What is eCommerce?
eCommerce can be defined as the practice of selling goods and/or services on the internet. eCommerce requires a secure online infrastructure, including a shopping cart interface and payment system to facilitate online sales and protect customers' private purchasing information.
Businesses all over the world must move more quickly than ever before.
Increased competition, better-informed consumers, and the economy are pushing brands to evolve and embrace a new way of doing business.
In this time of change, businesses with an eCommerce presence are in the best position to thrive.
If your current business doesn’t sell online, it’s time to start an online store.
And, if you’re planning to start a business, start online before expanding into a physical presence.
How to Start an eCommerce Business in 6 Steps
Lay the foundation
Before you can start an eCommerce business (or any business), you have to plan.
You must consider the details of what your venture is going to look like.
The opportunity is enormous
The data is irrefutable. eCommerce is booming:
As of March 30 , ecommerce sales from pure-play ecommerce retailers are up 34% year over year in the U.S. and Canada, and the number of orders has increased 52% year over year, according to the data, which is based on more than 1 billion consumers and more than 400 million orders from 2,500 businesses in 120 countries.
Consumers are turning to online shopping to get the goods they need and want.
Some shop online out of convenience, and others out of necessity.
There’s no denying that online shopping has become a way of life. And, the demand is only growing.
Choose an eCommerce business model.
The world of eCommerce covers a lot of ground.
So, it’s not enough to know that you want to start an eCommerce business. You need to have a specific idea of exactly what type of eCommerce business you want to run.
You can write a business plan, or develop a clear vision of where you’re going is essential if you’re ever going to get there.
If you’re starting an eCommerce branch of an existing business, your current business model will guide you to the appropriate eCommerce model.
But, if you’re starting an online business from scratch, you have a little more flexibility.
Here’s a quick overview of how eCommerce businesses are often classified:
- Drop Shipping: This model has a fairly low barrier to entry. You set up a storefront and partner with a business vendor or supplier who fulfills all of your orders. The supplier manages inventory, packs, and ships purchases directly to your customers. There’s no need to buy inventory upfront.
If you choose this model, be sure to find a reliable partner. Your customers will see your brand (not your fulfillment partner) if that partner messes up. So, your reputation takes the hit.
- Wholesaling and Warehousing: In this business model, you take on more responsibility and more control because you purchase inventory from a supplier and rent warehouse space to store it in. You also have a higher up-front investment as a result. You’ll manage your inventory and be responsible for packing and shipping orders when customers place them from your online store.
- Private Labeling and Manufacturing: This business model is for those who have an original product idea. Rather than buying and reselling existing products, you will design your own products and work with a manufacturer to make them. Some manufacturers may also handle fulfillment and shipping to the customer. Or, you may need to acquire warehouse space and manage your own fulfillment.
- White Labeling: In this model, you apply your branding to a pre-existing product. The manufacturer of that product then fulfills and ships your orders. The caveat is that you have to buy a certain quantity of inventory when white labeling. If that inventory doesn’t sell, then you’re stuck with it.
- Subscription: Subscription eCommerce has really taken off over the past few years. This model involves delivering a new product or box of products to subscribers at regular time intervals. Customers purchase the subscription rather than individual products. This model requires more complex fulfillment than single one-off orders but offers a consistent revenue stream.
For a more detailed breakdown of your eCommerce business model options, read this article from ecommerceCEO.
Be sure to consider each model’s pros and cons before deciding which one is best for you.
Then, get to know every detail of that model so you can execute it without a hitch.
One of the big benefits of an e-commerce business model is that you can leverage existing services to reduce your costs. For example, you don’t need to develop a fleet of delivery trucks like Amazon. This can be very expensive, as we point out in our guide on how to start a trucking company. Instead, an e-commerce business lets you leverage third-party delivery companies to deliver your products to customers.
Reducing your costs and focusing your attention allows you to create a great experience for your customers. And that translates to a win for you and a win for your customers. Customers expect flawless online shopping experiences. You don’t want to undermine your success by giving your earliest customers a poor experience.
