E-commerce is now more popular than ever. In fact, the number of e-commerce websites has increased from 9.8 million to 27.6 million between 2019 and 2024. If you’re looking for ways to make money online and be your own boss, consider starting an e-commerce business. Although it takes a lot of time, effort, and dedication, it has the potential to become a profitable and enjoyable venture. With our simple guide on how to start an e-commerce business, you can successfully implement an e-commerce store.
What is e-commerce business?
Before getting into the main discussion, let’s first understand what an e-commerce business is. E-commerce involves the buying, selling, transferring, or exchanging of goods, services, and information using mobile devices, computer networks, and other electronic technologies in today’s Internet era. Electronic commerce is a modern digital business method. By using the Internet, buyers and sellers can learn about the quality and price of products from home and can buy and sell through various e-commerce websites.
E-commerce Business Model
An e-commerce business model is the conceptual framework your company creates to attract customers and increase revenue. There are different types of E-commerce business models that allow various companies to properly establish themselves in the industry and engage their targeted customers. In this context, it is essential to implement e-commerce customer service to assist customers and ensure their satisfaction.
Four Traditional Types of E-Commerce Business Models
If you’re starting an e-commerce business, you’ll almost certainly fall into one of these four categories. Each has its own advantages and disadvantages, and many businesses operate in any categories simultaneously. Knowing which category your big idea falls into will help you think more creatively about your opportunities and risks.
- Business to Consumer (B2C): A B2C website sells to individual customers, similar to a brick-and-mortar storefront. A customer can choose a product, check out, and wait for the product to be shipped to them.
- Business to Business (B2B): A B2B website buys and sells products or services to other businesses. They can usually handle bulk or repeat orders.
- Consumer to Consumer (C2C): A C2C website or marketplace allows consumers to sell products to each other. Etsy and eBay are popular examples of C2C e-commerce sites.
- Consumer to Business (C2B): A C2B website allows individuals to sell to businesses. In many cases, customers can write reviews, exchange affiliate links, or provide space on their website in exchange for compensation.
Why Start an E-commerce Business?
E-commerce stores have many advantages, including:
Low overhead costs: Compared to running a brick-and-mortar store, an e-commerce website is often more cost-effective. There is no need to pay for commercial property and the utility costs that come with it. Instead, you will invest in a domain name, web hosting, inventory, and digital marketing.
Opportunity to reach a larger audience: With an e-commerce store, you don’t have to limit your customer base to your local area. Even if you live in a small town, you can reach customers across the country and the world. This can lead to higher profits and greater success.
Ability to scale easily: It is much more difficult to grow a business with a physical storefront than one that operates online. If you start an e-commerce business, your website and store can expand quickly as your business grows. You don’t have to open and operate additional brick-and-mortar locations.
Flexibility for customers: In today’s day and age, customers are busy and often lack the time or inclination to visit a store to buy what they need. If you can serve them with an e-commerce website, they can shop whenever they want from their home, office, or anywhere with an internet connection. If you keep your customers happy with good products, they will return to you and refer their friends.
Access to customer data: An e-commerce business allows you to collect valuable customer data. You can gain insights into the buying habits and demographics of your customers. Additionally, you will have a better understanding of demand, which will help you reduce the risk of understocking or overstocking.
8 Steps To Start an E-Commerce Business
1. Define your e-commerce business concept:
First and foremost, figure out what you’re going to sell. Ideally, you’ll choose a product or service in a very specific niche. This way, your competition will be less, and your chances of success will increase.
If you decide to sell clothing, for example, you can target young professionals with affordable suits for young children along with comfortable formal wear. Make sure you are passionate about what you are trying to sell and/or do well.
2. Validate your ideas
A business idea is only worth pursuing if you determine that it is actually viable. To do this, consider the following:
- Market-based criteria: Market-based criteria focus on market factors that will affect your business. These include market size, competition, target customers, and whether your products or services are part of a trend or a flat or growing market.
- Product-based criteria: Product-based criteria revolve around your products and services. They examine your potential selling price, size, weight, durability, how seasons may affect demand, product regulations, and whether your product fulfills an emotion or solves a pain point.
