The Ultimate Introduction to Starting an eCommerce Business
Feb 09 2021
37 min read
37 min read
Table of Contents
- What is eCommerce?
- eCommerce Trends
- How Does eCommerce Work?
- Types of eCommerce Business Models
- The Evolution of eCommerce
- Anatomy of an eCommerce Business
- How to Market Your eCommerce Store
- Which eCommerce Business Should You Start?
- Tools and Resources to Help You Grow Your Ecommerce Business
- Business Tools
- Website Marketplaces
- Learning Resources
- Create Your Online Business Today
The daily grind is tiring.
You commute to work, clock in, put in your hours, and head home right when the sun is starting to set.
Then you rinse and repeat until you can finally have a breather over the weekend. But all too quickly it's Monday again.
Enough is enough.
You want something better for yourself. You want to start a business and be your own boss.
So you search online for how to make money online.
You learn that there are many ways that you can build a viable income online — freelancing, affiliate marketing, tutoring, consulting, etc.
What about eCommerce?
eCommerce is appealing for many reasons. More people are shopping online than ever before with no signs of slowing down.
It’s a trend that has massive income potential, and the good news is that starting an eCommerce business has never been easier.
So what is it and how can you start making money doing it?
This resource will give you a comprehensive overview of everything you need to know about starting a successful eCommerce business — from what it is and how it works to getting your business up and running, getting that first sale, and the tools to help you do it all.
It can feel rather overwhelming if you’re just getting started. But with this in-depth guide, you’ll be able to launch an eCommerce business and start generating profit in no time.
What is eCommerce?
eCommerce (or electronic commerce) is the buying and selling of goods using the internet. Since the first transaction in 1994, eCommerce has grown to become a multi-trillion dollar industry.
eCommerce is estimated to reach a staggering $6.54 trillion in sales by 2022.
Those figures are projected to continue growing as consumers shift even more of their spending online.
That’s good news for you, as it means it’s not too late to get into eCommerce and build a profitable business.
Here are some examples of eCommerce:
eCommerce Example #1: Online Stores
Best Buy is a multinational retailer that sells a range of electronics, appliances, and other items from its physical locations.
They also sell products directly from their online store:
Visitors can browse their product catalog and order directly from their website.
Amazon is another example of an online store that most people are familiar with. The company initially sold books, but has since expanded to include a wide range of products. A large majority of their product sales are conducted through their website.
eCommerce Example #2: Online Auctions
eBay is an example of an online site that works like an auction house. Sellers can list their products for sale and consumers and bid on them.
A broken laser pointer was the first item sold on eBay for $14.83 to a collector. The founder personally emailed the buy to make sure he knew what he was buying.
Other items sold just a week after that purchase include Marky Mark underwear, a Superman metal lunchbox, and a Toyota Tercel. The company now has yearly revenues of over $10 billion.
Not bad for something that started off as an idea.
eCommerce Example #3: Payment Gateways
PayPal is an example of a payment gateway. Users can connect their account to a debit or credit card to send money and accept payments.
eBay purchased PayPal back in 2002 for $1.5 billion and phased out its own competing payment service.
eCommerce Example #4: Classified Websites
Craigslist is a classified advertisement website where users can post items for sale and even offer services. Other users can reach out and either meet in person or transact online.
Craig Newmark started Craigslist as an email distribution list of events in the San Francisco Bay Area that he sent to his friends. It eventually became a web-based service and has since expanded to include other categories.
The company now does yearly revenues of over $1 billion.
eCommerce Example #5: Online Banking
Bank of America offers online banking. This allows users to conduct financial transactions online from paying bills to transferring funds.
Consumers don’t need to visit a branch in person for basic tasks. They can simply log in to their accounts and send money online to others or a business.
These are just some examples of eCommerce. While many of these companies now do billions of dollars in revenue a year, they all started with a simple idea and have grown to become household names.
Of all the different types of eCommerce businesses, online stores are one of the easiest to get started with. It’s also the business model that I’ll primarily be covering in this article.
The eCommerce industry is constantly changing how people shop.
Here are some eCommerce trends that are worth paying attention to:
eCommerce Trend #1: More Consumers Shop From Mobile Devices
Shopping from a mobile device wasn’t always so easy.
Mobile phones in the past didn’t have the same capabilities they do now and websites weren’t designed for small screens.
But new advances in mobile devices, particularly touchscreen capabilities and faster connection speeds, made it easy for consumers to shop right from their smartphones.
This has led to more consumers shopping from their smartphones. 72.9% of all eCommerce sales are now expected to take place on a mobile device by 2021.
These figures simply can’t be ignored. As you build your online store, it’s important to think about optimizing for mobile devices right from the start.
Otherwise, you risk users bouncing out because your site wasn’t designed for mobile devices.
eCommerce Trend #2: Consumers Use Social Media For Product Research
There are an estimated 3.81 billion social media users.
Those figures are HUGE. They represent nearly half the world’s population!
Social networks like Facebook and Twitter are still widely used to connect with friends. But more people are using these platforms to inform their purchasing decisions.
40% of consumers use social media channels to research products. Facebook is by far the most popular:
The implications are clear:
A social media presence is a must.
More importantly, you’ll need to monitor your brand mentions and stay on top of what other people are saying about your business.
eCommerce Trend #3: Personalization is Key to Driving Sales
Walk into any local retail store and it will likely be the same the next day. Retail stores can’t personalize the shopping experience for individual customers.
Just how effective is this?
59% of online shoppers find it easier to shop for interesting products on personalized online stores and 56% are more likely to return to a site that offers product recommendations.
Online shoppers want a more personalized shopping experience. One way to build customer loyalty and drive more sales is to utilize a product recommendation engine.
Visit Amazon and there’s a good chance your homepage looks different from mine:
Amazon utilizes algorithms to recommend products based on a user’s browsing and purchase history.
eCommerce Trend #4: Rise of Voice Shopping
“Hey Alexa, order milk.”