Choose your niche
Knowing your business model is important. But, it’s only a starting point for what your e-commerce business will eventually become.
The specific products you sell – and the specific people who buy them – define your unique business. So, it’s important to dig deep and identify your business’s niche.
What is a niche?
A niche is a targeted subset of a larger market. This can describe both a product or service and the specific audience for whom the product or service is intended. For example, organic beard wax for men with curly hair is a niche product. Health-conscious men with curly beards are a subset (niche) of the larger market of men who use grooming products.
As we explain in our business ideas guide,
Don’t make the expensive mistake of trying to build your own business geared toward too broad an audience. Make sure you build your business to meet the needs of a specific niche to avoid overspending and underwhelming all of your potential customers.
You’re more likely to succeed if you start your business with a specific product or service designed for a particular group of people.
So what will you be selling? And to whom?
It’s vital to get specific.
We just emailed the info to you.
Conduct market research
Once you’ve outlined your business model and niche, it’s time to dive into market research.
Online business ideas are a dime a dozen, but you need to know if there’s a real market to sustain your proposed business.
In our free ebook How to Start a Business From Scratch, we outline 5 essential questions you must answer to assess a business idea.
1) How many potential customers are there?
2) Can these customers pay for your products or services?
3) Do these customers have the specific need you solve?
4) Who is competing for your customers’ business?
5) In what ways can your company be better than your competitors?
For help in answering these questions, check out Chapter 2 in the free ebook.
And, whatever you do, don’t skimp on this step.
Your new business cannot succeed without a healthy market of customers to support it. So, make sure that a healthy market exists before you dive in head-first.
Deal with the legal stuff
Every business, online or off, has to jump through the appropriate legal hoops. From choosing a business structure to filing permits and getting a tax ID... there's plenty to take care of.
So let's get started.
There are four main types of legal structures for businesses.
For new business owners, choosing the best business structure for your business can feel overwhelming.
Don’t rush yourself into making a decision. Instead, spend some time reading about your options.
Consider which structure is most helpful for your business and how each structure can help you accomplish your professional and personal goals today – and in the future, as your business grows.
What are the 4 types of business structures?
- A sole proprietorship is the most basic business entity. A sole proprietorship means that one person is solely responsible for business profits and debts.
- A partnership is a shared responsibility between two or more people who hold personal liability for a business.
- Limited Liability Company (LLC) is a structure that permits owners, partners, or shareholders to limit personal liability but still includes tax and flexibility benefits associated with a partnership.
- A corporation is an entity legally considered separate from its owners. That means that corporations are permitted to own property, be held liable, pay taxes, and enter contracts.
Licenses and permits
Once you decide on your legal business structure, you’ll need licenses and permits to operate your business legally. Be sure to register with the government (typically your state and sometimes your municipality) and the IRS.
Your business structure determines the forms you need and where you have to register.
You can find a full list of the forms for each type of entity on the SBA website. You can also find state-specific tax obligations on the same site.
In some cases, you may need federal, state, or local licenses and permits to operate. The SBA’s database lets you search for licensing requirements by state and business types. And remember to contact your municipality to see if there are any local licensing or registration requirements.
You may also need to get a tax ID, called an employer identification number (EIN) from the IRS.
If you’re a sole owner and don’t have employees, this is not required. But you might want to get an EIN anyway to keep your personal and business taxes separate and to be sure that you can quickly hire when the time comes to expand your business.
The IRS has a useful checklist to help you decide whether you will need an EIN to run your business.
If you do need an EIN, you can register online for free.
DBA (Doing Business As)
Also, remember that most states require you to register your business if the trade name under which you operate your business differs from your business’s legal name.
For example, if your registered company is an LLC and is named “Three Brothers, LLC,” you cannot operate that business lawfully in most states if you’re selling products under the trade name “Three Tigers.” That’s because the registered name and your trade name are different.
Fortunately, this is not a difficult problem. You can simply register your actual trade name with your state (and or local government) by filing a “doing business as” (DBA) certificate. DBAs are also commonly called “assumed name,” “fictitious business name,” or “trade name.”
