How To Start An eCommerce Business
There is no surprise where the market trends are heading with the constant growth of eCommerce platforms, such as Amazon and eBay. The prognosis shows that the sales from eCommerce B2B are going to keep growing at the same rate for years to come.
More and more people are conveniently shopping from their sofas, and get the products delivered straight to their door within 1 to 3 days. Cannot be better.
However, some may feel sadness that many of the big retail chains like; Macy’s and Sports Authority, are closing their physical stores and are focusing solely on online retail.
The social event with visiting a store, and get the feel for the materials of the items you are purchasing, is lost. Instead you have to rely on customer reviews, product images and descriptions – and hope for a good refund policy if the products did not live up to expectations.
The eCommerce Business Is Booming – Great Business Opportunity!
For the person with an entrepreneurial mindset, there is a great opportunity to get into the eCommerce market, and start selling products or services online.
Be aware, however, that starting an eCommerce business is hard work with many steps and decisions that need to come together. Before you set-up your eCommerce store and get into the nitty gritty of building a brand – there are some basic, but crucial steps you will need to take.
10 Basic Crucial Steps To Start An
Step 1. Think Of A Good Name For Your Business
The name of your site and the legal name of your business do not need to be identical, but keeping them consistent has its benefits. Think of a name that clearly relates to your business and that is easy to brand.
With branding, I mean marketing. Pick a name that is easy to market and that describes your niche. If you cannot fit this into the actual business name, a tag line is a good option. An example of a tag line – in this case suitable for an hearing aid company, or maybe even better, an emotional support group – can be presented as:
“We Are Your Ears When No One Else Is Listening”
If you do not have any special niche and are selling a bit of everything, a general name with words like; “deal/deals” and “shop/shopping” in the name is good to use.
Step 2. Register Your Business
Choose a business name and register your company. There are legal protections and tax benefits for incorporating, so take some extra time looking into this. It will be well worth it in the end.
Here are the different business structures:
-Partnership (if you have a business partner)
To be a sole proprietor can be a bit risky. If your company is ever sued, the court can seize your personal assets if your business does not have enough to cover its debts.
However, both the corporation and LLC separate you and your assets from the business, and provide other tax benefits.
Step 3. Get Your Resale License/Certificate
To sell brand name products online, you have to apply for a resale license/certificate. The purpose of a resale certificate, also known as a tax exemption certificate, is to allow you to buy goods through your business without paying local sales tax.
Because of the fact that you are doing business online, and will have customers from all parts of the U.S., you have to register and get the certificate in the state you are currently living in. Just reach out to your local tax department to apply and you will receive your certificate within 8 days from applying.
You do not have to apply for a resale certificate if you decide to private label your own products or use dropshipping. Take a decision early on what eCommerce business model to use.
Will you manufacture and private label your own product? Sell only brand items? Or dropship? They all have advantages and disadvantages, so you have to carefully consider what would be the best option for your business.
You can read about the different business models in my prior articles:
Step 4. Get Your Employer Identification Number
You will need an Employer Identification Number (EIN) to open a business bank account, and file your business taxes next April, even if you do not plan on having any employees.
Your EIN is a bit like your business’ social security number, it is a unique number that identifies your business and helps you file important paperwork.
Step 5. Choosing A Product Niche And Evaluating Your Idea
Before you start looking for products, it can be a good idea to consider what your store will represent and who your ideal customers are. When you are clear on what way to go – what products you will offer and what is your market – you have to evaluate whether it will be realistic to implement your ideas or not.
To double check this, you can start with searching for your products or niche on Google Trends. With Google Trends you can check the demand for a product, years back in time, and Worldwide.
You can also check for customer reviews of similar products, or the actual brand item you wish to sell to get an idea if it is a good product and if it is still popular.
If the product solves a problem – even better!
If you are planning on selling good deals on Amazon, you can let the sales rank of a product be the judge. Any sales rank below 50.000 is considered a good selling item on Amazon. There are softwares you can use to check the monthly estimated sales related to the sales rank of a product. For example; Junglescout has a free sales estimator you can use.
