The Definitive Guide on How to Start an Ecommerce Business (Fast!)
Commerce as we know it has been turned on its head thanks to the internet.
Rarely is there a conversation around commerce without the mention of ecommerce, entirely online stores that serve customers without geographical or time constraints.
Ecommerce has grown to be one of the most popular online business models for budding entrepreneurs. This business model gives them the flexibility to sell their products anywhere in the world and start the business without significant upfront investment. What lures more and more entrepreneurs to this model is the reality that ecommerce will be the dominant way of shopping in the future.
For the countless people out there wanting to create a new business monetized by online sales, we’ve created the guide for you. It breaks down the steps necessary to start an ecommerce business and gives all the advice you need to be successful in the process.
(For those easily overwhelmed by directions, skip to the end, where we tell you how to bypass all the initial challenges of starting your own ecommerce business by buying one that’s already successful.)
How to Start an Ecommerce Business—Step by Step
When you’re first starting out, you’ll be full of business ideas and eager to get up and running. To help you get started, here’s a road map for your entrepreneurial journey.
Find Your Niche First
Your niche determines the scope of products and the kind of audience you’ll be working within your business model.
Choosing your niche is a big decision. First, you’ll need to find out what physical products to offer in that niche.
When starting out, keep things simple and avoid product variants (i.e., clothing that will come in multiple sizes, colors, etc.), as they add complexity and inventory cost (unless you’re dropshipping them).
Be careful of niches that are trending, as you want a future with your products and the flexibility to grow long term.
Your niche may determine how you’ll reach customers, whether by promoting via Pinterest or using Instagram influencers to reach your audience.
Once you are rooted in your niche idea, write out a full-fledged ecommerce business plan and aim to stick to it.
Research the Competition
Before solidifying your product ideas, make sure to validate the market.
To start with, find out who your competition is. If there is no competition in your niche, there’s a higher chance that there is no market for your product, rather than an untapped market (sorry to break it to you!).
Next, Google the products in your category, and scour Amazon as well. Look on Facebook for ecommerce companies in the niche, and use the Facebook ad library to see what kind of ads they’re running to get a sense of how thick the competition is and what kinds of ads you might need to run.
Finally, make sure to check Ahrefs and throw the type of ecommerce store in there to see Google ads your competition is running and the organic keywords they’re ranking for.
Before you close out your research, be sure to ask yourself: How many products do they have? Does it look like they’re dropshipping or sourcing their own products? If dropshipping, can you just use the same vendor that they do?
When you fully understand your competition, you can move on to the next step.
Legal Structure and Brand Name
All too important a step is choosing your business name. Make sure it’s unique. You can choose to invent your own brand name or choose a business name that clearly indicates what your business does.
Once you choose your name, you should clear it with the U.S. Patent and Trademark office to ensure the name isn’t already taken so you won’t run into legal troubles down the road.
Next, you may want to apply for your employer identification number (EIN).
Business owners use this for tax reasons. It’s free to sign up for it with the IRS, and you can get it instantly when you sign up online. An EIN also helps you keep track of your personal and small-business finances.
Choose Your Ecommerce Platform and Set Up Your Domain
Your ecommerce platform will be the framework for your business. Your platform operates like a physical store in that it’s the face of your business. The beauty of your platform is it comes with way more bells and whistles than any pop-up shop. You’ll be able to track metrics, set up payment gateways, and get expanded functionality found only in the ecommerce world. There are some major players in the ecommerce platform space, so let’s break down your options.
Most ecommerce storefronts you see are Shopify stores. It’s the most popular and trusted platform in ecom. Shopify provides templates that make it easier than ever to get a store up and running, and their payment plans are very affordable to those just starting out.
WooCommerce is a popular plugin for WordPress sites that want to add ecommerce functionality.
This plugin is free to download and is open source. This option is best for those who have some tech experience and are comfortable with WordPress.
