How do I start an E-commerce Business?
Table of contents
Introduction
What is an e-commerce business?
How to start an e-commerce business
- Step number 1: Study the e-commerce industry and identify your niche
- Step number 2: Pick a legal structure and a business name
- Step number 3: Apply for an EIN
- Step number 4: Obtain licenses and permits for your business
- Step number 5: Utilize an e-commerce platform to build your website
- Step number 6: Find or create products
- Step number 7: Promote your e-commerce business
The cost of launching an e-commerce business
Pointers for starting an e-commerce business
Conclusion
Website creation, management, and setup are now easier than ever for business owners, designers, and artists of all kinds. However, just like starting any other type of business, starting an e-commerce business isn't always simple.
In order to provide you with all the knowledge you require to launch your online business quickly, we'll break down how to establish an e-commerce business and other related things. So, let's start.
What is an e-commerce business?
An e-commerce business is a business that uses the internet to conduct transactions. This can include businesses that sell products or services online and businesses that use the internet to facilitate offline transactions. E-commerce businesses can be either small businesses or large corporations, and they can operate in various industries.
One of the numerous industries that have experienced significant growth over the past five years is online shopping. In fact, according to Statista, Global online retail sales reached 4.9 trillion US dollars. And throughout the following years, it is anticipated to rise by more than 50%.
Retail purchases made from a variety of gadgets have increased annually, fueling the e-commerce sector's rapid growth. It appears that it will eventually take over retail stores as it grows.
How to start an e-commerce business
Starting an e-commerce business differs noticeably from starting a brick-and-mortar business, but there are also several commonalities. All of the planning and legal steps that you'll need to take will be comparable to those of any other business, as we'll go into more depth below. But when the time comes to begin your business, you'll see how different opening an e-commerce store may be.
Step number 1: Study the e-commerce industry and identify your niche
Researching the topic is the initial step in learning how to start an e-commerce store. It is the same as you would do if you were launching a restaurant and weighing several locations, menu options, and themes. You should conduct research on the e-commerce market you're interested in and make some decisions in connection to your particular business.
Consider the exact products and services that your online store will offer, for example.
- Will you be offering products or services for sale?
- Are the products you're selling physical or digital?
- Where will you buy your products from?
In a similar vein, you'll want to consider the kind of business strategy you want to use - will you sell single items, bundles, subscriptions, or something else?
During this process, you should also think more broadly about how you will deliver your services or products to your clients. What will be the costs for your startup? Do you need to be aware of any rules or laws that apply to your product or service?
These lines of inquiry, along with others, will be essential to the startup of your business and will help you as you start to develop your business strategy. You'll have a better idea of your specific goals and action plan once you've finished this process. An important part of this phase, especially in the e-commerce sector, is determining your specialty.
The e-commerce market is expanding, which is fantastic for individuals wishing to learn how to launch an e-commerce business, but it also means there will be more competition. Therefore, you should conduct a competitive analysis and identify a market where you believe you can successfully build your brand and make sales of products and services.
Step number 2: Pick a legal structure and a business name
Once your idea is selected, the following step is to choose a name for your e-commerce business. Like any other business, you should choose a name that stands out while yet being very clear about what your business does. In addition, you should probably check the website of your local secretary of state to make sure that a rival business does not already register the name you choose.
Although you probably won't want to spend too much work on a website just yet, it will be worthwhile to investigate if the domain name for your proposed company is accessible. Consider using an alternative business name or other different structure, such as "yourbusinessname.co" rather than "yourbusinessname.com," if your preferred domain name is already in use.
Next, choose your business's legal framework. Your e-commerce business will be significantly impacted by the legal and financial consequences of your choice of business entity. You can choose to establish a corporation, LLC, general partnership, or sole proprietorship as your type of business entity. Each of these entity types has both advantages and disadvantages, so before choosing which is best for your company, you might want to speak with a lawyer or other legal professional.
You won't actually need to file for registration in the state where you're doing business if you decide to create a sole proprietorship or general partnership. As a result, if you wish to legally operate under the name you've chosen, you must submit a DBA, or "doing business as," application to your local government. Your business will instead be affiliated with you personally.
Step number 3: Apply for an EIN
The next action is requesting an employment identification number (EIN) for your e-commerce site. Having an EIN may help you distinguish between your personal and business funds, even though not all sorts of business companies are required to have one.
Additionally, the IRS accepts free EIN applications by phone, fax, mail, and online. If you're researching how to start an online store, you should apply for this business tax ID online because you'll receive your number instantly.