- Both product and market-based criteria can help you understand whether your products or services have potential. If you believe there is a market for your offerings, you can move on to the next step.
3. Write a business plan
Once you’ve taken your business idea and validated it, it’s time to create a business plan. Think of your business plan as a blueprint that outlines what you want to achieve and how you will get there. In general, a business plan includes the following elements:
- Executive Summary: Discuss your structure, industry, leadership team, and offerings.
- Competitor Research: Analyze your competitors and their strategies.
- Product or Service Description: Explain what each offering is and how customers can benefit from it.
- Marketing and Sales Strategy: Describe what you will do to reach potential customers and retain the ones you reach.
- Financial Projections: Work with an accountant to estimate your pricing strategy and profit goals.
4. Set up your business
After you solidify your e-commerce business idea and finalize a business plan, you can take the plunge and set up your dream business. Choose a business structure, name your business, apply for an Employer Identification Number (EIN), and open a business checking account. It’s also a good idea to obtain all the licenses and permits you need to operate legally. For help with the setup process, don’t hesitate to contact an attorney, accountant, or other professional who can answer any questions you may have and point you in the right direction.
5. Develop or source your product
Next, you need to develop the products you want to sell. If these are original products, you can make them yourself or outsource the work to a manufacturer. At this point, you should decide whether you want to mass-produce your products or order them in smaller quantities to have stock.
You may decide to stock a small quantity and only a few products until you have a better idea of demand and determine whether bulk inventory makes sense. Another option is dropshipping, where products are manufactured and sourced when the order is placed. If you’re selling professional services online, like graphic design or bookkeeping, you should focus on what those will be and how much you’ll charge for them.
6. Build your e-commerce website
Your e-commerce website will be one of your most important assets. Customers will visit your site to learn about you, explore your offerings, and, hopefully, make a purchase. The easiest way to launch a site is with an e-commerce website builder, such as Shopify or BigCommerce. While each platform is different, most allow you to market your offerings, manage inventory, collect payments, ship orders, access analytics, and more.
If you are limited on funds or don’t want to invest heavily in your business at first, a free e-commerce platform can come in handy. You can always upgrade to a paid plan or platform as your business grows. Do your research and compare your options so you can choose the best e-commerce tool for your unique budget, preferences, and goals.
7. Figure out order fulfillment
Fulfillment is an important part of your e-commerce store because it ensures that your customers receive the product or service they paid for. Fortunately, most e-commerce website builders come with shipping label printing and allow you to automatically add shipping costs during checkout. If you want to take the entire fulfillment process off your plate, you may want to outsource it to a company. Just make sure your potential profit is more than what they charge.
8. Market your e-commerce business
In a perfect world, you would launch your e-commerce website globally, and countless targeted customers would flock to it. The reality, however, is that you need to find, attract, and convert your target audience. Although your marketing plan will depend on your budget, product or service, and capabilities, it may include search engine optimization (SEO), social media marketing, paid search, email marketing, and/or influencer marketing. Whatever strategy you choose, be consistent and establish a brand that allows you to stand out from your competitors.
5 Tips for Running Your E-Commerce Business:
Once you have all your ducks in a row and your e-commerce store is ready for business, keep these tips in mind:
1. Focus on customer retention: Retaining an existing customer is easier and less expensive than acquiring a new one. That’s why you should make every effort to keep your customers coming back through excellent service, loyalty programs, exclusive discounts, and new products and services.
2. Optimize your shipping strategy: While an e-commerce store offers many benefits to customers, high shipping costs can be a deterrent. If possible, offer free shipping or shipping deals to loyal customers or those who spend over a certain amount.
3. Offer excellent customer service: In the world of e-commerce, the customer is truly king. This means that you must be responsive and cater to customer needs and preferences through friendly agents, live chat, and 24/7 availability. Otherwise, your reputation and profits may suffer.
4. Diversify your distribution channels: To increase your chances of success, go beyond your website and use other channels to sell your offerings. Amazon, social media, and affiliate marketing are a few options to consider.
5. Upsell and cross-sell: When you upsell, you encourage customers to buy a higher-quality product or service than they might have initially considered. Cross-selling is when you encourage customers to buy products related to or complementary to their initial purchase. Both strategies can increase profits.
