Ecommerce businesses have been steadily gaining popularity and online shopping is becoming increasingly commonplace. They offer greater flexibility, affordability, and opportunity for many startups. So, how exactly do you start an online business?
Setting up an ecommerce business has its challenges like any new business venture, and the process involves many steps. To help achieve a strong start we have provided this 14-step guide.
Benefits of Starting an Ecommerce Business
Starting an ecommerce business is exciting and the five main advantages of doing so are listed below.
No Shop Front Means Lower Overhead Costs
You don’t need to worry about the maintenance, rent, or insurance that having a brick and mortar shop entails. Your great idea and well-made products, along with an eye-catching website are the foundation for ecommerce success.
Sell Your Product 24/7
Unlike a traditional brick and mortar store that is limited to time, an ecommerce store can operate all the time, so your orders will increase because the customer has the convenience of a store that doesn’t close.
Gain Customers Worldwide
If you have a physical store, you are limited by the geographical area that you’re able to service, which in turn limits your customer base. Whereas you can have customers all over the world with an ecommerce website, including your loyal existing customers can find convenience in jumping online in their pajamas at the comfort of their house to order your products.
Visibility of Sales and Tracking
Ecommerce owners are able to track their customers’ shopping habits more easily, which includes advertising and marketing. You’ll be able to track where most of your customers are coming from and what keywords they search through with organic search data. You’ll be able to evaluate ROI with pay-per-click campaigns or messaging with social media. Other operational processes that assist sales tracking are: the automation of checkout, billing, payments, and inventory management. Not to mention you’ll be able to upgrade your customers through email drip campaigns.
So with all these valuable advantages what is the strategy? We describe the steps below for you to optimize these huge opportunities.
The Ultimate Guide to Starting Your Ecommerce Business
1. Find Out About Your Audience and Product Demand
One of the most important steps will be your research, both qualitative and quantitative. As part of that it is crucial to consider the type of customers you are targeting and who they are.
Create Buyer Personas
Create a well-built customer profile, as well as multiple different profiles, because each customer type has particular behaviors, needs, and interests. Depending on your business, you could have 1 or as many as 20 personas. This is because your personas are meant to represent a segment of your target market, not the whole thing.
Think of this exercise as describing your ideal customers. By grouping people into persona categories, it's much easier to tailor your content, messaging, product development, and services to different groups of people.
How Do You Create Buyer Personas?
The goal of creating a persona can be broken down into four categories.
Who - This will include background about the person such as job, career, and family. Demographic information such as gender, age, income, or location.
What - These are the goals of your buyer persona. What are their challenges they are facing that is causing them inability to reach that goal? This is where you come in by asking what can you do to solve this.
Why - Now that you know “what” you can ask why they wouldn’t buy or use your product/service is the follow-up. This is the most critical question to answer. By understanding the biggest pain points & frustrations, you can create messaging that showcases how your product can solve those pain points and help them achieve the goals and KPIs of their role.
How - This is the plan to craft your messaging such as describing your solution to your persona. At its core, people ‘hire’ your product to achieve something they need to achieve. By understanding what job people need your product to do theirs, you can create effective messaging that showcases how your product can help get that job done.
Then, you’ll need to ask the right questions to the right people, and present that information in a helpful way so you can get to know your persona(s) better. Some examples include the following:
These questions will give you insight into who is using your product.
- What is your job title?
- What skills are required to do your job?
- What knowledge and tools do you use in your job?
- What industry or industries is your company?
- What is the size of your company?
- What does it mean to be successful in your role?
By understanding the main goals and KPIs of your target audience, you can create messaging that showcases how your product helps potential customers achieve the things they’re being paid to achieve. These are powerful questions to ask to get a clearer understanding.
- What are your biggest challenges?
- How do you learn about new information for your job?
- What do you use our product to achieve?
- Describe how you were achieving this before you found our product?
- What is the main benefit you get from using our product?
This question helps you understand where these people are getting their information from, and then you can plan the channels to reach them. For instance, if you know they all are active on Twitter you can use paid advertising as well as focus your social media efforts on that medium.