Here’s a terrific guide that explains what a DBA is, the DBA state requirements, and how to file a DBA for your business in all 50 states and U.S. territories.
Build your brand identity
A strong brand identity is the most effective way your eCommerce business can gain a competitive edge in an increasingly crowded marketplace.
And that’s why it’s vitally important to make conscious, consistent branding choices. The decisions left unmade, and a brand left untended may hurt your business.
Your brand embodies how people think of and perceive your business. This includes the perceived mission and values that guide your company, the products and services you sell, and how you sell them.
As a result, your brand exists independently of the decisions you make. But, the branding decisions you make can lay the foundation for a strong, positive brand.
So, ask yourself these important questions:
- What are my brand’s values?
- What identity/personality do I want my business brand to project?
- Can customers get something from my products or services that they can’t get anywhere else?
- What is the most important part of my customers’ experience?
- Can customers get something from working with me that they can’t get anywhere else? If so, what?
Your answers to these questions (and others like them) will build the core of your brand. So, give them some thought. This core brand identity will become a sort of lighthouse for your business – always guiding it back to your home identity and values.
Your business name, company logo, and business website design are central elements of your brand identity.
Your business name plays a role in nearly every aspect of your business.
It’s how customers will identify and remember you. So, it’s essential to choose a name that represents your brand accurately. Otherwise, your business will go unnoticed by your target audience and attract the wrong (non-buying) leads to your eCommerce store.
But, not only that, your business name will define your online domain. So, your business name will become the online address where customers will find you. You must choose a business name that embodies your brand and has an available domain.
This can be tricky in today’s saturated market. Finding just the right business name is challenging. So, if the task daunts you, don’t feel bad. But, do get help.
Think you can get a perfect score?
As we’ve previously explained:
Whether every detail of a logo is intentional or not, every detail will influence people who see that logo.
Nothing should be arbitrary …
It’s in your best interest to make sure that every logo design choice is intentional and communicates the message you want to convey.
Your company logo will become the face of your brand. For that reason, it’s important that your logo properly communicate who your brand is. Otherwise, you’ll find that your target customers dismiss your business as a poor fit for their needs or their values.
So, hire a designer to create a custom business logo that visually embodies your unique brand.
And, read up on how to identify a strong small business logo with these articles:
- The Small Business Guide to Creating the Perfect Logo
- The Psychology of Logo Design: How Fonts, Colors, Shapes, and Lines Influence Purchasing Decisions
- The 18 Most Iconic and Influential Logos of All Time: Decade by Decade
Develop your product or service
Once you understand your business model, your market, and your specific niche, you have the necessary context to develop a product or service that can thrive.
If you plan to sell existing products, you can start by researching possible options and then curating a list of products that fit your brand.
Be picky when choosing the items you’ll sell.
And only sell products that both appeal to your target audience and resonate with the mission and brand values you’ve outlined. Consistently offering products that align with your brand and the ideal customer will show that you “get” them. It will also inspire brand loyalty and motivate them to come back.
If you’re planning to private label and manufacture, then you’ve probably got a pretty good idea of what you want your product to be. But you’ll need to flesh out the details and the product design before taking it to a manufacturer.
The best products solve a specific problem for customers. So, make your primary focus on solving that problem as you work with your product designer.
And, remember – the best solutions are often the simplest ones.
A service is intangible and hard to demonstrate online.
That makes services trickier to sell.
Start by brainstorming the general services you’d like to offer. Then, nail down every detail before you share your offer online.
That starts with defining your services and deliverables in detail so that you can paint as complete a picture for your customers as possible.
If you want your business to succeed, you need to show potential customers the specifics of what you will offer – and deliver – as vividly as possible.
So, what exactly will a customer actually get in exchange for their investment?
Create your online store
Your website is the hub of your eCommerce business.
It's where the rubber meets the virtual road, so to speak. Customers will research your brand, investigate your products, and - if you've done your job well - load up their virtual shopping cart and then check out all in one place.
Your business website needs to guide users through their shopping experience from beginning to end.
