Starting an ecommerce business can be exciting and scary.
You have to take care of the product fulfillment, taxes, and website design. The euphoria of first sales is mixed with the anxiety before inflation and the rising competition. And that’s all given you know what you’re about to sell! The pressure is too much, and it’s not unusual to see novice entrepreneurs huffing and puffing at their business plan.
It doesn’t have to be that way.
Truth be told, there’s no better time to get into ecommerce than now. As worldwide ecommerce sales are projected to top $7 trillion by 2025, more and more people become the bosses of their own and invest in online ventures. And customers keep coming, believe us: brands our development agency works with can’t keep enough products stocked.
All you need is a plan, a roadmap to setting up a successful ecommerce business. And we’re here to bring it to you.
Read on to find the six basic steps to starting an ecommerce business in 2022 based on Elogic experience helping ecommerce startups to grow for years.
How to Start a Successful Ecommerce Business
There’s one thing that distinguishes startups that last from those who earn a quick buck and disappear from the market. The successful ones are built with a long-term vision in mind.
Let’s get down to the basics: how to start an eCommerce business?
Step #1: Find Products to Sell Online
Knowing what you want to sell means you’re one step closer to a good start.
It’s also one of the most challenging parts of starting your own ecommerce business. Following your passion isn’t enough; some best ecommerce business ideas come up after thorough market and competitors’ research.
To find your ecommerce niche and market fit, you need to look at the unique value proposition (UVP), high margins, and ease of your product warehousing and shipping.
Here are a few ways to come up with an idea for your ecommerce product:
- Carry out market share research and identify the market gap. You can use SEO tools like Semrush and Google Keywords to see what product categories are most searched online as well as get insights about audience demographics and top-selling products. For instance, there’s a huge trend for the health and wellness niche in 2022, so things like food supplements or organic nutrients can really become a goldmine.
- Make an existing product better. There are so many products that with a tweak here and an adjustment there become customers’ favorites. Check out the case of Carbon38: the brand improves the cut, design, and material of women’s activewear for it to be both functional and stylish.
- Use social listening tools. Analyze relevant groups and pages on social networks (Facebook, Twitter, Instagram) to get insights on goods and services that are trending.
- Stay ahead of trends. Go over sections for best-selling products on sales channels such as Etsy, Amazon, eBay, AliExpress to check if there’s anything there that you can offer as well.
- Bring ideas of other countries to your country. Keep an eye on the products that became popular in other locations and bring them to your region. Or approach other country’s traditions from a new angle. That’s how Elogic’s client Helvetiq took off: as the brand owner Hadi Barkat was preparing for his citizenship test, he came up with a quiz for his Swiss friends. Over time, the game became a classic, selling over 40,000 copies in Switzerland alone.
Step #2: Choose Your Type of Ecommerce Businesses
The next step will bring you closer to answering the question of how to start an ecommerce startup. Once you’ve found your product, it makes sense to choose how you’ll be selling it. There are four main types of ecommerce businesses:
- Business to Customer (B2C) where you sell to individual users directly. This business model is the easiest and cheapest to set up.
B2C examples: Amazon, Zappos, Target.
- Business to Businesses (B2B) where you sell to businesses. This model generally requires more startup costs and implies complex supplier-vendor relationships.
B2B examples: General Electric, Benum, Quill.
- Consumer to Consumer (C2C) where you act as a consumer yourself and sell products and services to your peers. This model is characteristic of freelancers and entrepreneurs making products for sale themselves.
C2C examples: eBay merchants, social media shops, freelancing websites.
- Consumer to Business (C2B) where you sell goods or services to businesses. Unlike B2B, this model is less complex and is typically established when consumers provide services to an organization.
C2B examples: UpWork, Shutterstock, Fiverr, various auctions.
Step #3: Research Ecommerce Business Revenue Models
The next step is to figure out how to manage inventory and source goods. Let’s see which type of ecommerce business revenue model will suit you best.
- Dropshipping. The model works best for startups that want to make a profit without managing inventory or investing heavily. You just set up a storefront, and the rest is managed by your supplier.
