Build the e-commerce business of your dreams with help from this handy how-to guide.
Market Research and Planning
- Identify Your Niche: Research current trends and demand in the e-commerce space. Consider your interests, market size, competition, and profitability.
- Target Audience: Define your ideal customer profile. Understand their preferences, behaviors, and purchasing patterns.
- Business Plan: Develop a detailed business plan outlining your business model, revenue streams, marketing strategies, and financial projections.
Legal and Administrative Setup
- Business Structure: Choose a legal structure for your business (e.g., sole proprietorship, LLC, corporation) and register your business name.
- Licenses and Permits: Obtain necessary licenses and permits required for operating an e-commerce business in your location.
- Tax Considerations: Register for taxes, understand your tax obligations, and set up accounting practices.
Product Selection and Sourcing
- Product Selection: Decide on the products you will sell. This could be physical goods, digital products, or services.
- Suppliers and Inventory: Find reliable suppliers or manufacturers if you’re selling physical products. Consider dropshipping if you don’t want to handle inventory.
Build Your Online Store
- Choose a Platform: Select an e-commerce platform that fits your needs (e.g., Shopify, WooCommerce, BigCommerce). Consider factors like ease of use, scalability, and features.
- Design Your Store: Create a user-friendly and visually appealing website. Customize your store’s design to reflect your brand and enhance customer experience.
- Payment Gateways: Set up payment gateways to process transactions securely (e.g., PayPal, Stripe, credit card processors).
. Digital Marketing and Sales Strategy
- SEO: Optimize your website for search engines to increase organic traffic.
- Content Marketing: Create valuable content (blogs, videos, social media posts) to engage with your audience and drive traffic.
- Social Media Marketing: Utilize social media platforms to promote your products, engage with customers, and build brand awareness.
- Email Marketing: Develop an email marketing strategy to nurture leads, announce promotions, and retain customers.
Launch and Growth
- Soft Launch: Consider a soft launch to test your store with a limited audience before a full-scale launch.
- Analytics: Use tools like Google Analytics to monitor your store’s performance, track visitor behavior, and make data-driven decisions.
- Customer Feedback: Gather and analyze customer feedback to improve your products, services, and overall shopping experience.
- Scale Your Business: Explore opportunities for growth, such as expanding product lines, entering new markets, or investing in paid advertising.
Ongoing Management
- Customer Service: Provide excellent customer support to address issues, answer queries, and build customer loyalty.
- Inventory Management: Keep track of inventory levels, manage stock, and streamline order fulfillment.
- Regular Updates: Continuously update your website, products, and marketing strategies to adapt to changing market trends and customer preferences.
Key Considerations for 2024
- Mobile Optimization: Ensure your e-commerce store is fully optimized for mobile devices, as mobile shopping continues to rise.
- AI and Automation: Leverage AI tools for personalized marketing, customer service chatbots, and inventory management.
- Sustainability: Consider eco-friendly practices and products, as consumers increasingly value sustainability.
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Starting your own e-commerce business is an exciting venture, especially if you’ve dreamed about the freedom of being your own boss. If you are crafty or have a knack for selling, then the entrepreneurial route could be a great choice for you.
Lifting a business off the ground is hard work. It requires business acumen, creativity, and discipline to take the necessary steps to put your idea out there. But it can be a very worthwhile and rewarding journey. Global e-commerce sales are projected to reach $6.3 trillion in 2024, and, according to the US Census Bureau, e-commerce accounted for 15.4 percent of total sales in 2023 [1, 2]. There is huge potential to profit from e-commerce.
In this article, you'll find a step-by-step guide to starting your online business, learn about the possible costs you may encounter along the way, and explore cost-effective courses to help you gain the skills to set up a successful business. If you're ready to explore e-commerce now, consider enrolling in the Google Digital Marketing & E-Commerce Professional Certificate, which includes building and managing e-commerce stores.
How to start an e-commerce business
E-commerce is on the rise, so you’ll need to consider how to stand out because everyone can use digital marketing for their business. Despite the competition, there is a bright future ahead for e-commerce entrepreneurs. Here’s how to get started.
Step 1: Research e-commerce models and decide what to sell.
The e-commerce space today is vast, with plenty of competition, so it is important to consider what your e-commerce business model will be. There are four basic types:
Business-to-customer (B2C): A common business model, in which a business sells to consumers, anything from spices to shoes. B2C brands can sell different brands under one umbrella, such as Amazon, Walmart, and Alibaba.
Business-to-business (B2B): In B2B models, businesses sell products or services to other businesses. Orders tend to be recurring purchases. Examples include Amazon Business, Alibaba, and Rakuten.
Customer-to-customer (C2C): C2C models tend to be online marketplaces that connect consumers to exchange and sell goods and services. Online C2C businesses include Craigslist, Etsy, and eBay.