And, as we’ve mentioned previously,
…eCommerce websites are unique. They need to manage inventory, process payments and provide a convenient shopping interface.
And, they need to work harder to overcome the inherent uncertainties of the internet in order to inspire consumers to part with their hard-earned cash.
The bottom line is that eCommerce sites need to play by a different set of rules than a typical website.
It’s not enough to have a pretty website. There need to be some serious coding guts behind the design to make an eCommerce website do everything that it needs to do – and do it well.
And, it must do it well, or your first customers will also be your last.
Choose an eCommerce platform
Many eCommerce websites are built using existing eCommerce platforms such as Shopify, Woocommerce, or BigCommerce.
Those platforms specialize in eCommerce, providing stable and comprehensive solutions for managing inventory, shopping carts, and secure payments.
If you’re looking to get started fast, using an eCommerce platform is probably your best bet. For reviews of the best eCommerce platforms, check out this article from ecommerceCEO.
Many eCommerce platforms provide free (and some fancier paid) templates that you can use for your website. But we do recommend choosing a platform that will allow you to use your own custom design.
Sharing a web template with thousands of other online stores is a surefire way to blend into the background.
If you want your online store to stand out, it needs to have a consistent and unique visual brand identity. Starting with a free template that anyone else can use presents an uphill battle in achieving that goal.
On top of that, templates restrict your control over your online store – limiting your ability to change the layout and appearance for marketing optimization purposes. “What you see is what you get” templates are easy. But, they’re also confining and difficult to grow.
Develop your website design
Your website’s design should visually embody all of the brand traits and values that you identified earlier.
As the core of your visual brand, your company’s logo should serve as your source of inspiration.
- Your website should share the same color palette (or an expanded version of it) as your logo.
- It should mirror the same emotional tone as your logo.
- And, website copy should appear in the same or complementary fonts.
In addition to making design choices that support your visual brand, it’s also important to remember that your primary goal is to motivate visitors to make a purchase.
Create your product listings
Regardless of appearance or platform, there’s one thing that every online store has in common – product listings.
Creating compelling listings can help your sales skyrocket – while lackluster listings will stagnate.
So, what does a compelling product listing look like?
The best and the worst listings all include the same three components – product titles, descriptions, and photographs. It’s how you execute them that makes the difference between success and failure.
Master each of these three components, and you’ll create effective listings that leap into shopper’s carts.
Your listing titles identify your products to your potential customers.
And, the more descriptive your listing title is, the more the customer can learn about your product at a glance. You can showcase what makes your product special and why customers can’t live without it before they’ve even clicked through.
Use evocative, descriptive words to highlight your products’ best qualities, and your listing titles will motivate sales.
Strong product photography is your best sales tool.
Shopping on the internet involves more uncertainty than shopping in person. In a store, you can handle and examine an item with your own two hands. Customers can’t touch the products they want to purchase online.
But great product photos help to allay some of that uncertainty. And, well-styled photos that showcase the product in a way that resonates with your target audience help shoppers to envision that item in their lives.
Take as many photos as needed to give your customers a complete understanding of the product. And, of course, show it off to its best advantage.
Take photos with natural light (instead of camera flash) – this makes a world of difference. Play around to find out what time of day yields the best lighting for you.
And remember that these pictures must appeal to your target customer. So, keep those customers in mind and style the photos accordingly.
But most importantly, make sure your products are the stars of the photos – simplicity is key.
Writing an awesome product description is the final step to creating a stellar listing.
This is your opportunity to tell the story of your product. Include all of the unique details that make your item special and desirable.
Help potential customers envision how the product might fit into and improve their lives. People make buying decisions with their hearts more often than their heads. So, paint an appealing picture with your words, and you’ll attract better results than if you simply list features.
Finally, take a look at the descriptions your top competitors write. Never plagiarize their carefully written copy. But you may get inspiration on what sort of information to cover or ideas for formatting.
Market your website
Starting an online store doesn't equate to immediate sales and success. It takes time to build a web presence and a customer base.
But, there are certain steps you can take to help your shop grow faster.
Here are a few tips to help you grow your business.