Step number 4: Obtain licenses and permits for your business
You should now apply for any business licenses or permissions required to operate legally in your city and state after receiving your EIN. As we previously indicated, you do not technically need to register your e-commerce business with the state if it has already been set up as a sole proprietorship or general partnership unless you are submitting a DBA to operate legally under a certain business name. However, if your business falls under one of the other categories of business entities, you must register it with your state and get a general operating license. You might also need to submit an application for a regional operating license, depending on where your business is based.
Because most e-commerce businesses are home-based, they typically don't require as many business licenses and permits as brick-and-mortar stores do. It is first necessary to determine the local regulations, which can typically be done by visiting the website of your state or municipal government. For instance, most places need that the owner obtains a home occupancy permit in order to lawfully operate a home-based business. This kind of license merely serves to demonstrate that conducting your business from your house isn't worsening any traffic, noise, or other problems in the neighborhood.
Some additional business licenses and permits you might need include:
- Licenses for specific professions and trades.
- Tax on sales permits.
- Environmental, health, and safety approvals.
- Signage permits.
- Permits for building and construction.
Step number 5: Utilize an e-commerce platform to build your website
The paperwork required to register and formally start your e-commerce business has now been completed. Most of what we've done so far resembles starting a typical brick-and-mortar business. Instead of hunting for a location and preparing to open your physical store, you will now start creating your website and online store.
This website will act as the public face of your business, much like a physical storefront. Before making a purchase, people will go there to discover more about your services. As a result, creating your website will be one of the most important phases in starting an online store. Therefore, as you create your online storefront, you should keep the following in mind.
As we previously mentioned, you should think about your domain name first. At the very least, your domain name should roughly match your business's name. In this sense, choosing an e-commerce platform will probably be your most crucial decision. Your e-commerce platform, whether it be an all-in-one app like Shopify or an open-source platform like Magento, will act as the basis on which you build and develop your online business.
Most e-commerce platforms let you create and launch your online store as well as manage inventory, take and send orders, collect payments, add your domain (or purchase one), and more.
Even though there are hundreds of these platforms available, you might wish to start with one of the following widely used choices:
Shopify
Shopify offers an all-inclusive, user-friendly solution with a range of add-ons. Additionally, one of Shopify's four subscription plans is accessible; the Shopify Starter plan costs $5 per month. Note that this plan excludes a complete web store.
WooCommerce
If you've already created a WordPress site or are familiar with the platform, you may download WooCommerce to start selling on it. The complete set of e-commerce functionalities is included in this open-source, free-to-download plug-in. WooCommerce is more appropriate for business owners with some technical skills than Shopify, so they may benefit from its open-source nature.
Squarespace
Most often seen as a website builder, Squarespace also includes e-commerce capabilities and is well known for its modern designs. Squarespace offers two options specifically designed for online stores: Basic ($26/month) and Advanced ($40/month).
Like Shopify, Squarespace is easy to use and appropriate for business owners of all technical skill levels. Due to the fact that Squarespace's primary function is as a website builder, it might not offer as many features, tools, or add-ons as some alternative solutions.
Magento
Finally, if you want total control over every aspect of your online store, choosing the open-source version of Magento might be your best choice. This e-commerce platform allows you to edit your website, but you must have the required technical know-how to do so.
While it's safe to say that this platform is typically not suitable for e-commerce beginners if you do have the necessary technical expertise or the money to hire a developer, you'll discover that Magento possibly offers the most of any open-source solution on the market, plus, it's free to download.
You can see that there is a lot to do during this phase and a variety of important variables to consider when choosing the ideal platform for your e-commerce business. In the end, a functional system that enables you to get up and run and manage your operations on a daily basis will serve as the backbone of your e-commerce business, so you'll want to consider pricing, functionality, usability, and more.
Once you've decided on whatever option is ideal for you, the following step is to begin editing and creating your website. It would be nice if you took the following into account:
- The layout of your online store
- Style of the design
- Colors you want to employ
- Other factors
Depending on your platform and financial limitations, you could decide to build and publish your website yourself or engage a professional designer or developer to assist you.
Step number 6: Find or create products
Once you've chosen your e-commerce platform and established your website, the process is nearly over. Finding the actual sources for the goods you'll sell is the next step. You have to think about how you would approach this process when you were conducting your study in step one. For instance, you might only need to describe your product and provide your own services on your website if you're selling them, such as consulting services. As an alternative, you might create your own products or buy wholesale versions.