Shopping with just your voice may sound like a foreign concept. But more consumers are doing exactly that with smart speakers.
Amazon Echo is the most popular smart speaker, but Google Home is expected to surpass it in market share by 2025.
Virtual assistants have certainly come a long way since Siri made its debut on the iPhone 4S.
Voice shopping is growing in popularity. Spend on voice shopping in the US is expected to reach $40 billion by 2022, up from $2 billion in 2017.
eCommerce Trend #5: Shopping With Augmented Reality
Nothing beats the convenience of shopping online — there are no crowds to deal with and you can easily compare prices.
But there are also major drawbacks. You can’t physically hold a product in your hand or try it out before you buy it.
Augmented reality or AR aims to bridge this gap. Consumers can use smartphones with AR capabilities to “test out” a product before placing an order.
IKEA built IKEA Place to allow its users to virtually place furniture in their homes and visualize how it would look.
The AR market is projected to reach $72.7 billion by 2024. Other retailers, including Converse and Gap, have begun experimenting with this innovative way of shopping.
As you plan your entry into eCommerce, paying attention to emerging trends will be important to effectively compete.
How Does eCommerce Work?
eCommerce businesses work on the same principle as brick-and-mortar stores — you place an order and receive the product you purchased.
The difference with online shopping is you don’t get to physically handle the product. The entire transaction is done through a computer or mobile device via the internet.
Then, it’s just a matter of waiting for your order to arrive at your doorstep. It sounds straightforward enough for buyers. But there are also many things happening behind the scenes.
Here’s a basic illustration of how eCommerce works:
eCommerce consists of complex systems that work together to facilitate a transaction. These systems include:
- Shopping cart software
- Payment processor
- Inventory management system
- Dispatch system
A web server hosts your website and delivers pages to users via a browser. Think of it as a virtual storefront that you can “stock” with products.
Shopping cart software is software that enables users to browse products on your site. It displays a list of the added products and automatically tallies up the total.
A payment processor allows users to enter in their credit card information and send money securely to complete their purchase. PayPal is an example of a payment processor.
Customers can use PayPal to pay for a product and businesses can accept those payments. However, PayPal takes a small percentage of each sale.
Inventory management systems allow businesses to keep track of inventory. Many also send alerts on when to resupply stock.
Finally, dispatch systems automatically send orders to a warehouse where they are packaged and shipped to the customer.
Companies with complex supply chains, like Apple and Best Buy, employ all these systems together to maximize efficiency.
However, only a web server, a payment process, and a shopping cart are necessary to build an online store. The rest like inventory management and dispatch can be handled in more traditional ways like using spreadsheets.
Let’s look at the different types of eCommerce business models you can consider:
B2B: Business to Business eCommerce
B2B eCommerce refers to online transactions between businesses. An example might be a manufacturer selling its products or software to other businesses.
Dropbox Business is an example of B2B eCommerce. Dropbox offers cloud-based storage directly to companies.
B2B eCommerce business can be wildly profitable, but they also typically require more startup cash.
B2C: Business to Consumer eCommerce
B2C eCommerce refers to online transactions between a business and a consumer. This follows a traditional retail model but is conducted entirely online.
Zappos is an example of a B2C eCommerce business:
Zappos is strictly an online retailer — they only sell products through their website. Other examples of businesses that sell exclusively online include Newegg and Overstock.
C2C: Consumer to Consumer eCommerce
C2C eCommerce has gained tons of traction in recent years. These types of sites allow consumers to buy and sell products to other consumers.
Etsy offers an example of C2C eCommerce.
Shoppers can buy crafted items directly from independent sellers or even start their own shop if they so choose.
C2B: Consumer to Business eCommerce
C2B eCommerce is when consumers sell goods or services to businesses.
Upwork offers an example, as individuals can sell their services to other companies.
Companies can post a job listing and individuals can bid on them as a way to supplement their income. You may even consider using this platform as you grow and scale your online store.
It’s easy to fall into the hype of starting an online store. But like with any business model, there are advantages and disadvantages of eCommerce to consider.
Let’s explore these in more detail:
Advantages of eCommerce
- Low startup costs: Opening a physical store can easily cost tens of hundreds of thousands of dollars once you factor in costs like rent and inventory. In contrast, starting a dropshipping store can set you back a modest $418.
- Sell products internationally: eCommerce doesn’t have the same physical limitations of brick-and-mortar stores. You can choose to sell locally or ship products to a worldwide audience.
- Showcase product recommendations: eCommerce allows you to create a personalized shopping experience. For example, you can showcase products to individual customers based on items they’ve viewed or purchased.
- Easy to retarget: With eCommerce stores, you can view data about your visitors and use tracking pixels with retargeting ads to bring them back.
- Ability to scale: It’s easier to scale an eCommerce business. There’s no need to worry about shelf space as you can add more products. You can also increase your ad spend and bring on new team members without being weighed down by overhead costs.
- Clear insight into buyer behavior: With online analytics, you get a clearer understanding of your business' return on investment than you can get from brick-and-mortar marketing strategies. Details like traffic sources can be used to form your marketing campaigns.
Disadvantages of eCommerce
- Shoppers are often wary of new sites: Starting a business can be difficult in the beginning as your name barely carries any weight. 89% of buyers are more likely to buy from Amazon than other sites because it’s a name that people know and trust.
- eCommerce is highly competitive: Heavyweights like Amazon and Wal-Mart can afford to sell items cheaply, making it difficult to compete against them online. The low cost of entry also means that eCommerce has grown more competitive over the years.
- Shoppers expect fast responses: 62% of shoppers expect an immediate response to sales inquiries. If you’re not available, you could lose that sale. One option is to hire customer representatives, but that incurs extra costs.
