your own idea.
Selling On Amazon
The Amazon business model, is quite different than selling on your own website. When you sell on Amazon, you’re selling your products alongside other third-party sellers.
To start selling on Amazon, you need to create a seller account and list your products. Amazon takes a commission from each sale, and they also charge for additional services like storage and shipping. It’s quite difficult to build a brand on a marketplace website like Amazon or Ebay. If you want to build a brand, it’s better to sell on your own website or create your own ecommerce store.
Resources On Ecommerce Business Models
I highly recommend that you take your time and learn the different business models and compare them mentally. Then decide which one best lines up with your resources and marketing strengths. Also, think about where do you want to sell.
Do you want to start your own online store on Shopify or do you want to sell on Amazon? Of course, you can do both, but marketing will be different. You can even skip selling products yourself and become an affiliate marketer. You should also study examples of successful businesses before diving in.
Step 2: Start Internet Niche Research
It pains me when people email me their ecommerce site and it’s filled with hundreds of products, dozens of categories, and no real focus.
Unless you have a massive budget, you can’t be the next Best Buy or Amazon. You have to niche down to run a profitable ecommerce store.
Choosing your niche is the most important step in opening your online business. Start this process by identifying successful companies already working in this space.
Make sure that the area is competitive – an absence of competition usually indicates that there’s no market, either.
Don’t pick an overly crowded niche, however, and skip anything dominated by major brands. If you’re having trouble with this, drill down further on what you want to do – the more specific you are, the less competition you are likely to face.
Niche-ing down also gives you the benefit of having a lot of “shoulder” niches, related to what you do, but not identical. You can work together with business owners in those niches to cross-promote, become (or acquire) an affiliate, and grow your customer base.
Using Data From Google
Keyword Planner – This is a great way to determine the relative difficulty of ranking for various keywords in your niche, as well as get an idea of how many people are searching for things related to what you want to sell.
Google Trends – You can use this free tool from Google to see if interest in your niche is increasing, decreasing, or staying about the same. If it’s dropping like a rock, you might want to reconsider. If you need some ideas, check out this list of trending products.
Pick a product category with a minimum of 1000 keywords and focus on a blog niche that does well in social media, where publishers in the area are affiliates on Amazon. If you can nab a few affiliate marketing opportunities, you won’t have to worry about shipping as much product, but you can still make a profit.
Resources On Niche Research
- How To Find Your Niche Online Without Costly Newbie Mistakes
- What To Sell Online: 21 Product Ideas That Drive Ecommerce Sales
- 10 Ways To Figure Out What To Sell On Amazon and Profit
- 125+ Print on Demand Products To Drop Ship
- 12 Best Options for Your Amazon Research
- 100+ Simple Things To Make And Sell Online
- How to Start a Content-First eCommerce Site
- How To Start An Online Boutique
Step 3: Validate Target Market and Product Ideas
Now that you’ve identified a niche and business model, you might be tempted to start hunting for products to sell.
Don’t. Before you think about product ideas, think about personas. You can’t expect people to buy your product if you don’t know who you’re selling to.
Who are you? What does the store represent? Who are your ideal customers? You need to project a consistent brand image (a journey that starts with your brand name). An organic seed company that started selling conventional fertilizer wouldn’t last very long.
The other thing you should think about is your second sale. It is hard to acquire new customers, once you do, you need to try to maximize their lifetime value. So consider your target audience and see if you can figure out upsells, cross sells or even a subscription based model.
Using Facebook For Market Research
Fortunately, Facebook makes it relatively easy for us to find your target audience online. Specifically, know exactly how many people you can target. You can drill down to get very focused numbers and detailed demographics.
I call it a “targetable target audience” – its a bit of a funny term, but you’d be surprised to know that most entrepreneurs have no idea how many people are in their target audience online. If you want a brand targeting hardcore triathletes that also enjoy mountain biking, you may have to go a little broader. You can’t build a business if your target audience is only 100K people.