- What publications or blogs do you read?
- What events do you attend?
- Where do you spend most of your time learning?
- What's your favorite social media channel to get information?
Interpreting the various things that are stopping potential customers from signing up for your product allows you to focus time and effort on removing those blockers and increasing conversion rates. We recommend asking these questions.
- What triggered you to seek out a solution like ours?
- What are the top 3 things you’re looking for in a product like ours?
- Describe a recent purchase. Why did you consider a purchase, what was the evaluation process, and how did you decide to purchase that product or service?
- What was your biggest fear or concern about using our product?
- Was there anything that almost stopped you from signing up?
To find those to answer these questions you can have interviews with real customers, collect information on website forms, or you can prospect customers through surveys.
You should also consider negative personas, which are an example of who should not be your customers. This is useful for the long run to know who isn’t worth your time, money, and efforts. Some of the people you don’t want to target and why is because of the following reasons:
- They may not have a budget.
- They won’t need what you're selling.
- They may become a customer, but were an expensive customer to acquire.
- They are a short-term customer and will not likely be a repeat customer. This means you’ll probably never recoup the cost compared to acquiring them.
For your negative personas, a good place to begin your research is looking at customers with low customer satisfaction scores, which might be an indication they were never really a proper fit for your company.
As you pick out some of your less-than-ideal customers and learn more about them, you'll identify common characteristics and habits that will help you shape your negative personas.
To create a persona you can follow HubSpot’s template
It can be hard to know how your goods should be priced. If your prices are too low people will assume the product is low quality, too expensive and no one will buy it.
This is why many ecommerce businesses turn to competitor pricing, which focuses on how much your competitors charge for similar products.
First of all, find out the sales volume and focus on ones that sell 250-400 per month, which is a good volume to aim for.
2. Get to Know Your Competition
When researching your competitors, look for the answers to the following questions:
- What is their marketing strategy?
- What is their sales strategy?
- What is their social media strategy?
- What situation are their finances in?
- What is their year on year growth?
- How many customers do they have?
Complete a SWOT Analysis
SWOT is a commonly used acronym that is short for: Strengths, Weaknesses, Opportunities, Threats. The Strengths and Weaknesses are internal factors that you have more control over while Opportunities and Threats are external factors that you have no control over.
What is a SWOT?
Strengths - What are the areas you are good at? You should ask yourself what you do better than anyone else. Also, look at times you’ve achieved fantastic results.
Weaknesses - What are the areas that need or could use improvement? Consider situations you’ve struggled to meet expectations.
Opportunities - What can be considered weaknesses that could be turned into a strength? For example, you could ask how you can make your product better.
Threats - What are potential obstacles such as emerging competitors, changes in the market, or things that will negatively affect your business? These are important to consider so you can have a contingency plan.
Completing a SWOT analysis is a good way to start evaluating the position of your business, but it should always be followed by more planning and development, because it doesn’t produce actionable outcomes. The analysis seeks to locate both external and internal factors affecting your business. It is useful for gaining insight into your company, brand, project or product. You should use a SWOT analysis in the following areas:
- Product of Service Launches - It is useful for product positioning.
- Strategy Building - The analysis is helpful in building a business plan.
- Business Growth - It will help you understand if you will reach growth goals.
- Marketing - It will help you learn how to best market your product.
- Team Evaluation - Useful for evaluating strengths of a team and best for restructuring and creating new departments.
How Do You Write a SWOT?
A good starting point to keep focused is brainstorming this list of topics to evaluate. You can start to think about the SWOT analysis questions that are related to:
- Your customers.
- Your competitors.
- Your market share.
- Business growth.
- Price point.
- Online following.
- Customer retention rate.
- Budget restrictions.
- Company culture.
Then pick 5-10 real strengths, opportunities, threats, and weaknesses. Also, if you have 5 strengths, find 5 weaknesses. For every opportunity, try and write down a threat. This makes it easier to compare the categories. Next, think about which items on your list are most pertinent to your overall goal and expand on those. Here are some SWOT templates to help you.