- Shoppers are impatient: What makes shopping from Amazon highly attractive is their same-day shipping option with Amazon Prime. If customers have to wait a long time, they may not shop again from your store. Worse, they may post a negative review about your business which could hurt future sales.
- Fraud is a major concern: Consumers run the risk of having their identities stolen when they purchase from a new site. Businesses also run the risk of being targets for phishing attacks.
- Regulations and taxes: With an online store, you need to apply for a business license and complete all the necessary paperwork. You’ll also need to collect sales tax and file returns according to your state’s requirements.
It’s a lot to take in, but understanding the advantages and disadvantages of eCommerce can prepare you for some of the challenges that lie ahead.
Here are some of the different types of eCommerce business models you can start.
Types of eCommerce Business Models
There are different types of eCommerce businesses you can start. But before you do, you’ll need to think about inventory management and product sourcing.
Let’s take a look at each one in more detail:
Dropshipping is one of the easiest ways to start an online business.
It’s a fulfillment method in which products are shipped directly to the consumer. What makes this business model appealing is you don’t need to stock any products.
With dropshipping, you won’t need to pay huge overhead costs for a warehouse. Once you receive an order, simply send it to your supplier and they’ll take care of the rest.
Dropshipping is a great way to get your feet wet in the entrepreneurial world.
Startup costs are low and suppliers are often happy to work with business owners — sales you send over ultimately mean more revenue for them.
This is a business you can potentially start today. However, no business venture is without its downsides.
Because dropshipping is so easy to get started with, stores can sell products at a competitive price to attract customers. This results in lower profit margins.
Inventory management is another issue. If your products are out of stock, your customers have to wait which can lead to frustration with your business or even order cancellations.
- Easy to start. Dropshipping is a business you can start today.
- Low startup costs. No need to worry about managing inventory.
- Highly scalable. You can leverage multiple suppliers to handle orders.
- Lack of control. You don’t have any control over your products’ branding.
- Thin profit margins. Low overhead costs mean that stores often compete on price.
- Supplier errors. Botched shipments or long waiting times can hurt your reputation.
Reselling products is a more traditional retail model.
It takes more work than dropshipping, but has higher profit potential. This involves working directly with manufacturers and negotiating prices for their products.
If you’re just starting out, you may not be able to get good rates. But once you scale and establish your business, you can ask for bulk discounts and increase your profits.
With this eCommerce model, you’ll need to think about inventory management. You have several options:
- Store products in a spare room
- Rent a local warehouse
- Have another company handle fulfillment
An example of the latter is Fulfillment By Amazon or FBA, a service that enables third-party sellers to ship their products to a fulfillment center and have Amazon handle the shipment.
You can wholesale products (B2B) or sell directly to consumers (B2C) on sites like eBay or Amazon. You can also sell products from your own online store.
- More control over inventory. Orders you receive can be shipped right away.
- Higher profit potential. Buying in bulk allows you to negotiate lower prices.
- More flexible. You can scale your business as profits grow.
- Higher startup costs. Buying inventory comes with higher overhead costs.
- Need to handle logistics. You’ll need to manage inventory and track orders.
- More work to set up. More planning involved to get the ball rolling.
Developing and manufacturing your own products can easily cost thousands of dollars or even much more.
White labeling (also private labeling) is one option you can consider if you have an idea for a product, but don’t have enough capital.
White labeling is when you purchase products directly from a manufacturer and put your branding on them. You can even work with a manufacturer and have them produce a product based on your specifications.
For example, Costco sells a wide selection of products under its Kirkland Signature brand. But they don’t actually manufacture many of these products.
Instead, other manufacturers make their products and Costco slaps on their label. Kirkland Signature now accounts for almost a third of all Costco sales
However, there are also several downsides to white labeling.
Most manufacturers require a minimum production quantity to make it worthwhile. You could be stuck with a ton of products if you can’t sell them.
- Build a professional brand. You can put your own labels on these products.
- Reduced production costs. Manufacturers already have production lines setup.
- High profit margins. You can determine price points for your products.
- Minimum production quantities. Managing inventory means higher overhead costs.
- High startup costs. You’ll need a larger investment.
- Potential liabilities. You could be held responsible for manufacturing defects.
Selling Your Own Products
Another option you can consider is to sell your own products.
For example, maybe you have an idea to sell high quality handcrafted jewelry. You can sell your items on a site like Etsy or on your own online store.
This is the approach that Steve Chou’s wife from MyWifeQuitHerJob.com took. She was able to grow Bumblebee Linens to 7 figures with this business model!
This approach isn’t as easy as dropshipping or reselling products. But it does offer a high profit potential as we’ve seen with the example above and you have more control over product quality.
However, you’ll need to source materials and either make the products yourself or work directly with a manufacturer. This means you can expect higher startup costs as a result.
You’ll also need to manage inventory and track customer orders. Alternatively, you can turn to FBA to handle the logistics.
- Quality control. If you make the products, you can control its overall quality.
- High profit potential. You can price your products as you see fit.
- Highly scalable. You can hire employees to help you scale your business.
- Time-consuming. Selling handcrafted items requires a huge time investment.
- Not as scalable. Not always possible to scale depending on what you sell.
- More logistics involved. You’ll need to handle customer orders or rely on FBA.
The eCommerce subscription model is another business model that has become popular in recent years. 15% of online shoppers have signed up for these subscriptions.
The way it works is straightforward — customers pay a monthly fee and you ship out products on a recurring basis.
These could be products that you create or rebrand.
Dollar Shave Club follows a subscription model with its personal grooming products. The company sells Dorco razors, but rebrands them with their own label.
Another approach is to put products together from different suppliers and sell them as a sort of care package.
This is the model that SnackCrate follows.
SnackCrate doesn’t make any of its products. Instead, they source snacks from countries around the world and put them together into a neat package for a monthly fee.