Once you’ve identified the image you want to project and the customer you are catering to, it’s time to come up with product ideas. I suggest starting with one – you’ll invest less at the start, and if you want to offer more you can test the waters with affiliate marketing.
In the example of an organic seed company, you could find popular organic products on Amazon and create content to send traffic to those affiliate products. If something catches fire, you can consider making your own brand of that product. If you’re not 100% sure what to sell, you can use affiliate marketing to validate your idea. Product research is something you can’t skip over.
Sourcing Products
If you do end up taking the physical product route, you need to research manufacturers and find a reliable supplier. I recommend Alibaba for this, as it’s the world’s largest online market for sourcing products. You can find pretty much anything here, and if you have a product idea but don’t know how to make it yourself, chances are somebody on Alibaba does.
When considering a manufacturer or supplier, be sure to check their customer reviews and shipping times. In my experience, shipping from China takes anywhere from 2-8 weeks depending on the company you use.
Before you invest in the product, though, evaluate it carefully. Even if you choose a dropshipping model, you want to test it carefully and get a feel for the product yourself so you can identify any potential problems and prepare customer service scripts to answer common questions.
Part of validating your idea is to determine the profitability of it. Can you suppliers that meet your pricing? What happens if your supplier falls through is there a backup option?
Step 4: Register Your Ecommerce Business & Brand Name
If you want to start a successful business, you need a brand that connects with your persona. Identifying your persona makes building an ecommerce brand easier. You might avoid girlie colors and images if you are selling products to corporate businesswomen interested in living a sustainable life.
But before you set up your store and get into the nitty gritty of building a brand – there are some basic steps you’ll need to take.
Register Your Business.
Choose a business name and register your company. I recommend filing an LLC with an S-Corp election. There are legal protections and tax benefits for incorporating, so don’t skip it.
Pick Your Store’s Name
The name of your site and the legal name of your business don’t need to be identical, but keeping them consistent has its benefits. Make sure whatever you choose fits your niche – you don’t want to pick a brand name at the last minute.
Get Your Business Licenses
If you’re not familiar with this process, the Small Business Association has plenty of resources to help you get started, including a mentor-protege network and courses on small business basics. Look actively for mentors – their advice can be priceless, even for little things like acquiring business licenses. One of the smartest decisions I ever made was finding someone who could show me the ropes.
Get Your Employer Identification Number
You’ll need an Employer Identification Number (EIN) to open a business bank account and file your business taxes next April, even if you don’t plan on having any employees. Your EIN is a bit like your business’ social security number: it’s a unique number that identifies your business and helps you file important paperwork.
Apply for Business Licenses and Permits
Operating an online store does not exclude you from needing certain business licenses and permits. Check with your city, county, and state to see what sorts of sales tax licenses or home business licenses you need, and get those approved before you start operating.
Find the Right Vendors
You’ll have a lot of competition selling products online, so it’s in your best interest to find the best quality and best prices for the products you sell or materials you use to create your products. Shop around until you find a vendor you want to do business with long-term – this includes your ecommerce software (your “shopping cart”). Think scalable from the start.
Logo Creation
Don’t fret over it too much, but do make sure that it is not in use by another company in your niche. Logo design doesn’t have to be terribly original, however (and really shouldn’t).
Any ecommerce company needs a brand identity. It’s what distinguishes your company from the rest and helps you build an audience. From your website design to the way you communicate with customers, your brand identity should be reflected in everything.
Get Visual
Consider the colors of your brand, the imagery you’ll use, and the typeface or fonts you’ll employ carefully. If you’ve got the budget, you might want to hire a marketing firm to create a design brief for your company. If not, you can create your own. Just keep it consistent and read marketing tips designed to help build your brand.
Step 5: Finalize Your Ecommerce Business Plan
By now you should have a great idea of what your business will look like. You have your target market, your product niche and your brand name.