- Wholesaling. You’ll have your own warehouse and will be able to track all customer orders and have enough money to invest in-stock inventory.
- Manufacturing. The model is the best fit for those who sell unique products closing a certain market gap. In this model, you will need to send the prototypes to a contracted manufacturer who will produce an item. The manufacturer will either ship goods to the shoppers directly or send the final version of the product to your warehouse.
- Subscription-based model. You’ll have to send a box of products on a regular basis to your customers (as our Umovis Lab client, for example).
Step #4: Choose Your Brand Name
Selecting a powerful brand name gives you an advantage over your competitors and has a great influence on your business’ positioning in the market. It is not as easy as it seems at first.
Come up with a brand name that:
- Appeals to your target audience
- Fits your brand persona
- Short, simple, catchy, and original
- Available in the form of a domain name
Insider tip: Use automated AI-powered tools if you have trouble coming up with a unique business name. Go to a business name generator app and type in the keywords that best describe your product. Based on that keyword, the generator will give you a list of possible business names and categorize them in different ways.
Insider tip #2: Think into the future. If you’re starting a jewelry business online because you bead bracelets in your spare time, “Jane’s Beads” may not be an appropriate business name if you plan to scale it. Choose an imaginative trademark name for your brand, not only the one that reflects your work.
Step #5: Write a Business Plan
An ecommerce business plan will help you clarify your general ecommerce strategy, identify business opportunities, figure out potential obstacles, assess your available resources, and evaluate the viability of your growth plans. A business plan for an ecommerce startup is a must-have: if you request additional financial support, your investors will use it to evaluate your ecommerce business solvency and mitigate any upcoming risks.
A perfectly written business plan consists of the following elements:
- Executive summary. This one-page section gives a high-level overview of your business, including your business concept and objectives, target market, unique selling proposition (USP), current financial state, and funding projections.
- Company description. That’s where you share all the essentials about your company, including but not limited to its name, legal structure, type of ecommerce business, founders and company roles, employees, licenses, etc.
- Products and services. This section might be as detailed as you want, but some key elements should be a description of your product and its features, its unique value proposition, its price in comparison to your top competitors, the expected profit margin, and the production and delivery details (manufacturing, wholesaling, drop shipping, etc).
- Market analysis. This part presents in-depth knowledge of the market you’re operating in, analyzes your business position, and inquires into target customer demographics and the existing competition. Use PESTEL or SWOT analysis to pinpoint your market insights.
- Marketing plan. This is an advertising strategy your business will implement to sell your products. List the key areas of marketing focus (SEM, social media, content marketing, etc.), determine your ecommerce KPIs, and allocate the budget.
- Business operations. Here you should dwell upon the administrative side of your business processes and explain how you are going to create and distribute your products or services. Provide the list of your facilities, staff members, manufacturers, suppliers, fulfillment and shipping centers, etc.
- Financial plan. In this section, you need to report your financial transactions and calculate all the expenses for at least 6-12 months.
- Appendix. This final part is perfect for supplements and supporting documents, like credit history, business contracts, legal binding documents, licenses and permits, lease agreements, market research in graphs and tables, etc.
While writing your online retail business plan, try to stay up to the point and set realistic goals. Conduct marketing and competitors research really thoroughly and invest your time and efforts in business analysis. Don’t be afraid to consider various time frames and budgets as you will periodically revise your plan.
Step #6: Legally Establish Your Business
How to set up an ecommerce business legally? You’ll need to get through all the registrations, permits, and licenses required to manage an ecommerce business. Generally, ecommerce businesses do not require as many licenses and permits as physical stores, unless you plan to sell alcohol online.
The US retailers should apply for the EIN (Employer Identification Number) first. EIN is a unique nine-digit security number that identifies your business process and enables you to open a business bank account and file your paperwork. You have four options to apply for your EIN:
- online (via IRS ( Internal Revenue Service) website
- by fax
- by mail
- by phone
After you’ve applied for your EIN, you’ll need to apply for business licenses and permits.