Read Your Competitors’ Reviews
You can learn from the successes and failures of others by reading the reviews of your competitors. You can learn from their mistakes and try to emulate their successes.
The amount of reviews they have can also be very useful. For example, if they have thousands of reviews, they likely already have market share, and entering that market could be extremely challenging. Whereas if they have few reviews, there are better opportunities for you to gain market share.
The reviews will also reveal your potential customer’s problems and the solution your product provides and enables you to figure out which solutions your competitors are not offering.
Bookmark offers some great information on marketing strategies or even test out their product for yourself too.
3. Decide on Your Business Model
You need to decide who you expect to buy your services or products and what transaction types you are hoping to make.
Types of Business Model
Ecommerce businesses generally come under 1 of 4 common types of business models. They are all different with their own unique challenges and benefits. By knowing what category you want to be in, you can create a plan to get you there.
Business to Business (B2B)
This market is companies selling goods or services to other companies. The B2B model usually occurs across a longer time frame, higher value orders, and more recurring orders.
Pro and Cons of B2B
The pros of this business model include a predictable and stable market, greater customer loyalty, lower operating costs, and a reasonably high sustainable profit margin from the repeat customers.
The cons are that B2B usually requires significant capital to start up the business, including the cost of registration, branding and setting up the office, whether virtual or physical. The customer pool is smaller and decision making amongst businesses is often slower so sales are more difficult. Profits can also be lessened by the demand for bulk discounts.
Business to Consumer (B2C)
This is the traditional store model of a business selling their services or goods to a consumer. This is the most popular business model.
Pro and Cons of B2C
The pros include a smaller startup capital requirement and minimum knowledge or supervision qualifications because a basic understanding of the internet enables you to set up a ecommerce site. This model involves selling to a large customer base, and you have more control over discounts, giveaways, and campaigns to the customers.
The cons are that this model is very competitive and most businesses already have a majority of the market share. Shipping products across borders can be very problematic if you choose the wrong shipping company and the B2C market requires upgrades more frequently than in other models in maintaining your product platform.
Consumer to Consumer (C2C)
This model involves a consumer selling a product or service to another consumer usually through a third-party website or an independent online platform. If you are a C2C company the income usually results from the listing or transaction fees.
Pro and Cons of C2C
The pros include no costs to listing your products on a C2C website and the products gallery is virtually unlimited.
The cons are that the costs on a third party C2C site may reduce the profits of the seller and product quality can be at risk because the model requires that both parties trust one another.
Consumer to Business (C2B)
This model allows individuals to sell goods and services to companies. C2B provides a channel for companies to source and hire a variety of service talents and products from around the globe.
Pro and Cons of C2B
The pro of the C2B ecommerce model is in pricing for goods and services. This approach gives consumers the power to name their price or have businesses directly compete to meet their needs. It also provides an opportunity for companies to prioritize hiring from regions where the standard of living is low, thus, reducing what figure goes on the paycheck.
The cons include a high level of communication skills required to convey project ideas. Companies that hire freelancers could face a challenge in sending payment to freelancers in some parts of the world. The possibility of outsourcing means the freelancer paid for the job may not even be the one doing it. This situation could put the employer at a disadvantage as he gets a substandard service.
4. Determine Your Sales Strategies
Direct to Consumer (D2C)
The D2C strategy is pretty commonplace as it has recently risen in popularity. Consumer packaged goods and manufacturers are increasingly using this strategy in order to remove the middleman and increase profits.The producer can make all the decisions, including marketing, sales, brand, and reputation.
White Label vs Private Label
‘White label’ is when you put your brand on a generic product, rather than on one you have created yourself. If you choose a ‘private label’, a manufacturer will make a product uniquely for your business.
Regardless of whether you choose to white or private label, you will cut your production and design costs, and you can focus instead on your website and marketing.
If you choose to become a wholesale retailer, this means you sell your product in bulk for lower prices.
Dropshipping has also become a common way of doing business, due to the popularity of ecommerce.