Customer-to-business (C2B): With C2B, individuals sell their goods and services to companies. A good example is Upwork, which enables businesses to hire freelancers.
At the same time that you're considering your business model, you'll also want to explore the delivery method you'll use to distribute your goods or services. Generally, you'll use one of the following delivery methods:
Direct-to-consumer (D2C): Sell your own products directly to customers, without the help of wholesalers or retailers.
Dropshipping: Set up a storefront (website) so customers can pay by credit card or PayPal, sourcing from a supplier that manages inventory and packaging. Dropship businesses are quick and inexpensive to start.
Wholesaling: Purchase products in bulk at a discounted rate from a retailer to sell on your website.
White label: Put your own name and brand on a generic product that you purchase from a distributor.
Private label: Hire a manufacturer to create a product to be sold exclusively by you.
Subscription: Deliver products such as pet food or fresh vegetable boxes on a monthly or weekly basis to loyal customers who prioritize convenience.
Read more: E-commerce Platforms: How They Compare + How to Choose One
Find your niche
To find your niche, you’ll want to consider what type of product you want to sell, to whom, and how you will distribute it. Whether you sell your own hand-crafted products or source generic ones, you make all the decisions when you start a business—and you get to decide what works best.
Step 2: Write a business plan.
After you establish the foundation of your business, you’re ready to draft a business plan. This written document details your objectives and roadmap for finance, operations, and marketing. You can use it to get organized and be used to attract potential investors.
Do some research to figure out the current competitors and market landscape for your product or service. Determine your target market and how you might sell to potential customers. Plan the logistics, including when, where, and how you will proceed in the coming months.
Read more: Business Plan: What It Is + How to Write One
Step 3: Choose a business name and start building your brand.
Next, your business needs a name and brand identity. For those starting white label e-commerce businesses, the brand is especially crucial to the success of your business.
Choosing a business name can be fun, but it requires a bit of strategic thinking. In addition to a unique yet uncomplicated name that clearly explains what your product is, you’ll also want to check if the web domain, social media handles, and legal name are available. Do your research to make sure it translates well across cultures, especially if you aim to go global.
In building your brand, you’ll need to design a logo that will be placed on all packaging, website design, and marketing materials. Eventually, you may want to hire a designer who can translate your brand’s ethos into beautiful web visuals.
Step 4: Register your business.
Before you begin selling, you’ll need to register your business by choosing a legal structure, applying for an employer identification number (EIN), and obtaining other permits and licenses specific to your chosen business model.
Once you’ve decided on a business name, consult your local secretary of state’s website and U.S. Patent and Trademark Office to ensure your business name is available. You will need to choose your legal structure, a business entity type that will determine the legal and financial guidelines of your online business—typically, you can select from a general partnership, LLC, corporation, or sole proprietorship. Consider consulting a legal professional to ensure the right choice for your business.
Next, you can apply for an EIN. Registering for this business tax ID can be done online for free from the IRS website. This nine-digit number allows you to separate your business finances from your personal finances.
After receiving your EIN, check what other business licenses and permits you need to operate in your city and state. If your business is a general partnership or sole proprietorship, you won’t need to register with your state unless you file a DBA (“doing business as”). Many e-commerce businesses are home-based, so they don’t need as many licenses as brick-and-mortar stores, but you might need a home occupation permit that states your business doesn’t contribute to traffic or noise. Your business registration requirements will differ depending on your state, industry, and business type.
Read more: How to Create an LLC in 5 Steps
Step 5: Create your e-commerce business website.
With the paperwork signed and your business officially registered, the next step is to create an e-commerce website. The website is the “storefront” for your business for customers to arrive, browse, and place items in their shopping cart. Your business website and its functionality are critical to your success.
To start, you’ll need a domain name that matches your business name. Then, you’ll select an e-commerce platform that suits your bandwidth for creating and maintaining the online store. The most common type is an all-inclusive software (like Shopify), on which you can conduct business operations such as managing inventory, shipping orders, and more.
Here are just a few e-commerce platforms to choose from:
Shopify: This popular e-commerce platform is all-inclusive and user-friendly, with plenty of customization options. With this hosted, software-as-a-service (SaaS) platform, you can choose from several subscription options depending on your business needs.
Squarespace: Known as a platform for building websites with modern templates, Squarespace also offers e-commerce capabilities. It is user-friendly but does not offer as many customizable e-commerce features as Shopify.
WooCommerce: WooCommerce is an open-source plug-in that you can add on to start selling on your WordPress site. It is free to download and offers a wide range of e-commerce tools, best for entrepreneurs with prior technical experience.
Magento: If you’re tech-savvy, you might want to use Magento, an open-source platform that allows you (or a hired developer) to customize every element of your online store.