If you intend to sell items, this phase will be more challenging because you must determine how much stock to start with and what your beginning costs would be. When you list your inventory on your online store, you should also make sure that you carefully consider SEO, the customer experience, and the sequence of events between the moment a customer places an order and the time they get it.
Step number 7: Promote your e-commerce business
You now have more understanding of how to start an e-commerce business. Now that your products or services are prepared, posted in your online store, and your website is up and running, you're ready to start offering customer assistance. Of course, to do this, you'll need to market your e-commerce business successfully. Here are some examples:
Invest in SEO
Search engine optimization for online stores is known as e-commerce SEO. Get your product pages to appear in the top 10 Google, Yahoo, and Bing search results. Your website will receive more traffic as a result. According to Backlinko, a page in position #1 is ten times more likely to obtain a click than a page in position #10.
Some strategies to invest in SEO are
- Identifying keywords and putting them into your page, product, and blog article URLs
- Enhancing the user experience and the structure of your website
- Acquiring backlinks from trustworthy websites
If done correctly, you can appear for widely used search phrases associated with your items.
Launch a campaign using influencers
Influencer marketing is a clever strategy to help your online store grow. It lets you work with creators who bring in money for you, increase the exposure of your brand, and connect with new audiences. Influencers, who are akin to online celebrities, act as brand ambassadors for your business. You compensate them for promoting your goods by giving them free merchandise, money, or discounts.
According to a recent Mediakix study, 80% of marketers believe influencer marketing be successful. With 67% of brands using it, Instagram is the most widely used platform. Additional marketing channels include:
- YouTube
- TikTok
- Snapchat
- Twitch
Finding suitable customers is made incredibly easy with influencer marketing. How frequently have you seen an influencer's Instagram post, liked what they were wearing, and wanted to purchase it? Influencer marketing shortens the sales cycle for a product. Shoppers may now make straight purchases from Instagram and TikTok thanks to more social commerce tools.
Sell on marketplaces
It is common knowledge that most online shoppers use marketplaces. In 2021, the largest online marketplaces generated $3.23 trillion in sales, or two-thirds of all e-commerce worldwide.
By reaching millions of people worldwide, marketplaces like Amazon and eBay can make it easier for people to discover your brand. In addition, some clients are ardent marketplace buyers. Therefore, there is a higher possibility that they will buy from you through a recognized channel. They do, however, have high selling costs and other restrictions to take into account.
Because of this, it is advised for e-commerce businesses to leverage marketplaces in addition to their branded store. Not all of your best-selling products should be present in a marketplace; only a select handful should. Create listings that are compelling and showcase your brand, and include branded packaging inserts with marketplace orders to attract customers to make direct purchases from your website.
Run PPC campaigns
Pay-per-click (PPC) advertising is the main internet advertising strategy for both big and small businesses. It is easy to grow, has statistics to back it up, and offers a respectable return on investment. Targeting online ad space on websites, social media networks, or search engines is common in PPC advertisements. These adverts are successful for e-commerce enterprises because they target customers who are prepared to make purchases and can generate higher sales than organic marketing.
Facebook and Google are the two most used PPC advertising networks. In addition, e-commerce brands frequently use Google Shopping advertisements. These advertisements are not new. For example, you'll see an advertisement when you search for "men's boots" that provides comprehensive information about numerous items relevant to your search.
Conversely, Facebook advertising is displayed on both Facebook and Instagram. To advertise your products, you can use a range of ad types and target particular personas.
PPC advertising has a lot to offer in terms of campaign targeting. Both the target audience and the type of advertisement you broadcast are completely up to you. In order to attract visitors to your website to make another purchase, you can also show retargeting advertisements to those who have already visited certain landing pages or other ads.
If you own a shoe business and a new line of boots comes in, you can make advertisements for them. Perhaps the boots are made of rubber and are waterproof. Your advertisements will appear in front of individuals who are actively searching for what you're offering if you develop a series of ads that target keywords like "best rain boots."
Upsell your products
Most of us have certainly heard the famous phrase "Would you like to supersize your order?" in some form or another. It's an illustration of upselling or recommending a product that is a little more premium than the one the buyer was first considering.
Upselling and cross-selling can often be more profitable for e-commerce businesses than finding new clients. A premium product may not always be known to your clients, or they may just require further information to realize the benefits of an upgrade (or package).
Is one of your product models, for instance, made of slightly nicer leather? Or does one carry a unique handmade component? Make sure to call attention to the distinction and politely inquire about an upgrade when appropriate.
When using upselling to boost sales, there are two major things to keep in mind:
Ensure that the upsells you offer are connected to the original offering.
Be considerate of your customers' predicted price range.