It is easy and cost-effective to set up, and you can set up an online storefront and take payments. However, you never actually touch the goods you sell. You simply place the order with your supplier and they ship directly to the customer so you do not deal with inventory, packaging, or stock control.
A subscription model is when a customer must pay a recurring price at regular intervals for access to a product.
5. Find a Name for Your Business and Register
The name for your business needs to be unique and refer to what you do or sell. Check with the U.S. Patent and Trademark Office to see if it's available as well as register your business name on the Secretary of State website you have chosen to run your business.
You must register with the Secretary of State to start a nonprofit, corporation, or limited liability company (LLC). A registered agent is needed to register your company and this is a requirement for the majority of businesses. A registered agent is someone who is responsible for receiving legal communication on the company’s behalf, including correspondence from the Secretary of State and processing notices.
6. Get Business Licenses and Permits
Even if your store does not have a physical location, you still need to get permits and business licenses. Contact local authorities to find out which are necessary for you, and obtain them before you start performing business functions.
The websites for your county and state should list which licenses or permits you will require in your industry.
Types of Permits and Licenses
Local permits and licenses – Determined by the location of your company and type of business, including businesses run from home.
State permits and licenses – Set by your location and type of business. Fees differ from state to state and are generally highly regulated.
Federal permits and licenses – If your business operates in places regulated by federal agencies, you may require a federal license or permit. Check with the federal agency to see if this applies.
7. Attain Your Employer Identification Number (EIN)
What is an EIN? It stands for Employer Identification Number and is a 9-digit code given to you by the IRS. It is used for the following business requirements:
- To hire employees.
- To open a business bank account.
- To apply for a business license.
- To get a business loan.
- To build your business credit.
- To file tax returns.
- To register as a corporation or LLC.
If your main place of business is in the US or associated territories and you have an SSN, you can apply for your EIN online.
Companies that operate from an international location cannot apply online so the application will be more time-consuming. Therefore apply as soon as possible. The process is free and straightforward. For international applicants, please call (267) 941-1099 Monday - Friday between the hours of 6:00 AM to 11:00 PM Eastern Time.
You can follow our guide the 4 ways to apply for an EIN.
8. Define Your Brand and Create a Logo
Brand identity is how you choose to show who you are as a brand. This is through a brand persona that can be a person, character, mascot, or idea. It is a collection of personality traits, attitudes and values that your brand showcases on a regular basis. Parts of your brand identity include branding guide, logo, and your unique selling proposition (USP).
Develop Your Brand Persona
Decide if your brand persona will be cool, trendy, intelligent, classy, or what other characteristics it will reflect. This should come through in all your communication, including your website, emails, or direct customer contact.
Types of Brand Personas
A brand persona can fit into a few different general types. Here are some to consider:
- Excited – This persona is adventurous, happy and willing to try new things.
- Sophisticated – This persona is stylish, intelligent and elegant.
- Caregiver – This persona is kind, empathetic and generous.
- Competent – This persona is persuasive and has great leadership qualities.
- Rugged – This persona is tough and athletic.
Some tips for creating a personality brand image include thinking about what your persona looks like, e.g. a person, animal, or other object. Make a list of the attributes of your brand that you want to highlight, and create a personality from those attributes. Consider how your persona would communicate and engage with others and then create a style guide using the fonts and colors to match the persona.
Avoid materials that are hard to work with and which might make it difficult to manufacture. Shipping and manufacturing should be as smooth as possible to avoid lengthy delays and issues.
Factor in the costs of manufacturing, so investigate which products cost less to produce, but that customers highly value.
Test the quality of your manufacturer before you order in bulk. Local manufacturing generally means you will not have to wait a long time to get the products. Search online to find out which ones are in your area. Check out products they have previously produced so you are familiar with the quality of their products.
You will not have to design packaging from the ground up. However, it’s important to consider that packaging is one of the first ways your customer will personally experience your brand. It is the first thing they see when accessing the product. Packaging varies so much from product to product and will depend on the specific size, shape, and type of product you’re selling. A great place to search for packaging suppliers is ThomasNet.
