If you thought starting an eccommerce business is as easy as registering a domain and customizing online store themes, you might want to review the market data on the latest ecommerce trends.
You’ll notice that, even as digital business tools get smarter and online shopping continues to pick up, it’s getting increasingly harder for new ecommerce businesses to stay afloat. As many as 90% of them reportedly end in failure within the first 120 days.
This is a contrast to brick-and-mortar stores, which supposedly survive at the rate of 78% by the end of the first year.
Interestingly, the affected ecommerce merchants are blaming their failures on very basic drawbacks that can be avoided by planning ahead.
It’s those stumbling blocks that we’ve now reverse-engineered into a foolproof guide on how to start an ecommerce business. Think of this as the business plan template that’ll keep your ecommerce business safe from the common startup pitfalls.
Building a profitable eCommerce business is a long-term process that requires consistency and commitment, and it often takes a few years to achieve your business goals.
Not only it's important to sell the right products to the right audience, one of the things you need to consider is your competition. Your competitors can indicate successful blueprints for your business that work.
It's important to understand and choose the right platform for your eCommerce business. It's also advised to keep your online store up-to-date with eCommerce-focused solutions for both, your business and your customers.
Choosing the right payment gateways is a critical factor to help you avoid restrictions, such as insufficient payment options as your customers can visit your website from both local and international locations.
1. What you are selling
To start an ecommerce business, you’ll, of course, need products for your online store. And if you hope to turn it into a success over the long haul, your ecommerce products must be the type that’s guaranteed to sell like newspapers on Sunday mornings.
You could start developing those product ideas from your own interests. Perhaps consider niches that you’re passionate about, and then conduct market research to ascertain the level of demand for each of your selected products.
Other reliable sources of ideas would be industry leaders, established brands, and online marketplaces. A review of their audience engagements, ecommerce trends, inventory stats, and product options should give you a rough idea of what’s hot in the market right now.
Try to also establish what other ecommerce businesses might be missing out on, or maybe even consult your peers and local community for ideas on high-demand products.
For more clarity, you could feed the ideas into automated market research platforms such as Semrush, Google Trends, Jungle Scout, Helium 10, or Viral Launch. They’ll give you insights into the demand levels for each of your proposed products, with some of the tools even stretching further and generating revenue estimates based on machine learning analytics.
You’d want your ecommerce business to sell products that can be sourced easily, but are not widely available to consumers. They should also have the potential for a good profit margin, a unique selling point, and a strong market demand.
2. Who your customers are
Once you’ve found bankable product ideas for your ecommerce business, the next step should be defining the market that you intend to sell to. This is where you get to figure out who your potential customers are, what they do, where you’ll be getting them from, and so forth.
You could, for instance, try answering the following questions while drafting your business plan;
- What is the geographical boundary of your target market?
- What are the ages, gender, and income levels of your target buyers?
- What are their preferences?
- Which devices do they use?
- How much are they willing to spend?
- Which social media platforms do they spend the most time on?
- Which pain point do they need solving?
These are insights that you could draw from market research tools, census data, industry survey reports, search trends, established ecommerce businesses, as well as your own interviews and consumer surveys.
Consider, for example, examining the web traffic analytics for various ecommerce store URLs that specialize in your product niche. Tools like SimilarWeb, Ahrefs, and Moz can help you with the numbers.
And while you’re at it, you might also want to review what industry leaders are saying about existing customers.
All these data points will ultimately provide clarity into your target audience and give you the much-needed head start to building well-personalized marketing strategies.
💡Creating market segments and customer persona can be two of the most effective tactics to help you identify your target customers.
3. Your competitors
To make this ecommerce store stand out from the rest, your business plan should follow Sun Tzu's principles.
In his book, The Art of War, the ancient Chinese military general states that:
“If you know the enemy and know yourself, you will win a hundred battles. If you know yourself and not the enemy, you will suffer a defeat for every victory gained. If you know neither the enemy nor yourself, you stand to lose every battle”.
When applied to the ecommerce business context, this can be interpreted to mean that you only emerge victorious if you know your competitors just as much as you understand your online business.
The objective here is to define your ecommerce business rivals in terms of;
Who they are.
Where they’re based.