The requirements for Europe vary depending on your country. In most cases, you’ll need a residence permit to apply for tax registration and register a company name. While choosing a European country to open your ecommerce business in, consider the taxes and legislations of each individual state: Estonia with its e-Residency program may be a much more appealing option than locating it in Italy.
How to start an ecommerce business in Dubai?
To obtain an ecommerce license, you’ll need to register a tradename. Mind the rules here: your brand name should not contain indecent terms, insult the general public, or contain God’s name or divine traits in Arabic or English, such as Al Qader, Al Aleem, or Al Razzaq. Then, apply for the ecommerce license with the Department of Economic Development (DED).
For more specific requirements on how to create an ecommerce business in a particular location, contact a tax advisor in the country of your interest.
Step #7: Identify the Best-Suited Sales Channel
When you are done with all the legal matters, the next thing is to select the best-suited sales channels. Share your products across social media like Instagram and Facebook. These social networks are free and can be used to showcase your products and promote them among subscribers.
There are some sales channels where you can easily sell your products to a wide audience such as Amazon, AliExpress, Etsy, and eBay. These marketplaces also can deliver insights into their high-demand product across categories.
There are many advantages to selling products via Amazon such as:
- Increase sales from a high traffic channel (Amazon has nearly 184 million visitors per month)
- No need to pack and ship your products if you use fulfillment by Amazon
- Solid back-end support that provides inventory tracking and credit card processing
- Built-in trust factor that often encourages shoppers to buy on the Amazon marketplace
Step #8: Pick an Ecommerce Platform and Build Your Online Store
Marketplaces give you a very limited possibility to showcase your brand and capture customers. It is also challenging to compete with other brands that sell similar products. And don’t forget that those marketplaces charge you business with substantial fees.
Building an ecommerce website from scratch gives you full control over your business and the freedom to personalize and customize your store as you wish.
Read also: How to Maintain an Ecommerce Website
In this regard, your most important decision will be choosing an ecommerce solution that meets all your business requirements. The wrong choice of ecommerce platform can negatively affect your ongoing operations. There’s a vast ocean of ecommerce platforms in the market now, but here are a few popular ones:
- Adobe Commerce (Magento) is an optimal choice for businesses that value customization and want to create a one-of-a-kind web design & functionality.
- Shopify is a great choice for retailers without extensive technical knowledge or resources to hire a tech team. If you seek ease of use, automatic maintenance and security features, and ease of integration, this platform might be for you.
- BigCommerce will work for those who look for an easy setup and a quick go-live solution. Retailers running on BigCommerce usually do not plan on expanding but rather want to start selling ASAP.
- WooCommerce might be a perfect fit for small businesses or content-heavy websites that already run on WordPress and on a budget.
For more in-depth platform comparisons and options, read our related guides:
- Magento vs Shopify
- Magento vs BigCommerce
- Magento vs WooCommerce
- Magento vs Drupal Commerce
- Magento vs OpenCart
- Magento vs nopCommerce
Need help in deciding on an ecommerce platform? Check out our video guide and make the right decision for your business.
Step #9: Figure out Your Fulfillment and Shipping
After you set up an online store, make sure you’re able to fulfill the orders that come in. Order fulfillment means storing, packing, and shipping your products on time, which you can do either in-house or with the help of a third-party company.
To provide an excellent customer experience, you should have a reliable shipping system set in place. Here are some popular solutions to help you ship your products in an effective way:
- FedEx (Federal Express)
- DHL (Dalsey, Hillblom, and Lynn)
- UPS (United Parcel Service)
- USPS (The United States Postal Service)
Ecommerce fulfillment costs will vary per order and depend on the type of product, order complexity, product size and weight, delivery speed, and sales volume.
Step #10: Market Your Online Business
You have products to sell, an ecommerce store to maintain, and order fulfillment to organize. But it’s not enough to answer the question of how to run an ecommerce business.
No matter how great your products are or how user-friendly your store is, people will need to find it to shop there. That’s where marketing comes in to help drive traffic to your website.
Here are a few digital marketing tactics you might try.