Begin by researching the details of when, where, and how you’ll ship products. Also consider the size of your product since it will affect your storage and shipping fees. Find out if there are any rules for how you need to store your product and for how to transport the type of goods you sell.
During your research be sure to find out if there are any unique restrictions or customs regulations for any international shipping.
- Do countries have laws about transporting the kinds of goods you want to sell?
- Are there customs regulations about international shipping of a given product?
Shipping costs are calculated based on four factors so it is important to consider how that will work in your business.
- Service and speed.
- Dimension and weight.
- Shipping volume.
After thorough research on your shipping you can decide on the two shipping options.
Ship From Your Home
This is an easy and accessible way to commence business and avoid third party shipping problems.
When considering this option you should ask yourself the following questions:
- How long will it take to get a product to your customer?
- Am I able to ship my items?
- What is the dimensional weight?
- Does the package need to be insured?
- How much will each shipment cost?
- What does it cost to return an item?
- Where is the package going?
Use a Third-Party Logistics (3PL) Company
If you prefer not to store your products at home, you can send it to a 3PL who deals with shipping.
The products will be stored in a warehouse, and the 3PL will be in charge of shipping the product from the warehouse to each customer.
Consider these important factors when deciding on a 3PL:
- The cost of the warehouse fees; there will be a monthly fee for the storage.
- The cost of the Pick and Pack fees; this is the charge for the employees finding and boxing the item.
- What is the minimum number of orders, for example, some have a 500 monthly minimum order.
Then ask the shipping company these questions before making a decision:
- What is the transit time for your shipment?
- What is the method of shipment?
- What does your insurance cover?
- Can they offer storage if you need it?
Create Shipping Page on Website
When faced with a purchase roadblock or question, the first place many customers will check is a store’s shipping policy or FAQ page. Populating this page with the right information helps customers find answers quickly, and reduces the need for them to contact you.
Make sure to include a shipping page on your ecommerce site with the following information.
- Tracking shipments.
- Shipping options and delivery times.
- Returns and refunds.
- Customs and international shipping availability.
- Lost or damaged packages.
Some major questions to answer on your shipping policy or FAQ page include:
- Do you do returns, exchanges or both?
- Are packages insured?
- What happens if my order arrives late?
- Are there faster shipping options?
- How do you handle shipments that go through customs?
Become Familiar With Carrier Information
Each carrier has a list of prohibited items that they will not ship and you should check each carrier to find out what their prohibited and limited liability items are.
Often dimensional weight pricing is used with UPS, FedEx, and USPS. This means even if your package is light, you may be charged based on its size. Each carrier has different rules regarding dimensional weight, so in some cases, repackaging your items can save money and would be an option.
Shipping carriers provide basic value protection ranging from $50-$100 at no additional charge. Exceptions may apply depending on the item you are shipping and the service you choose, so carefully review the insurance options each shipper offers and check prices of the additional value fees.
UPS, FedEx, and USPS all have varying guaranteed delivery times, so you’ll want to select the service which will get your package to its destination by the date and time you need. Guaranteed delivery times may be suspended during peak seasons, weather conditions, and other unforeseen circumstances.
Some Questions to Ask Yourself Because it Matters
- Are you shipping to a domestic or international address?
- Is your package going to a rural area?
- Are you using a business or a private residence?
- Are you using a street address or a PO Box?
Each of these shipping destination variables may come with a surcharge, depending on the shipper and level of service you choose. Only a few carriers offer return label shipping. Here are a few carriers that allow you to offer return shipping labels to your customers USPS, FedEx, UPS, DHL.
12. Design a Website and Purchase a URL
You need to find a domain name and any relevant redirect URLs. Register these and start building your website.
There are many options available for web hosting services. Shared web hosting is a cheap and popular option. Other options are available if you have more than one site, such as reseller web hosting, which will enable you to keep them all on the same account.
Here are some of the best web hosting services you could choose between:
Bluehost is often a default if your site is built in WordPress and is a top web hosting preference for most business owners and website managers.