The subscription model certainly sounds appealing. You get predictable recurring revenue once you build up a customer base.
But one of the downsides of this business model is churn rates — the percentage of subscribers who cancel. Churn rates are around 5.6%, but can vary from industry to industry.
- High-profit margin. Products you sell can be marked up for a premium.
- Greater predictability. It’s easier to predict demand in advance.
- Highly scalable. Once you have systems in place, you can start to scale and expand.
- Extremely competitive. More companies are entering the subscription eCommerce market.
- Subscription fatigue. Consumers are wary of signing up for more services.
- High churn rate. Unless you offer tons of value, you’ll likely lose customers.
Let’s look at the impact eCommerce has had.
Impact of eCommerce
eCommerce has radically changed retail.
Just look at the following chart:
In 2017, eCommerce sales accounted for 10.4% of total retail sales. That figure continues to steadily rise as more consumers shift their spending online.
eCommerce sales are expected to account for 22% of total retail sales by 2023. That’s a whopping 111% increase!
Let’s look at the impact of eCommerce on consumers and business:
More Choices for Consumers
You’re looking to buy a pair of shoes. So you drive down to the store, but the ones you want aren’t available in your size.
At this point, you have a few options — buy a different pair, visit another store to see if they have your size, or forego your purchase entirely.
Either option can lead to a frustrating shopping experience.
The above example is how Zappos was founded. Nick Swinmurn, the company founder, had the idea to sell shoes online after he was unable to find a pair of Airwalk Desert Chuka boots.
One of the largest impacts that eCommerce has had is giving consumers a seemingly endless number of products to choose from.
If one store doesn’t have what you’re looking for, you can simply load up another site.
Rise in Comparison Shopping
It wasn’t easy to compare prices before the internet.
If you were looking to save on a camera, you would have to visit multiple stores to compare prices until you found one with the best deal. The whole ordeal could take an entire afternoon.
In contrast, eCommerce has made it effortless to compare prices. You could easily compare prices on just about anything in a matter of minutes.
If this sounds familiar, you’re not alone. 36% of online shoppers spend time finding the site that has what they want at the lowest price.
This is great for the average consumer. But it often means that business owners have to operate on thinner profit margins to compete on price.
Offline Research, Online Purchases
eCommerce has led to another rise in consumer behavior: offline research, online purchasing.
Have you ever gone to a store to test out a product only to purchase it online because you knew you could get it cheaper?
Don’t worry, I’ve done it too.
It's called showrooming.
Because online stores have lower overhead costs, many can offer lower prices on the same products available in a brick-and-mortar.
This has led to consumers visiting retail stores and then making their purchases online. We even do it while in the retail store (59% of shoppers admit to using their devices while in-store to compare prices).
Showrooming has had major effects on retailers.
Just look at this chart comparing eCommerce sales and department store sales:
It’s clear that department store sales are steadily declining. One reason is the continued dominance of eCommerce and the desire to find great deals.
Low Startup Costs
Starting a retail store isn’t cheap.
One business owner spent over $30,000 to open a consignment store in Texas. Costs start to add up once you factor in rent, licensing fees, store fixtures, inventory, etc.
That kind of capital isn’t exactly easy to come by. But it’s a completely different story with eCommerce.
You don’t need a storefront, which significantly reduces overhead costs. And you don’t even need to stock products as you can get started with dropshipping.
eCommerce has such a low barrier to entry that anyone with a little capital can build a profitable online business.
The Evolution of eCommerce
eCommerce is a multi-trillion dollar industry.
It didn’t start like that, of course. Let’s look at some of the major milestones that led to this explosive growth:
1972: First Online Deal
The first online transaction wasn’t for a book or a household item. It was so some students could get their hands on marijuana.
Students at the Stanford Artificial Intelligence Lab used the ARPANET (predecessor to the internet) in the early 70s to arrange the sale of marijuana with students at MIT.
Money was handed over in person, so it technically wasn’t an eCommerce sale. But it’s still a noteworthy inclusion as it’s the first deal that the internet facilitated.
1989: World Wide Web
You’re reading this page thanks to Tim Berners Lee, a British computer scientist who invented the World Wide Web in 1989.
Lee developed three technologies: HTML (HyperText Markup Language), URI (Uniform Resource Identifier), and HTTP (Hypertext Transfer Protocol) — all of which make it possible for users to browse and follow links across the web.
The first webpage is still published. It’s nothing fancy, but it laid the foundation for enabling people to access information and eventually make purchases online.
1994: First Online Purchase
The first legitimate online purchase can be traced back to August 11th, 1994.
Dan Kohn created a site called NetMarket and sold a CD of Sting’s “Ten Summer’s Tales” to Phil Brandenberger in Philadelphia for $12.48 plus shipping.
It’s the first time that encryption was used to make the transaction secure. A secret code was used which enabled Kohn to securely send his card Visa information.
1994: Amazon Was Founded
Jeff Bezos founded Amazon, a name which was settled on because it sounded “exotic and different,” in his garage in Washington.
The company sold books and was generating a staggering $20,000 in sales a week within just two months.
Here’s what the original homepage looked like:
Amazon is now one of the most valuable companies in the world with a market cap of over a trillion dollars.
1998: PayPal Was Founded
PayPal was one of the first companies to deal with secure online transfers.
Anyone could sign up and send money electronically by linking their email address to their bank account.
Its ease of use made it a popular way to send payments, especially on sites like eBay. PayPal was eventually sold to eBay for $1.5 billion back in 2002.
2004: Facebook Was Founded
Facebook was founded by Mark Zuckerberg.
The platform was initially limited to Harvard students but has since expanded to include anyone with a valid email address. The network now has 2.5 billion active monthly users.
This inclusion is important for two reasons: More people are turning to social media for product research and the site is a major player in social commerce.