Social media is the perfect way to expand your brand’s reach. In fact, social media marketing is one of the top ecommerce trends to build a community around your brand, which will eventually drive more traffic for less cost.
Create social media profiles for your brand on Facebook, Instagram, and Pinterest and create engaging content that your target audience would like to check. Launch Facebook and Instagram ads campaigns to scale quickly. Don’t forget to set up your conversion pixels to track sales.
You can also integrate user-generated content from social media on your website. Take a look at how Elogic’s client Joie is leveraging this trick: the brand placed a carousel with its users’ Instagram posts wearing brands’ clothes. You can even see which particular item is worn and purchase it right away.
Email marketing is a game-changer in marketing. It helps to inform, update, and remind your current and potential customers of your brand-related news, be it a new product collection or a sales season. You’ll also find email marketing useful to reduce the cart abandonment rate.
Our Finnish apparel & fashion client, Marimekko, sends personalized emails to notify customers about the products they added to their shopping cart but never purchased.
Investing in SEO is one of the cheapest marketing strategies yielding long-term results. To get your website to rank high in Google search results, you should accurately identify the keywords that customers are using to find your goods. You should also optimize the technical aspect of your website.
For instance, compressing images, optimizing the store back-end processes, and adding a sitemap have made a Swiss glassware brand, Glassmania, organically reach top positions on search engines.
Content marketing is a rising trend that can help you to establish your brand as an authority in your industry. Write engaging, informative, and relevant articles to answer the questions your customers are searching for.
Amsale is one of e-commerce business examples that uses content marketing to create brand awareness and build credibility. This luxury bridal house and Elogic client added a blog to their website to keep users posted on the latest fashion trends and answer their pressing questions on wedding gown design. So these steps to setting up an eCommerce business help you to start faster.
How Much Does It Cost to Start an Ecommerce Business?
Now that we’ve looked into how to start an ecommerce business from scratch, you must be interested in one more essential aspect – cost.
Apparently, building an online presence can save you much money in comparison to a physical store, e.g. rent, furniture, shop assistants, and more. But if you ask how to start my ecommerce business free of charge, we’re here to disappoint you.
Just like any retail business, you’ll need at least a few hundred bucks to invest in a strong online presence. Your costs will depend on the type of ecommerce business you’re launching, the platform you select, hosting provider, store functionality, marketing expenses, and more.
Given the aforementioned factors, we recommend considering the following costs:
- Business licenses and permits: Depending on your business model, the country where you operate your business, and the products that you’re selling, you can face different licensing and permit fees. Some countries charge low fees, from $15 to $70, where other countries can charge $100+.
- Ecommerce website development: The ecommerce website quote estimation varies depending on multiple aspects, such as project scope, method of development, design complexity, setup of an eCommerce business, third-party integrations, custom modules, support, maintenance, and functionalities. It may cost several hundred or several thousand dollars to develop a site that meets your business requirements.
Related article: Ecommerce Development Cost: Set the Right Budget for Your Project
- The domain name and hosting: Some ecommerce platforms offer hosting within the cost of the platform and some do not include it in the package. If you need to buy your own hosting, you can expect to pay up to $1000 per month depending on how much traffic you expect to get. Fees for a domain name can range from $1 to $40 annually depending on the registrar you opt for.
- Manufacturing: Manufacturing is perhaps the most expensive part of starting an ecommerce business and can range from $1,000 to $100,000 and beyond depending on various factors. If you want to find out a rough estimate of the manufacturing costs in China, you can check the Alibaba marketplace. If you plan to produce your product from scratch, it’s better to contact the manufacturer directly to get a precise cost estimate.
- Marketing: As you’re starting out, marketing expenses can be difficult to estimate, so you’ll definitely need to reap the benefits of any free marketing options you have available. Once you have a better idea of what works well for your business, you can start allocating between 5% and 15% of your total income on marketing, including ads, blogging, and email campaigns.
What the Future Holds: 4 Tips to Succeed in Ecommerce Business
As a final recap of our ecommerce startup guide, we’d like to give you a few tips on how to start a successful ecommerce business and keep it growing.