Magento is for those who want a highly customizable online store. It’s free to download, but this option is best for those who have a strong technical background or the funds to hire a developer.
BigCommerce captivates its fair share of ecommerce entrepreneurs because it offers 0% transaction fees. It’s said to be a more SEO-friendly ecommerce platform and handles security for your online shop.
Etsy and eBay
These platforms are very different from each other, but they offer anyone the option to build a business entirely on their platforms or in tandem with an ecommerce store. An Etsy shop can fit in nicely with a Shopify store, helping you to diversify channels. And eBay can be the testing ground for selling new products before adding them to your ecommerce store.
Once you choose the platform, you’ll set up your domain name and begin to build your ecommerce website. Ideally, your domain name will be the same as your brand or business name.
Source Your Products
To launch your new products, contact potential suppliers and shop around for the best product quality and pricing.
To understand what your cost will be from start to finish, get detailed quotes from both suppliers and freight companies.
If you’re uneasy about funding your own inventory, browse dropshipping vendor catalogs. Hint: Here’s our guide on dropshipping, in case you’d like to learn more.
Marketing Your Ecommerce Business
There’s a plethora of ways to market your online store to potential customers.
All the heavy-hitter digital marketing strategies you may be familiar with will help your storefront.
Optimize product pages
Don’t underestimate the power of detailed product descriptions. Telling your customers exactly why they need your product and laying out its value proposition converts them. Product pages should be optimized with high-quality images, video, and branding.
Fast vs. slow marketing
Consider fast and slow strategies for marketing your business.
A fast strategy would include paid media—usually Facebook ads, but Google shopping ads can also work—to quickly get in front of your target market. This will take some investment in ads and a strategy that ensures you get the most from your ad spend, but it’s one of the fastest ways to get eyes on your products.
Or you can try a slow strategy by going the search engine optimization (SEO) route. You won’t see many results for a long while, but once you do, it can be a massive boost to your net profit. Plus, good SEO is more for the long haul, enabling you to rank for keywords over an extended period.
Social media should also be a part of your strategy because it lends itself well to showing off physical products. You can use influencers or paid bloggers to promote your products. Overall, social media enables you to form a relationship with a customer base.
Use email marketing from day one—don’t be shy about getting those emails!
Create full-fledged email funnels and segment the audience based on where they are on their buying journey. You can segment your audience into these categories:
- Cold traffic (just signed up).
- Engaged (people visiting multiple pages).
- Product purchasers.
- Specific product segments that would be good to upsell or cross-sell an accessory product.
- Brand evangelists (people known to your brand who have high engagement with your emails and products) who can be used to “jumpstart” more content-engagement initiatives.
Segmenting your list helps you reach your target audience in the right way for their buying journey.
Make sure to have an abandon-cart funnel with a specialized email segment and a pixel to retarget your customers with ads. The right abandon-cart sequence can help increase monthly sales.
Cheap retargeting campaigns using the biggest ad networks, including Facebook, Google ads, and YouTube, can give you a feeling of “being everywhere,” which can be a great lift to your sales.
Create “pixel” funnels
Send cold traffic to a blog post to nurture, retarget, or offer more content to your audience. By using a segmented list of included and excluded audiences (for example including those interested only in one particular product type) that draws them further into engagement with your brand.
Coupons and discount codes
Use coupons and discount codes to build hype and traction early on. These will help you stand out in a crowded niche and draw customers away from your competitors.
How Much Money Do You Need to Start an Ecommerce Business?
Without the need to pay rent and employees, ecommerce usually requires less upfront capital than a brick-and-mortar store.
Still, inventory isn’t free, so you should have a good amount of capital if you’re sourcing products yourself. A good ballpark figure would be $10‒20k, with a few thousand extra available for marketing purposes.
For some people hungry to get started now, having that much ready capital isn’t feasible. An alternative, cheaper route is to start with dropshipping to get going and then switch to sourcing your own products down the road.