Businesses can create a Facebook Shop and customers can buy directly within the site or mobile app.
2007: Apple Launches the iPhone 2007: Apple Launches the iPhone
“An iPod, a phone, and an internet communicator.”
These were the words that Steve Jobs famously uttered as he unveiled the first iPhone, which would completely change how consumers shop online.
Smartphones like Blackberry had been around for a long time. But these devices weren’t as innovative and using them to shop online was clunky.
The explosive growth of smartphone users combined with faster connection speeds have resulted in more people shopping from their devices than ever before.
Mobile commerce is projected to reach $3.56 billion in 2021.
How consumers shop online is constantly changing.
Some changes we’re seeing in the industry today that we’ve previously covered is the use of voice to make purchases and AR to better visualize products.
eCommerce will continue to evolve, but who knows what the future holds.
Anatomy of an eCommerce Business
Successful online stores share similar characteristics. Understanding what these are can be beneficial as you start planning and building your eCommerce business.
Let’s take a closer look at each:
Memorable Brand Name
What do some of the largest companies have in common?
They have memorable names.
A strong brand name can distinguish your products and enhance how others perceive your business, distinguishing you from the competition.
A brand name should give some indication of what your company does. But this doesn’t always have to be the case.
Instead of naming itself BuyAnythingOnline.com, Jeff Bezos instead chose to name his site Amazon after the world’s largest river.
Another tip is to keep your business name short. Shoppers are going to have a hard time remembering your name if it’s too long.
Check that your brand name isn’t already in use. Otherwise, you may find it difficult to form a business entity or you run the risk of infringing on trademarks.
As you build your eCommerce business, you’ll likely oversee everything from managing your inventory to marketing your products and handling customer inquiries.
But attempting to do everything yourself severely limits your growth potential. Not to mention that you’ll also burn yourself out from taking on too many responsibilities.
A strong eCommerce team typically consists of the following roles:
- Director of eCommerce
- Web developer
- IT technician
- Inventory manager
- Logistics manager
- Digital marketing manager
- Customer represent representative
Start small and bring on new team members as your eCommerce business grows. You can even outsource some tasks to save on costs instead of hiring in-house.
Strong Vendor Relationships
Vendor relationships play a crucial role in the success of any organization. Strengthening these ties can take time, but they can benefit your business in many ways.
Becoming a “customer of choice” can mean receiving preferential treatment or getting early access to new products. It can also lead to volume discounts if you order regularly and send payments on-time.
Despite the importance of Supplier Relationship Management or SRM, 23% of organizations don’t have an SRM program in place.
That’s good news for you as it means you can bring someone on to manage supplier relationships and give your business an edge.
Efficient Inventory Management
Some of the largest online retailers have hundreds or even thousands of products. Keeping track of that much inventory isn’t easy.
Inventory management systems keep track of your products. Some even send alerts when stock starts to dwindle, so you know to place an order soon with your suppliers.
Effective inventory management allows you to quickly locate and ship your products out when orders come in.
Why is this important?
Because shoppers are impatient. 45% of consumers will unlikely order from a company if they receive their packages too late.
Instead of managing inventory yourself, you can use a fulfillment service like Amazon FBA to handle the logistics.
Simply ship your products to their warehouse and they’ll take care of the rest.
Excellent Customer Service
Not every customer will buy right away. Some may have questions about your products or may call in to see if it’s in stock.
Customer service is certainly an investment, but it can ultimately pay off in the long run by reducing your overall customer acquisition costs.
Zappos is a prime example of a company that prioritizes customer service. One representative stayed on a call with a customer for 10 hours and 51 minutes!
In contrast, many companies typically try to end customer service calls as quickly as possible to help the next customer.
If your competitors aren’t exactly known for customer service, you can use that to your advantage by prioritizing your customers.
Clear Value Proposition
A value proposition is a statement that helps your prospects understand why they should do business with you. It answers the question, “What’s in it for me?”
A strong value proposition can also hold your visitors’ attention and keep them on your page longer.
Here’s an example of how Tortuga positions its travel backpacks:
Value proposition doesn’t necessarily have to come from the products themselves.
Millions of shoppers buy from Amazon because they know they’ll receive their products fast with one-day shipping.
Many customers choose to buy shoes at Zappos because of their stellar customer service. If something goes wrong, they know they’ll be taken care of.
Think about your value proposition and communicate that clearly on your website.
First impressions matter on the web.
48% of people judge the credibility of a business based on its website design. If your website is poorly designed, you risk visitors bouncing out.
A quality website is key to making a good first impression. Equally important is an intuitive navigation structure that makes it easy for visitors to navigate your site.
Here’s an example of a navigation structure you can follow for your site:
This site architecture allows users to click through categories and subcategories to find the products they’re looking for.
There are different ways you can structure your eCommerce business:
- Sole proprietorship
- Limited Liability Company (LLC)
The structure you choose will determine how much you pay in taxes and your personal liabilities.
As a sole proprietor, your business and personal assets are not separate. If you form an LLC, your personal assets are not at risk if your business faces any lawsuits.
Operating any kind of business, including an online store, also means that you’ll need to obtain the necessary licenses and permits.
Each state has its own requirements, so check your state’s website for more details. Here’s a state-by-state listing.
The steps to register your business depends on the structure you’ve chosen and the state you live in. Some states require that you register a legal entity name.
Registering also protects your business name and prevents anyone else from using it. You can either register your name on your own or by hiring a filing company to do it for you.
With all these components together, you have what it takes to build a successful eCommerce business.
Let’s look at how to make your store and bring in customers.
How to Market Your eCommerce Store
Starting any kind of business isn’t easy. But you managed to push through and launch your online store.
Now it’s time to pop open the champagne and wait for the sales to roll in, right?
This isn’t Field of Dreams. If you build it, “they” most definitely won’t come. You need to market your eCommerce store to get the word out and drive sales.