Now is a good time to step back and put your business plan on paper and determine your startup budget, loan needs and monthly expenses.
Financial Management
The most important aspect of a business is the financial one. Figure out your break-even point, both in unit sales and duration (in months). Any real business is an investment of resources. In fact that was one of the first things I learned in MBA school. A CEO’s role is to take resources and turn it into a return.
Yet, I am sad to see that many entrepreneurs don’t take the time to project their revenue and expenses. If you can’t figure out your profit margin, you will fail.
The business planning phase is also when you want to iron out details like your staff, product sourcing, logistics and marketing budget. Make sure you understand all the available financial resources available to you. And learn the basics of accounting and bookkeeping, even if you hire someone else to manage your books.
Inventory Management & Fulfillment
Many entrepreneurs steer away from selling physical products online. You don’t need to store products in your garage to sell online. You can utilize fulfillment centers to handle the inventory for you.
Companies like ShipBob will store your inventory for you while they utilize their warehouse space to ship products. Once you have a lot of assets tied up in inventory, you’ll need insurance.
Inventory management software will help keep your business organized, especially if you are dealing with a large inventory of items. But I wouldn’t recommend it for beginners. Keep it simple when you start off. Order products from the manufacture and have it sent straight to the fulfillment center.
Make sure you iron out logistics before building your store. Even if you are dropshipping, you will need to know where your inventory is coming from.
And no ecommerce business can succeed without a solid strategy, so be sure to have that outlined as well.
Step 6: Create Your Online Store
Once you’re officially an ecommerce business owner, you need to register your domain name and any redirect URLs that might be relevant. You’re going to need the website design info you settled on in the last step now, when you finally build your storefront.
There’s a lot of moving parts when it comes to an ecommerce website, but I’ve broken it down here.
Whatever design you chose needs to be compatible with your ecommerce software, too.
There are literally hundreds of ecommerce shopping cart platforms, some are free while others are premium. Choosing the right ecommerce software is not easy. You need to carefully evaluate things like loading speed, features, compatibility with different payment gateways, compatibility with your business structure, your web developer skills, SEO-friendly features, and more.
I’m putting together reviews and comparisons to help you pick the right one. We’ve done a ton of research and the best options are below.
Once you decide on your ecommerce solution, don’t hire a “CRO Expert” or expensive development company. Just use a theme. You might need to pay a small fee of $100 or so to get a good template, depending on the shopping cart you choose and what they offer.
There’s lots of themes for BigCommerce, Shopify and WooCommerce. If you’re looking for a powerful Shopify theme to help turn visitors into buyers, Booster Theme may be a good option. It includes marketing tools that would help you save $281/month on apps. Booster Theme includes integrated apps, conversion-optimized designs, and loading speeds that you can’t find in any other theme.
Not a fan of Shopify? There are a ton of alternatives.
If you don’t want to worry about taking credit card payments, you can sell products online on a marketplace like Amazon.
Love the idea of your own digital real estate? Make sure your ecommerce platform can scale with you and integrate with popular ecommerce marketplaces to increase your exposure.
Setting up your online store is much more than adding your products and content. You need to get your email marketing and automation set up as well.
This is important to set up BEFORE you get traffic. Email marketing is essential for driving conversions. Make sure you set up coupons, thank you emails, and upsells so you can turn visitors into shoppers. You also have to think about customer support.
Ecommerce Website Resources
- Complete List of Online Store Builders
- The 56-Point Ecommerce Website Checklist For Launch Success
- Shopify Site Launch Checklist
- How to Set Up a Shopify Store For Success
- How to Start an Online Store and Get Sales on Day 1
- Ecommerce Website Development: What Store Owners Should Know
- Step By Step Guide to Creating an Ecommerce Website
Step 7: Attracting Customers to Your Ecommerce Store
Apologies to any Field of Dreams fans, but if you build it there’s no guarantee they’ll come. You need a real marketing plan.