How to create your own ecommerce website
After you’ve selected an e-commerce platform, you can move forward with building, customizing, and launching your online store. You’ll decide on the template design, create a wireframe, add your product inventory, and write out descriptions to introduce your business.
Step 6: Source and develop your products or services.
Once you’ve set up a prototype of your website, you can begin to add your product names, descriptions, and photos. You’ll also need to obtain your products, whether that means you go into production to develop them or source them from a wholesaler.
If you are a craftsperson, you’ll want to produce enough inventory to last the first few months. That might mean creating one of each color and size of a clothing line, or twenty of each ceramic pot. This number will vary depending on your labor bandwidth and your marketing strategy, like how much traffic you’re driving to your website’s launch.
Then, you’ll need to arrange logistics such as branded packaging, warehousing, inventory management, and shipping.
Tip: Start up on an e-commerce marketplace
If you're just starting up, consider selling on an e-commerce marketplace such as Etsy or Amazon. These established companies host thousands of sellers with advanced algorithms to show desirable products to the right customers, which means you can rely less on SEO and social media marketing.
Step 7: Launch and market your business.
Congrats! Once you have successfully launched the business, you can begin monitoring your metrics and key performance indicators (KPIs) as your business grows. Continue to experiment with different types of digital marketing to drive traffic to your brand.
Amid the inventory management, logistics, and marketing, you’ll want to ensure that your shipping and fulfillment go smoothly for every customer. It is wise to prepare contingency plans in case anything goes wrong.
How much does it cost to start an e-commerce business?
Starting up your own e-commerce business is an investment that can reap generous profits, especially if a large consumer base connects with your brand. It also requires time: it can take up to two years to get an online business off the ground and start earning a profit.
Here are some upfront costs to consider:
Licenses and permits: Your legal documentation, such as licenses and permits, will depend on your business entity type, your state/location, and the products you sell. Fees can vary from state to state, from $50 to hundreds of dollars.
E-commerce platform, domain name, and hosting: Software such as Shopify will set you back $29 a month for just basics and $79 for a regular plan. Open-source platforms are free to download, but you’ll need to consider hosting and developer fees. Some platforms include a domain name and hosting, while others must be purchased separately—a domain can cost as little as $1 a year, while hosting can range from a few dollars to $700 per month.
Product inventory: Inventory might be your biggest and most strategic expense, since you’ll want to have enough to sell but don’t want to waste money on items that won’t sell. You may also need warehouse space and equipment.
Shipping: Shipping costs will vary depending on your products, sales, shipping services, speeds, and methods, and whether it is an add-on to your e-commerce platform. You may choose to outsource the entire shipping process if you want to focus on the products and other business operations.
Marketing: When you’re starting out, you may want to invest more in marketing and advertising. Deloitte's 2022 CMO Survey reports an average of 13.8% of overall budgets going toward marketing activities [3]. However, these days, some new e-commerce businesses spend up to 30 percent on customer acquisition [4]. Using free resources and experimenting at first is recommended.
Employees: Depending on how big your company is and how fast it grows, you may be running the show for the first few months or even years. Some business owners experience rapid growth and need to hire employees shortly after launching the business, while others remain solopreneurs.
Generally, there are fewer costs associated with e-commerce than brick and mortar. With rent prices and inflation escalating, and a behavioral shift in the way consumers shop, e-commerce might just deliver a higher return on investment (ROI). Going online has many attractive benefits and a bright future for anyone interested in starting a business.
The initial start-up can cost up to tens of thousands of dollars. New business owners can choose to self-fund, rely on support from friends and family, or take on loans.
Tips for starting an e-commerce business
The journey to creating a successful e-commerce business requires motivation, strategy, passion, and a stroke of luck. Starting a business can feel similar to the birth of a child—hard work, but extraordinarily rewarding. Here are some tips when you’re just starting out:
Start small. You don’t have to invest in hundreds of products at first. If you’re a craftsperson, create an Instagram account and simple branding to gauge interest. If you’re sourcing products, give yourself a timeline to procure items, create a website, and soft-launch with targeted Google or Facebook ads. Then, build your business from there.
Keep up with trends. Social commerce is important to consider, as it was one of the biggest trends in e-commerce in 2023, along with artificial intelligence, augmented reality, and the rise of TikTok [5].
Experiment with marketing. People won’t know about your business unless you promote it. Thankfully, there are many ways to conduct A/B testing on platforms like Google Ads with fewer dollars before launching a major campaign.
Take advantage of partnerships and multi-channel strategies. Even though D2C sales are trending, your brand awareness and sales can benefit from featuring your products on channels such as large online retailers like Amazon and Etsy. Social media partnerships, including influencer and affiliate marketing, and public relations (features in select publications) can also help you get noticed and gain traction.
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