Here’s how to market your eCommerce store and start bringing in sales:
eCommerce Marketing #1: Promote on Social Media
Try to find someone without a social media account and you’d be hard-pressed to. There are over 3.5 billion social media users.
These figures mean you simply cannot afford to ignore social media.
Start with the major platforms, including Facebook, Twitter, and Instagram as these are the most popular. Completely fill out your profiles to get them ranking for your brand name.
Visitors to your profile pages should know exactly what your business offers. Follow this image optimization guide to ensure you have the correct image sizes with each network.
It’s time to start posting. Share content that’s relevant to your audience to build a following for your brand.
Here are some ideas to get you started:
- Product showcases
- Product giveaways
- Customer spotlights
- Upcoming sales
- Behind the scenes
- Event coverage
Here’s a Facebook post from Bobbi Brown Cosmetics that details their skincare routine:
They also include details about the products they use.
Building a following on Facebook can be difficult, especially if you’re still a new brand.
With Facebook Ads, you can increase your reach by showing your ads to your audience. You don’t need a large budget either as you can set a daily limit.
There are even different formats including photo ads, video ads, carousels, and slideshows to showcase your products.
Bewakoof uses carousel ads to showcase their products to shoppers based on their interests and browsing history:
Here are more success stories of how businesses are using Facebook to increase their reach and grow their sales.
Instagram product tagging is another way you can market your products. This feature allows you to tag your products and link them to your site.
Here’s an example of how Lulus uses product tagging to promote their products:
Lulus was one of the first companies to test product tagging for Instagram, which has led to over 100,000 visits to its website and 1,200 product orders.
Using this feature can also help you showcase your products and make it easier for your followers to buy from your business.
Here’s a guide to getting started with Instagram Shopping.
eCommerce Marketing #2: Use Google Shopping Ads
Amazon is undoubtedly a popular site for consumers to shop.
But when it comes to product research, 85% of shoppers turn to search engines like Google for product information before they make a purchase.
Search engines represent a massive opportunity for your eCommerce business. Ranking for your keywords can drive more targeted traffic to your product pages.
But even with search engine optimization (or SEO), you can’t expect a new product page to suddenly rank in the top position overnight.
It can take weeks or even months to rank for competitive keywords. If you’ve just launched your new store, you can’t afford to wait that long. You want to start bringing in sales ASAP.
With Google Ads Shopping, you can advertise your products and drive visitors to your store with targeted ads.
Here’s an example of how these product ads appear in the search results:
Shopping ads appear at the top of the search results.
Users can see a photo of your product, its listing price, and your store name. If they’re interested, they can click on the ad and make a purchase.
How well do these convert?
Shopping ads have 30% higher conversion rates compared to regular text ads. These ads utilize a visual format, so they’re likely to attract more attention over plain text.
Google pulls data from your product feed to create your ads. You must include all the required attributes. Here’s the full list of product data specifications to include.
To make things easier, Google Merchant Center provides a template you can use in Google Sheets or Microsoft Excel to create your product feed.
Watch this video on how to create and submit your data feed:
Log into your Google Ads account and click the plus button to create a new campaign. On the next screen, click on the Sales and Shopping tabs:
From here you can link your Merchant Center account to your product data and place bids for your campaigns.
You can always get started with a small budget and gradually ramp up your spending once you start seeing results.
eCommerce Marketing #3: Utilize Content Marketing
The Content Marketing Institute offers the following definition for content marketing:
“Content marketing is a strategic marketing approach focused on creating and distributing valuable, relevant, and consistent content to attract and retain a clearly defined audience — and, ultimately, to drive profitable customer action.”
The key here is on providing valuable and relevant content. Then, you can leverage your content to reach your audience and drive them to your online store.
Perhaps the most popular method is blogging.
If you sell electronics, you can publish in-depth reviews of the latest gadgets. Or if you sell fishing equipment, you can publish a beginner's guide with links to your products.
Blogging allows you to capture prospects in different stages of the sales cycle.
Use keyword research tools like Keyword Planner (found inside Google Ads) to uncover keywords that your target audience is searching for.
Write in-depth content and publish them to your blog.
Remember to optimize all on-page factors to increase your content’s relevance. Optimize the following on-page factors for your keywords:
- Page titles
- Header tags
- Meta descriptions
- Internal/external links
- Image ALT text
Here’s a visual guide of the “perfectly optimized page”:
Be careful not to overly spam your content with keywords. Otherwise, you risk your site getting hit with a ranking penalty.
Don’t just limit your content marketing efforts to blog posts.
For example, you can use your blog posts to create:
- Guest posts
- Social media posts
Repurpose your content into different formats to reach a wider audience across multiple channels.
eCommerce Marketing #4: Remarketing
You’re looking to buy something, maybe a new pair of running shoes, so you search online and click through to a store.
But you decide to hold off on your purchase to do more research or you got sidetracked by something else.
Then as you browse through your Facebook feed the following day, you see the exact ad for the shoes you were looking at.
Is that a crazy coincidence or what?
That’s an example of remarketing.
Remarketing is a marketing strategy that allows you to show targeted ads to visitors who have visited a page on your site.
It can help your business drive more sales by bringing visitors back to your site and encouraging them to complete their purchase.
The average shopping cart abandonment rate is 69.57%. This occurs when a visitor adds a product to their shopping cart but leaves without completing the purchase.
If that happens, you can create a remarketing campaign on Google or Facebook and show an ad to that visitor. You could even offer a discount as an incentive.
Whether you use Google or Facebook, you'll need to add a tracking code or pixel to your website.
This allows you to create more relevant ads. For example, if a visitor visits a category page on smartwatches, you could create ads that show the smartwatches you offer.
eCommerce Marketing #5: Reach Out to Influencers
Influencers are authoritative figures in their respective industry. People listen to them and even make purchasing decisions based on what they say.