You click on the main category of your product, add the sales rank number, and you will get an estimation of the monthly sales calculated. As simple as that!
There are more tricks to research a product even further, but to get access to that information you should contact me, Stina Pettersson, for personal coaching (contact information below).
Step 6. How To Operate Your Business?
Your Own eCommerce Store Or Amazon And/Or eBay
Take a decision whether you want to create your own eCommerce store, or if you only want to invest your efforts selling on Amazon and/or eBay. There are pros and cons with both options. Let me present a few:
Pros With Having Your Own eCommerce Store
1. You do not have to pay any referral and storage fees, which gives you a much better profit margin on all sales.
2. You have something to show for when dealing with distributors/suppliers. With your own website, you will look like a more reputable business.
3. You can market your store and products through Search Engine Optimization, which is free and a great marketing tool if you are doing a good job with optimizing your product pages.
4. You can create a niche website and also blog about themes related to your niche and gain more traffic and buyer interest that way.
Cons With Having Your Own eCommerce Store
1. It cost money to hire a web designer to create an eCommerce store. You also have to pay for a domain name, web hosting, and maintenance adding new product listings (if you cannot do this yourself).
2. You can use a website platform like; Shopify to choose from pre-designed websites that you only have to add text content and product images into. However, with platforms like these, you often have to pay an additional monthly fee for using them.
3. You have to invest in marketing of your eCommerce store. You will not get visitors automatically, so in the beginning, you will have to invest money in different marketing efforts. You can for example use: Google Shopping Ads, Facebook or Instagram Ads.
4. It takes more time and effort to manage your own eCommerce store with; adding new product listings, keep track and update the inventory, remove old products, optimize all product pages, and so forth.
5. You also have to handle the customer service and shipping by yourself.
Pros Selling On Amazon And eBay
1. You can take advantage of Amazon’s and eBay’s already existing customer flow.
2. If you are using the Amazon FBA Program, Amazon takes care of the customer service and shipping for you. You only have to send in the inventory to their warehouse/s and they take care of the rest.
3. You will automatically be seen as a legit business because of Amazon’s and eBay’s reputation and credentials.
Cons Selling On Amazon And eBay
1. Your profit margins are going to be a lot lower because of the referral fees. Amazon takes 15% in referral fee and eBay takes 10%. This is true if you are keeping the inventory yourself, and also take care of the shipping.
2. If you are using the Amazon FBA Program, my experience is that Amazon charges about 45% – with the referral fee and other fees for storage and possible excess inventory included. We used to calculate on 30%, but Amazon always charged us more, so now we are calculating on 45% for total Amazon charges. In this way, we know we are covering all possible charges and will be pleasantly surprised if Amazon charges less.
3. Like anywhere online, there is a lot of competition, especially on Amazon and eBay. Many sellers are entering this field, which makes the market more saturated. Sellers are undercutting each other and are bringing the prices down too low, and as a result, the profit margins keep getting lower and lower.
To handle this problem, you should early on try to find good suppliers/distributors of the products you are planning to sell. Try to establish good relationships with them, so you can get even better discounts and future credits.
Try Thinking Scalable From Start!
Note! If you are planning to sell brand name products, you have to make sure your distributors are authorized to re-sell the brand in order for you to get brand approval on Amazon. You will have to provide Amazon with a final invoice from an authorized distributor/supplier, and possible also a letter stating that you are allowed to re-sell the brand.
You can read more about online retail and the brand approval process in my prior article:
If you decide to create your own eCommerce store, there are literally hundreds of eCommerce shopping cart platforms out there. Choosing the right 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 etc.
Like mentioned earlier, Shopify is a good alternative if you do not have enough skills to build an eCommerce store by yourself. For you that have web design skills, WordPress WooCommerce is a great option that I used myself to build my eCommerce store: Get Happy e-Deals.
Step 7. Create A Business Plan
This is not the most inspiring part of the process, but it really pays off to devote some extra time to. Creating a business plan at this stage, before starting your eCommerce store, could help you see the bigger picture and chart a strategic course for future growth.