When you chose your cart, I told you to think about search engine friendly features. They are NOT all the same.
Ecommerce SEO
The keyword-stuffing days of the early 2000s are long gone, but SEO is alive and well. You need to keep keywords and search terms in mind on each page of your site, in your URLS, and in your ad campaigns. You also need to think about driving traffic to your site.
The best ecommerce sites invest heavily in online marketing. If you don’t have the funds, you better have the elbow grease. Subscribe to marketing newsletters or listen to digital marketing podcasts to keep a pulse on the digital marketing industry and get your fill of marketing tips.
Facebook and Instagram Marketing
Will you use sponsored content, social media, pay-per-click ads, or a combination of strategies? How will you monitor what campaigns are driving traffic to your store? If marketing your site seems overwhelming, will you hire help?
Your site isn’t the only thing you need to drive traffic to. The product(s) you choose also need to be included in your marketing budget.
Your mission is to sell products, not drive traffic. To sell products, you have to think beyond your site and look for expansion areas.
Email Marketing is Huge
No matter what and how you decide to sell, the first step is to set up your email marketing automation. Place an opt-in freebie on your website, launch a social media campaign to gain subscribers, or host a giveaway where the entry ‘fee’ is your customer’s email address.
Running a giveaway is my go-to marketing tactic to get traffic and subscribers quickly. Giveaways have the added benefit of increasing your brand presence and product visibility. Building an email list gives you a group of warm leads to work with, making the sales process much easier.
Providing consumers with coupons and content via email helps to keep your brand on their mind, boost sales, and establish credibility. Keep your emails interesting – ask for your customers’ input often, including reviews. Also, send them your new blog posts. It’s important to mix in helpful content and not just pummel them with sales offers. Respond quickly to customer service and product quality issues, and work on building relationships. No sales interaction is about the first sale; focus on the next one always.
Analyzing Website Performance
On your site, look at how and where traffic flows. Are your product pages targeted to your persona? Are you losing potential customers in the same place? If you’re driving traffic to your store but nothing is selling, fix the leaks in your sales funnel by carefully optimizing each page and taking a close look at your product listings. Use Google analytics to help with this task. There are tools that can help you monitor and optimize every step of the sales process. Make use of them.
Look into partner and affiliate marketing to boost your brand presence by offering affiliate marketing options and partnering with retailers in your shoulder niches.
You can also offer bloggers in your niche a free sample of your product in exchange for reviews. If you’re selling products on Amazon, one easy way to gain consumer respect and confidence (and reviews) is to ask for feedback. Include a card with each product that asks for an honest review and provides contact information for your company (email is enough, unless you have a dedicated customer service phone line).
Ecommerce Marketing Resources
- Shopify SEO Case Study: How I Ranked a Shopify Store #1 in 30 Minutes
- What is Ecommerce Marketing? Top Strategies, Tips & More
- How to Create an Effective Ecommerce Marketing Strategy
- 15 Instagram Marketing Tips to Spread Your Ecommerce Brand Like Wildfire [INFOGRAPHIC]
- How to Promote Your Products Through Advertising and Online Communities
- Marketing Books and Resources
- How to Create a Facebook Shop in 5 Easy Steps
Ready To Start Your Ecommerce Business?
What are you waiting for? With so many successful ecommerce businesses, it is time to think big and start your own. You could sell anything online!
Did this post answer your questions about starting an ecommerce store? If so, please give it a share. I’ve spent years helping business owners like you. Running a successful ecommerce website doesn’t have to be a struggle or pricey.
If you’ve got the elbow grease and time, you could launch a profitable online store for a few hundred dollars per month.
Your success is important to me. If you take the time to read through the resources above, you’ll save hundreds of hours of work and you’ll know where you’re more likely to get your money’s worth in ecommerce. I really hope you enjoyed the insights I’ve shared on starting an ecommerce business.
Good luck with your ecommerce startup!