Tip #1: Offer Excellent Customer Experience
Online shoppers aren’t interested in an item anymore. Customers want to experience the brand, relate to it, identify with it. Brands that meet this need and invest in customer experience (CX) can expect a 15% to 20% increase in sales conversion rates and a 10 to 20% improvement in customer satisfaction.
Nearly 80% of American consumers say that speed, convenience, knowledgeable help and friendly service are the most important elements of a positive customer experience.
Don’t miss out on the possibility to earn more. Make your customer a king and sell more.
Tip #2: Focus on Conversion Optimization
The average ecommerce conversion rate is 2%. So if at least 2% of your website visitors buy from your store, you should be more than happy. But conversion doesn’t happen alone: you need to optimize for it.
Strategies to boost your conversion rates are similar to those of optimizing CX, plus using promotions: simplifying the checkout process, offering competitive pricing, providing promo codes, and launching private sales, etc. And some best ecommerce tools, like Google Tag Manager and HotJar, will help you track the conversion progress.
Tip #3: Work on Optimizing Your Store
You’ve got about 0.05 seconds to get your website visitor on the hook. That’s how long it takes them to form an opinion about your website. So you’d better optimize your website speed. Improve your store search and filtering. Create appealing, functional product detail pages (PDPs). Add some essential ecommerce website features, including breadcrumbs and a user-friendly menu.
Overall, optimize your store for an easy search and purchasing experience.
Tip #4: Use Multiple Sales Channels
You might have seen many guides on how to start your own ecommerce business. Some suggest selling on social media. Others offer their services to build a custom website. Others make you move to marketplaces.
But the key to success is combining multiple sales channels and delivering a unified, consistent CX across platforms. In the end, you’ll benefit more from selling products on your own website, engaging with your audience on Facebook and Instagram, and sending personalized emails to drive sales, etc.
Ready to Build Your Online Store?
Starting an ecommerce business from scratch is as exciting as it is challenging. At the end of the day, you need to learn a lot about finding a product, researching business models and plans, deciding on the brand name, obtaining all the necessary permits, building an ecommerce store, and choosing the marketing strategies if you want your business to be successful.
Going through all the steps to open an ecommerce store can feel like you’re climbing up the mountain, but there’s no bigger reward than ascending to the top. There are multiple benefits of starting your own online business instead of a brick-and-mortar one. The initial investment is much lower; your online store can operate 24/7 and has global exposure.
If you feel like you’re set adrift, especially in the technical aspect of starting an ecommerce business, we’re here to help.
How to Start an E-Commerce Business FAQs
How to Start an Ecommerce Site?
Developing an ecommerce site starts with choosing an ecommerce platform. Here, you have two options:
- choose a hosted SaaS platform with a pre-built design and functionality, such as Wix, Shopify, or BigCommerce. This option allows you to begin selling ASAP but will not add uniqueness to your brand or allow you to scale in the future.
- build a custom store on an open-source platform, host it, and develop features and themes from scratch. You might require some coding skills or technical assistance for this method; however, your ecommerce site will be unique in its style and scalable as you expand your product catalog. Some of the platforms you might be interested in are Adobe Commerce (aka Magento), Drupal Commerce, OpenCart, nopCommerce, etc.
How Much Does It Cost to Start an Ecommerce Business?
The cost to start an ecommerce business largely depends on your location, project scope, choice of servers, and your personal ambitions.
If you start out small selling handmade things with little to no marketing, the costs may go as low as paying SaaS platform subscription fees (for instance, $29/month for Shopify). If you take things more seriously and plan to scale, the price for ecommerce website development may go as high as $50,000 plus the expenses on product manufacturing, business licenses and permits, marketing, etc.
Is E-Commerce Still Profitable?
Ecommerce is extremely profitable now, especially after the global pandemic that has forced most traditional brick-and-mortar stores to go online. It is projected that online sales in the U.S. will grow to $600 billion by 2024, and approximately 95% of all purchases will be made via ecommerce by 2040.