Your product must meet the customer's initial wants, and once they have an anchor price in mind, they might not be enthused about a higher price point. A buyer will frequently observe an anchor price as the first figure and use it as a benchmark when comparing other price points. For the upgrade to be worthwhile, the new product must fit the customer noticeably better than the original.
The display below is well-known to anyone who has ever bought a computer. In addition, companies typically promote performance enhancements (upselling) or extra accessories (cross-selling) for you to take into consideration after you've chosen a specific model.
As soon as your e-commerce business is up and running, you should keep track of which marketing methods work and which don't. As time goes on, you'll have the chance to update and adjust your marketing strategy to see what works best for your business.
The cost of launching an e-commerce business
After going over all the steps required to create an online store, you might still have concerns about one important factor: cost. As you might anticipate, starting an online store will let you eliminate paying for things like rent, property insurance, furniture, and other costs associated with physical stores.
Even while it could be easier to fund one on a shoestring, there is still a range of costs associated with opening an online store. As with any business, it can be hard to predict exactly how much it will cost to establish your e-commerce business. Your startup costs will be greatly influenced by the type of e-commerce shop you're starting, the platform or software you employ, how you procure your products, and other things.
In light of this, you should consider your budget carefully before starting out and keep a record of all of your expenditures as you go. The following expenses deserve your undivided attention:
Business permissions and licenses:
Depending on your business kind, location, and what you're selling, you might have to pay a variety of licensing and permit costs, which can range from $10 to $50 in some jurisdictions to several hundred dollars for incorporation.
Ecommerce software:
Although using an open-source platform may be free, there will still be additional costs associated with this kind of solution. On the other hand, you may discover some of the most fundamental features of an all-inclusive platform for a reasonable fee. Of course, costs will be greater for solutions that are more intricate and comprehensive.
Hosting and domain names:
Although using an open-source platform may be free, there will still be additional costs associated with this kind of solution. On the other hand, you may discover some of the most fundamental features of an all-inclusive platform for a reasonable fee. Costs will be greater for solutions that are more intricate and comprehensive.
Processing of payments:
.
Although using an open-source platform may be free, there will still be additional costs associated with this kind of solution. On the other hand, you may discover some of the most fundamental features of an all-inclusive platform for a reasonable fee. Of course, costs will be greater for solutions that are more intricate and comprehensive.
Inventory and shipping:
The expenses of your merchandise and shipping can vary greatly depending on what you're selling. However, your initial investment in inventory will probably be the largest of all the charges we've covered so far. Therefore, when you first start out, you should be careful when purchasing inventory to avoid spending too much money on items you won't be able to sell. Naturally, your shipping expenses may vary depending on your sales, the shipping providers you utilize, the quantity of the products you're sending, and the client delivery alternatives you provide.
Marketing and advertising:
Budgeting 6% to 7% of your gross income for marketing and advertising is generally considered safe. However, this might be challenging to estimate when you're first starting out, so you should definitely make the most of any free marketing and advertising opportunities you can find. Then you may start looking into paid methods for promoting your store once you understand what works successfully for your e-commerce business.
Pointers for starting an e-commerce business
Launching an e-commerce business can occasionally feel daunting and stressful, just like starting any new business. However, you will have access to a range of business owners and entrepreneurs as a member of the online selling community. They will certainly be happy to share their advice and best practices with you as you start. So here are some helpful starting tips:
Start small.
You are not required to invest initially in hundreds of things. If you're a craftsperson looking to gauge interest, create an Instagram account and do some basic branding. Set a date for receiving items if you're sourcing them, create a simple website, and soft launch using targeted Google or Facebook marketing. Afterward, expand your company from there.
Follow trends.
One of the major changes in e-commerce for 2022, along with delivery services, understanding cryptocurrency, and direct-to-consumer (D2C) sales, is sustainability. For instance, launching a fast-fashion business is generally a bad idea. Start a subscription service for vegan meals or organic vegetables instead.
Experiment with marketing.
If you don't promote your business, no one will be aware of it. Fortunately, before starting a large campaign on a site like Google Ads, there are a number of economical methods to conduct A/B testing.
Conclusion
Instead of opening a physical business, opening an online one has several advantages, such as lower initial costs, the flexibility to scale up or down, and the opportunity to service customers from all over the country (or the world, if you're willing to ship that far) on a daily basis. In addition, starting an online store makes sense for ambitious business owners because it's considerably simpler and less expensive to expand if necessary. And by that, Winterplay studios can help a business like yours to grow. So, what are you waiting for? Let's get started today!