Rely on friends and family
As you’re first starting, look at your friends and family to make your first sales.
Online shoppers everywhere rely on positive reviews to feel safe about making a purchase. But, your brand-new online store has no reviews yet.
So, reach out to friends and family – they’ll want to support your endeavor. Encourage them to make a purchase or two and leave a positive, honest review. (It also never hurts to ask them to spread the word about your new online store to their friends.)
The social proof of those reviews and sales provide will “seed” your shop for future sales.
Embrace email marketing
Follow up with customers via email after they make a purchase. There are several different paths this communication may take. Whichever path you choose, make a point to thank them for their purchase. Here are a few options:
- Cross-sell promotion – Promoting a product or service related to their original purchase.
- Up-sell promotion – Promoting a higher-value version of the same product (this works best for subscriptions, services, and consumable goods).
- Refer-a-friend – Asking the current customer to share your business with a friend in exchange for a discount for one or both parties.
- Customer Survey – Requesting customer feedback so that you can improve your product, service, or customer experience.
- Discount – Offering a discount on a future purchase (this can be combined with any of the techniques above)
Whatever type of campaign you choose to run, make sure to write in an appropriate voice for your brand, keep it short and sweet, and check for typos and broken links before sending.
SEO stands for “search engine optimization.” In a nutshell, this means setting up your online store and product listings in a way that makes them easy to find on the web.
Mastering SEO is tricky. There’s a lot of info to cover, and it’s constantly changing.
And, while SEO is too big a topic to do justice here, we can tell you that you want to start educating yourself on SEO now.
SEO may play a large role in the success of your business.
Here are some reputable sources to kickstart your SEO expertise:
- Backlinko’s Blog and Newsletter
- Ahrefs Blog (start with their “SEO Basics” section)
- The Moz Blog and Moz Academy Training
- SEMrush’s Blog
Staying on top of SEO best practices will help keep your eCommerce store easily visible in search results on the web.
As a frugal and savvy business owner, you’ll also want to take full advantage of the inexpensive and easy exposure that social media marketing offers you. As we previously explained,
Social media gives you the ability to easily keep customers up-to-date on new products, store policies or sales. It also enables you to build a social rapport with current customers, while building low-pressure relationships with future buyers.
Maintaining (at a minimum) active Twitter and Facebook accounts will help you build an audience of loyal customers. You need to build an online presence to succeed.
Not to mention, people have come to expect legitimate businesses to have a social media presence. They view it as a sign of credibility – as well as appreciating the additional channel to reach out for customer support or simply to interact with your business.
Posting consistently on your social media accounts to reassure visitors that your business is active is key to successful social media marketing. Use Twitter and Facebook to share new products, promotional events, sales, and follower-exclusive discounts. By providing valuable content through your posts, you’ll give followers a reason to check in and share your posts regularly.
Social media is a perfect venue to encourage existing and soon-to-be customers to mingle – providing valuable social proof and word-of-mouth marketing for your brand.
Welcome to your future
The best online business to start is one that is thoughtfully planned and executed.
We’ve given you the framework to guide you forward. Now it’s up to you to decide what your future eCommerce business will become.
Whatever form your new eCommerce business takes, you’re on the verge of joining the ranks of a lucrative and resilient business community.
Interested in other types of businesses or how-to guides? Here are our comprehensive guides:How to Start a Business: The Complete Step-by-Step Guide to Starting a Business in 2022
How to Write a Business Plan (2022)
Branding: The Definitive Guide for 2022
The Definitive Guide to Successfully Rebranding in 2022
What is Brand Identity? And How to Create a Unique and Memorable One in 2022
The Ultimate Small Business Guide to Brand Equity in 2022
Brand Archetypes and How They Can Help Your Business: The Definitive Guide
The Definitive Small Business Guide to Brand Pillars in 2022
The Complete Guide on How to Name a Business
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How to Start a Small Business Blog
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How to Use LinkedIn: The Ultimate Small Business Marketing Guide
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We regularly update this how to start an eCommerce business guide. It was most recently updated on January 3, 2022.
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