That’s why companies are willing to pay big bucks to work with influencers. These individuals tend to have massive followings that engage with their posts.
Influencers with a million followers can command up to $10,000 per post. Even those with smaller followings can charge a few thousand dollars per post.
It’s a lot to shell out on a limited budget. But it can be an effective way to market your eCommerce business and spread the word.
So how do you find influencers?
The simplest approach is to search for hashtags that are relevant to your business on Facebook or Instagram. Look through accounts and note down any that aligns with your brand.
Here’s an example when searching for #techgadgets on Instagram:
Look for posts that are relevant to your business.
Don’t rule out micro-influencers or individuals with small followings. While these influencers may have smaller followings, they often have higher engagement.
Micro-influencers also charge significantly less than celebrity influencers. Once you’ve found influencers you can work with, send them a DM or an email.
Influencers have busy schedules. If you don’t hear back from them, wait a few days before following up again.
As your business grows, consider working with influencers with more reach to promote your products.
Which eCommerce Business Should You Start?
It’s a difficult question.
The answer depends on factors like how much capital you have and your long-term goals.
Let’s look at some scenarios that can help you make a decision:
If you have little to no capital...
You’re already working a full-time job, but you’ve barely been able to save anything. That leaves you with little to no capital to start a business.
Dropshipping is the best place to start.
This eCommerce business model has an incredibly low barrier-to-entry. You don’t need to purchase inventory or worry about overhead costs like rent.
To get started, you’ll need a domain name and hosting. These can cost anywhere from $10 to $20 a year.
Then, you’ll need shopping cart software. I’ll provide a more comprehensive overview in the next section, but you can either use free software or a platform like Shopify.
Shopify costs a modest $29 a month, but there’s a 14-day free trial you can sign up for.
Dropshipping is the best business model to start with if you have little to no capital. As you grow, you can reinvest your profits into stocking inventory and scaling your business.
If you have some capital...
You’ve been working and steadily saving over the last few years. You have anywhere from a few thousand dollars to $10,000 that you can allocate to start a business.
Consider reselling products.
With this business model, you’ll be working directly with manufacturers to purchase inventory in bulk that you can then sell on your store for a higher markup.
For inventory management, you can handle the logistics yourself or use a fulfillment service like Amazon FBA, which costs $39.99 a month for a Professional account plus selling fees.
The latter option allows you to spend more time on growing your business instead of managing inventory and shipping orders out.
As your business grows, you can negotiate discounts with your suppliers and scale your marketing campaigns.
If you are financially stable...
You’re financially comfortable and you have a sizable amount set aside for a new business venture. You have big plans and you’re not afraid to see them through. You’re in this for the long haul.
Consider creating and marketing your own products.
There are different approaches you can take. You can launch your own private label products or work with a factory to manufacture your product.
Then, you can sell on your site or offer your products on different platforms like Amazon and eBay. As for managing your inventory, you can set up a warehouse or use Amazon FBA.
On the marketing side, you can hire content writers to create quality content for your blog or social media profiles.
This business model isn’t easy as it requires more capital, but it gives you much more control and has a high profit potential.
Ultimately, only you can decide which eCommerce business is right for you. Whatever you decide, you’ll find the following tools and resources helpful.
Tools and Resources to Help You Grow Your Ecommerce Business
Need help building your eCommerce business?
I’ve put together a list of tools and resources that will help get you on the right track.
Here is a list of eCommerce platforms you can use to power your store:
Shopify is one of the most well-known eCommerce platforms on the market. It’s a fully hosted solution that starts at $29 a month for the basic package.
The platform includes all the tools you need to build a professional online store and sell on your website and multiple marketplaces.
There is also a large selection of apps you can install to extend the functionality of your store.
If you’re looking for an eCommerce platform that’s intuitive and easy to use, you simply can’t go wrong with Shopify. You can even sign up for a free 14-day trial to test it out.
BigCommerce is another popular eCommerce platform that enables business owners to build an online store and sell their products.
The platform supports cross-channel commerce, meaning you can integrate with top marketplaces, such as Amazon, eBay, and Google Shopping.
BigCommerce also offers Facebook, Pinterest, and Instagram integrations.
Even with little design experience, you can build a professional-looking store with the intuitive storefront builder and customize the theme to your liking.
Pricing starts at $29.95 per month for the Standard plan, $79.95 per month for the Plus plan, and $299.95 per month for the Pro plan.
There’s also a free 15-day trial you can sign up for.
Squarespace is a website builder that also has eCommerce tools for users to sell online.
You can use the drag-and-drop builder to create your own design or choose from a selection of ready-made templates.
You’re not just limited to selling physical products. You can also use Squarespace to sell your services and allow customers to schedule appointments.
Squarespace offers integrations with payment, social media, and marketing tools to grow and scale your business.
Pricing starts at $26 per month for the Basic Commerce plan and $40 per month for the Advanced Commerce plan.
You can get started with a 14-day free trial.
Magento Commerce, owned by Adobe, is a feature-rich eCommerce platform that’s designed to be highly customizable. It provides sellers with everything they need to scale their business.
Features include a page builder with drag-and-drop functionality, allowing you to design more engaging product pages.
Another huge selling point of Magento Commerce is the business intelligence and data visualization tools. You can use these tools to gain valuable insight into your business.
Magento Commerce doesn’t publicly display pricing information as there are so many customization options. You can get a free demo or reach out directly to their sales team for details.
OpenCart is a flexible and light-weight eCommerce platform. It’s built on a fully open-source system, meaning there are no costs associated with using it.
There are tons of modules you can install to expand your store functionality along with a large selection of beautiful themes.
Because OpenCart is open-source, you have more control over your store. But it also means you’ll need some development knowledge depending on the work you need done.