HostGator is a good choice if you want a hosting plan that’s affordable and includes support, this is the host for you. It is the best price for scaling your business.
Hostinger features many plan options all of which can be used in WordPress. This company has great SSD performance, regular backups, and dedicated IP. This is best for businesses.
Ecommerce Website Providers
To sell your products you need a website with ecommerce software. There are multiple options, so when deciding, consider features, loading speed, SEO and ease of use.
Shopify is a subscription to a software service that offers you to create a website and use their shopping cart solution to sell, ship, and manage your products. They have a robust ability to push discounts, gift cards, and coupon codes. Plus a larger sales channel that includes Point of Sale, Facebook module, simple buy button and more. It is highly manageable and offers a wide selection of add-ons.
WooCommerce WooCommerce is an ecommerce plugin for WordPress. It makes creating and managing an online store simple, with reasonable levels of flexibility and several vital features such as inventory and tax management, secure payments and shipping integration.
BigCommerce is more flexible if you want to switch your theme. It is best for large or fast-growing businesses. There are more than 5,000 extensions available to build your website.
Magento is built on an open source technology and you can install it on your server. It is a self-hosted platform, so if you choose Magento, you'll have to find your own hosting service. It does let you sell in person with Square and sell on marketplaces and social platforms.
Wix offers drag and drop features to create small websites along with 500+ free templates and 100+ Wix apps to choose from. Wix provides its own web hosting as well as domain names.
13. Marketing Plan
Developing a marketing plan will give you a clear guide on what steps are needed to build your customer base. The plan should cover what you will do each month, quarter or year.
It should contain the following parts:
- A goal overview including advertising and marketing goals.
- Your current marketing strategy and position.
- A detailed timeline of when each task will be done.
- Key performance indicators (KPIs) you can track to check the progress.
- Target market description and customer needs.
Here are some common types of marketing plans:
Annual or Quarterly Marketing Plan
This should explain your marketing strategy for the time period and detail any campaigns you will run during this time.
Paid Marketing Plan
What marketing you will spend money on? What is your yearly budget for the paid channels as well as timelines of run time? Paid marketing will include re-marketing, affiliate marketing, video advertising, display advertising, pay per click (PPC), native advertising, and search engine marketing (SEM).
Social Media Marketing Plan
This plan should define which social media channels you are going to use and explain your tactics and what you will accomplish in content and messaging on each social media channel. Also, define the metrics you will measure for social media such as number of followers, comments, and likes.
Content Marketing Plan
This is a strategic marketing approach focused on creating and distributing valuable, relevant, and consistent content to attract and retain a clearly defined audience. We recommend using a content calendar in order to plan your posts around topics, holidays, giveaways, contests, articles, and other original pieces.
14. Launch Your Online Store
After you have completed all the big steps to get your website and product up here is a checklist to run through for your online store launch.
- Add any applicable sales channels.
- Add a custom domain.
- Double check your payment gateway.
- Prepare your standard pages.
- Review your email notification settings.
- Conduct a content audit.
- Optimize all images on your website.
- Install an analytics tool.
- Have a pre launch marketing plan.
- Adjust your tax and shipping settings.
- Make it easy for shoppers to contact you.
- Install only the essential apps.
- Set up your billing information.
After your business is launched you may find it a little challenging to keep track of everything, so set up reminders for LLC filing, annual reports, and applying for permits to maintain your business. Your calendar will be essential during this busy time. Here are a list of 35 helpful remote work tools.
Creating an ecommerce site is an exciting and challenging adventure with its own unique difficulties. However, following the detailed steps as outlined above will make your path smoother.
In summary, do your research to understand your customers, product, and competitors. Choose a business model and sales strategy that will best suit your company. Then you need to name and register your business along with any necessary business licenses, permits, and an EIN to ensure that you can operate legally. Next define your brand, manufacturing, packaging, and shipping. Design your ecommerce website and hosting company carefully. Commence your marketing magic. Then it’s launch time.
You will discover by trial and error what works and what doesn’t for your ecommerce store. These steps will ensure a strong foundation to begin your startup journey!
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