You can use dropshipping as a kind of laboratory to see what kinds of products you should source based on what’s selling and then translate that into physical inventory that you invest in for your ecommerce business.
It’s worth noting that you’ll need to keep capital on hand for reinvestment needs. For example, as you grow, you’ll need to order more inventory to meet increasing demand. Many start out excited to see inventory sell, only to realize they’re ill-equipped to keep the inventory flow going. You can’t scale without reinvesting part of your profits back into the business.
Data will be your best resource for deciding how much to reinvest in inventory. Pay attention to seasonal patterns, and notice if seasonal spikes emerge. Stock up for your busiest times of year and use your down seasons to recoup investment costs.
Finally, be aware of things like Chinese New Year, so you can order a ton of inventory before the factories in China close for the holiday. Too many entrepreneurs forget this key part of sourcing from China and hurt their inventory because of it!
Our Tips on Starting an Ecommerce Business
While it might seem like there are a lot of steps to get your business up and running, it’s not so hard when you break things down. Here are some of our top tips to make the process smoother.
Know Your Personal and Business Goals
Revisit your initial business plan and truly understand why you’re getting into the ecommerce game.
Understand what you want from a business perspective (earning six figures, leading a remote team) and from a personal perspective (escaping the 9 to 5 work life, location independence) to ensure you stay on track.
You can’t go wrong when you know your “why” and where you want to go with the business.
Keep Things Simple
As you scale, things tend to get more complex, which can make it hard to troubleshoot problems. When it comes to scaling, take things one step at a time. Master each growth measure, like adding a new product or expanding into a new market, first before moving on to the next growth opportunity.
Track Your CAC and LTV Both Overall and by Marketing Channel
LTV stands for “lifetime value” per customer and CAC for “customer acquisition cost.” These two go hand-in-hand because together they compare the value of a customer and the average revenue they’re predicted to generate over their account lifetime against the cost of acquiring them.
Calculating this ratio is critical because it helps you assess whether you’re spending too much to acquire your customers or not enough.
Focus on Only 1 or 2 Marketing Channels Max
It’s not helpful to throw a bunch of darts and see what hits with your marketing strategy. Figure out which channels work best for your brand and stick to them, because any good marketing strategy needs time to show results.
You could implement the fast vs. slow strategy mentioned previously, because it enables a balance between spending money outright to get eyes on the business and planting seeds for future revenue via SEO.
Use Multichannel Selling
Your own ecommerce business is amazing, but so are other marketplaces.
Marketplaces are good to leverage, including Amazon’s Fulfillment by Amazon (FBA) program. Some customers will ONLY shop there, as it’s the most popular online marketplace in the world. That loyalty can become problematic when shoppers see your ad and search for your product on Amazon instead of going to your site to buy it.
So, love it or hate it, Amazon is unavoidable in the ecommerce space. By working Amazon into your model, like adding Amazon links to the FBA portion of your business on your ecommerce site, you can take advantage of multiple marketplaces at once.
How to Start an Ecommerce Business that Lets You “Jump” Ahead by 30‒40 Months
Most ecommerce businesses won’t be profitable within the first few months—often they’re barely profitable within the first year—so starting from scratch isn’t an easy way to make money.
There’s a plethora of startup problems, including getting the right product/market fit and striking a balance between inventory and fulfillment. Starting on your own is an uphill battle in which any one challenge can cause your ecommerce store to fail altogether.
Thankfully, there is a way to bypass these problems entirely.
When you buy an established, successful ecommerce business, the work has already been done for you.
Building the brand has been done, the supplier relationships are all set up, and the target market has already been identified and marketed to.
All you have to do is walk into the business and decide if you’d like to keep it running as-is or make changes to scale it further. It’s the difference between trying to survive in ecommerce when you’re first starting out and thriving in ecommerce because you’re buying an existing business.
If you want to see what your ecommerce business options are, here’s a link to all the ecommerce businesses for sale right now on our marketplace. Register your account with us to start shopping and get updates on your specific shopping criteria.