OpenCart is a good option if you’re just getting started with little to no capital.
WordPress + WooCommerce
WooCommerce is an open-source plugin that’s built for WordPress. The plugin is free to download and install, but other add-ons (like extensions and themes) come at an extra cost.
The WooCommerce plugin has an intuitive Setup Wizard that allows you to set up your store in just a few minutes. It also supports major payment gateways, such as PayPal, Stripe, and Square.
If you already have a WordPress site and want to turn into an online store, all you have to do is install the WooCommerce plugin.
Building an online store takes a lot of work.Here’s a list of tools to make things easier:
Namecheap is a domain registrar that offers competitive prices. Simply enter the name you would like to register and you’ll see a list of available domain names.
You’ll find a large list of top-level domains. But I recommend that you register the .com extension, which is priced at $8.88 a year.
If you need to register a new domain, then go with Namecheap.
HostGator is a leading website hosting service that’s well-known for its reliability. With their shared hosting plans, you can host an unlimited number of domains.
HostGator also offers 24/7 customer support. If you run into any troubles, you can reach a customer service representative at any time.
Monthly pricing for the baby plan starts at $11.95 per month, but you can bring that down to $5.95 per month by purchasing 12 months in advance.
Sumo is a free email capture tool that you can add to your eCommerce websites to build your email list.
Other features include social share buttons you can add to your content and heat maps that show what your visitors are doing on your website.
You can send up to 10,000 emails per month and connect your store with the free plan. The Pro plan is $49 per month and includes features like A/B testing, email integrations, eCommerce design templates, and more.
AWeber is an email marketing software that allows you to manage your mailing list and create an autoresponder series.
Use the drag-and-drop builder to create custom emails or choose from a library of templates to quickly get started.
With email marketing, you’ll be able to build relationships with your customers and send personalized emails with relevant offers.
AWeber offers a free 30-day free trial.
OptinMonster is a lead generation software that enables you to convert more of your website visitors.
With the plugin, you’ll be able to capture more leads with multiple form types and even split test different headlines to see what converts.
If you want to convert more of your visitors, then OptinMonster is a must-have tool. Pricing starts at $9 per month for the Basic plan and goes up to $49 per month for the Growth plan.
Upwork is a platform that connects businesses and freelancers.
Whether you’re looking for a content writer to grow your blog, a developer to customize your theme, or someone to manage your customer support, you’ll be able to find the right individual on Upwork.
Simply start by posting a job or browse profiles to find a suitable candidate. You can pay a fixed price or by the hour.
WP Engine provides managed WordPress hosting solutions on a secure and scalable platform.
Features include fast loading times and daily backups. Premium WordPress themes and the Genesis framework are also included, so you can build a professional website in no time.
Pricing for the Startup plan starts at $25 per month and goes up to $368 per month for the Premium plan.
If you use a combination of WordPress and WooCommerce to build your store, I recommend using WP Engine to host your site.
With the Keywords Explorer tool, you’ll be able to get thousands of keyword suggestions and other metrics like ranking difficulty, search volume, and more.
Ahrefs also includes Content Explorer which allows you to identify the best performing content in terms of social mentions and organic search traffic.
You can get started with a 7 day trial for $7, then it costs $179 per month.
Google Analytics is a free web analytics tool from Google that lets you track key information about your visitors, including how they found your website and what pages they visited.
You can also use the tool to track conversions, allowing you to identify which pages are driving sales and which ones aren’t.
The tool can be rather overwhelming, but you can register for Google Analytics for Beginners to learn more about how to navigate the interface and set up dashboards.
NicheHacks Academy is where you’ll learn how to build a successful online business.
You get access to powerful tools and a growing library of resources. There are over 145 step-by-step plans that you can follow that you can use to scale your business.
If you want to learn how to build an online business and grow your marketing skills, then I recommend joining NicheHacks Academy.
If building an eCommerce business sounds like a lot of work, that’s because it is.
Get a jump start by purchasing an existing online store.
Here’s a list of marketplaces you can use to buy (and sell) websites:
The Exchange Marketplace is a marketplace from Shopify where you can buy eCommerce websites for sale.
You can use the site to search for dropshipping sites that are already integrated with vendors like AliExpress and FBA or established businesses with everything setup.
Many listings provide metrics like average monthly revenue and profits. You can even check out the site for yourself and contact the seller if you’re interested in purchasing.
Flippa is another marketplace worth checking out if you’re interested in purchasing an online store. You can browse eCommerce businesses by price, age, type, and category.
Just like with the Exchange Marketplace, you can view details about a site like revenue and net profits, and reach out to the seller if you’re interested in purchasing.
Ready to take your business to the next level?
Here are some learning resources that will help you take your business to new heights:
- SEO Basics: A Beginner’s Guide to Search Engine Optimization
- How to Safely Rank in Google For Any Keyword
- How to Guest Blog and Gain Lots of Backlinks and Traffic
- Keyword Research Tools
- The Ultimate Guide to Content Marketing in 2020
- How to Make Sales With Facebook Ads
- The Small Business Guide to Instagram eCommerce
- A Quick (but Useful) Guide on Using Google Shopping Ads to Generate Sales and Revenue
- The Ultimate Guide to Blogging: How to Start a Blog That Makes Money
- The Ultimate Collection of Free Content Marketing Templates
- How to Write a Content Marketing Strategy Step-by-Step
- Content Optimization: The MarketMuse Guide
Create Your Online Business Today
Starting an online business has never been easier. It has a low barrier-to-entry and you can get started with a small investment upfront.
In this in-depth article, we’ve covered different eCommerce revenue models as well as how to build your online store and market your products.
It’s easy to feel overwhelmed when starting an online business.
If you would like to connect with like-minded entrepreneurs and access a growing library of resources, consider joining NicheHacks Academy.
We’ve love to hear from you. Be sure to leave a comment below!