Even if you already have been in business for a couple of years, it can be good to refocus the business and think outside the box. It may help you discover new ways to market your business and find new products that would boost your revenue.
A complete business plan should touch base on and include the following:
Organization &; Management
Products & Services
Marketing & Sales
You can find easy and functional business plan templates at SBA Create Your Business Plan. This service is for free, and very educational, with a step-by-step introduction.
Step 8. Branding Your Business
Think about how you visually want to present your business. Create a logo, and a graphic design template. Decide on what fonts and colors you want to use promoting your business and stick to your design.
If you keep changing logo and design template, it will get confusing for customers to recognize your business.
You want to make it simple, but describing. A short tag line under the logo can add an extra description of your business. If you cannot do this yourself, there are low price freelance designers to hire on fiver.com.
Step 9. Drive Traffic (Customers) To Your Product Listings
To market a new eCommerce store takes time, capital, and effort. If you do not have time nor knowledge, it can be good to hire a specialist to help out. According to marketing specialist, Darren DeMatas, it takes about 100 days to get traction and around 9 months to achieve significant growth. About the same time it takes to make a baby.
Create An Email List
No matter what and how you decide to sell, I highly recommend creating an email list. To do this you can place an opt-in freebie or discount on your website. An example would be a pop up window saying:
“Get 10% Discount On Your First Order When Signing Up For Our Newsletter”
Social Media Campaigns
You can also launch a social media campaign to gain subscribers, or host a giveaway where the entry fee is your customer’s email address. Giveaways have the benefit of increasing your brand presence and product visibility, while an email list is something you can work on regularly offering different sales and product discounts.
Incentives From Well Known Bloggers
You can also use incentives from famous bloggers. For less well known bloggers, you can offer a product sample in exchange for them reviewing it on their blog. More famous bloggers, will probably demand a payment to mention your product on their channels.
Affiliate Marketing To Boost Sales
Another way to go is to look into partner programs and affiliate marketing to boost your brand presence. Create an affiliate program where you offer affiliates a percentage for each sale they generate when marketing your eCommerce store and products. There are WordPress plugins you can use to manage your referral program, such as WPAffiliate.
Step 10. Stock Up Your Inventory Or Dropship
You do not need to think about stocking up on inventory if you are dropshipping. This is one of the main benefits with dropshipping. You do not need as much capital to get started. If you want to get more information about this eCommerce model, check out my blog post:
Although, your profit margins are often lower and you also have to lay your trust in the hands of other sellers/suppliers to ship out the products on time. If they would not, you can get punished for shipping too late on Amazon and eBay. Both Amazon and eBay keep statistics on certain measurements you have to live up to in order to keep your seller account.
I did the mistake of dropshipping from AliExpress with no real knowledge about the supplier and got a bunch of crappy toys that should have gone straight into the trash. I ended up having to refund all my customers, before and after, the Holidays. Not good and very costly!
Please do not make my mistake and make sure to have a good relationship with your dropship supplier. At least, always ASK FOR A SAMPLE from the supplier on AliExpress or Alibaba BEFORE you send anything to your customers. I was too eager to get hold of a very popular toy to sell before the Holidays.I did not have time to wait on a sample, and oh Gosh…I was in for a disaster.
Whether you have got a warehouse full of products somewhere or are using Amazon FBA, make sure you have got enough inventory to launch. This is a balance that can be tricky when using Amazon FBA, because you do not want to get hit with extra charges if your inventory does not sell out fast enough.
In general it is still better to have too much inventory than not enough. Pay attention to how your sales increase, so you can be smart with future orders.
Repeat And Watch The Big Bucks Roll In
If you have completed the 10 steps, you are now ready to launch. Exciting!
I wish you all the best of luck starting your eCommerce store. Hopefully, you will see the sales roll in fast enough. If not, you need to re-evaluate your business model and marketing strategy, and then get on it all over again.
Do not give up!
It takes time to create a financially rewarding business, no matter the business type. It is not a walk in the park, so to speak. You will most probably face certain problems on your way to success, but the most important is that you learn from them and move on – never stop the grinding.
Let’s start a business now!