Which eCommerce platforms do they use?
How they promote their products.
Their brand positioning.
Their market shares.
Their unique selling points.
Which channels do they communicate with their customers?
Competitor research tools like Semrush, AccuRanker, Sprout Social, and Moz should help you with most of the spying. They’ll identify your top rivals for each of the product keywords, and then proceed to dig into their traffic analytics, marketing channels, backlink profiles, social signals, etc.
Now you can start an ecommerce business that’s based on proven strategies, instead of relying on trial and error. You get to borrow the best-performing tactics while, at the same time, capitalizing on your rivals’ weaknesses and missed opportunities.
4. Your business model
This is where you decide how to approach your online ecommerce business idea, how the whole thing will be structured, plus the monetization formula that you’ll be using when selling products online.
In other words, what type of ecommerce business are you setting up? What selling channels will it be leveraging? How do you intend to scale your online business resources?
If, for instance, you happen to be running a brick and mortar business, you could go ahead and sync it with the online storefront.
Otherwise, it's still acceptable to proceed with a dropshipping business model, or maybe create an online store that specializes in services instead of physical products.
If you lack the resources to create your own ecommerce store from scratch, you could choose to showcase and sell products through an already-established online marketplace – such as Amazon or eBay.
Another popular option for entrepreneurs is a business purchase. This is where you acquire any of the pre-existing ecommerce businesses that have put up their websites for sale.
If you're considering using Amazon as your ecommerce store, check out our guide on "How to Start An eCommerce Store on Amazon".
5. Which ecommerce platforms to use
Speaking of websites, another thing you ought to consider before you start an ecommerce business is the infrastructure that'll host and power everything.
What you choose here will define not just your business model, but also your branding capabilities, ecommerce marketing reach, ecommerce website performance, plus the resources and tools that you'll be using to build and manage the ecommerce site.
A solopreneur would, for instance, settle for an end-to-end ecommerce platform such as Shopify. This allows them to register their own domain name, customize pre-built ecommerce templates, plus manage the subsequent online store operations from a centralized dashboard.
Other popular easy-to-use ecommerce platforms include Wix, SquareSpace, BigCartel, and BigCommerce.
The most popular one, however, is WooCommerce – which is a free self-hosted open-source platform that rides on the WordPress content management system. It's versatile alright, but you'll be required to secure a hosting server from a third-party web host.
6. Payment gateways
On your ecommerce platform, you'll need to integrate one or more payment gateways for processing all the transactions when you sell online.
You can begin by confirming all the payment processing solutions that are compatible with your selected ecommerce platform.
Thankfully, the most popular ecommerce platforms such as WooCommerce, Shopify, Magento, Wix, and BigCommerce all support a wide range of payment gateways. A quick scan through your ecommerce platform’s app store is all you need to discover the available payment gateway integrations.
Now, to select the most appropriate one for your ecommerce business, you might want to compare the available solutions by their payment modes, transaction fees, supported countries, and business bank accounts they connect to.
You'd want payment gateways that are not only competitively priced but also flexible enough to handle all the digital payment modes preferred by your targeted online shoppers. The system should be able to process debit and credit card payments, as well as remittances from other digital payment platforms.
Another thing to keep in mind is the geographical footprint of each payment gateway.
You should be allowed to open and operate a merchant account from the country in which the business name is registered. What's more? the payment gateway ought to provide a seamless link between its merchant account and the business accounts held by your local banks.
But, don’t stop there. Try to evaluate even the accompanying shopping restrictions, and then proceed with the integrations that accept payments from all your targeted customer locations.
Prioritizing the payment needs of online shoppers will, in fact, go a long way toward minimizing your cart abandonment rate.
❓Did you know: Payment processing issues alone have been shown to drive about 31% of cart abandonment cases
As much as 4% of would-be buyers bow out because their credit cards are declined, 9% are repulsed by insufficient payment options, and 18% leave because they can't trust the ecommerce business site with their card info.
Once customer purchases go through, comes the super intricate process of order fulfillment. Customers will be expecting you to hold up your end of the deal by shipping using the right channels, at the right time, and in the right manner.
So critical is shipping to the whole customer experience, in fact, that it's the single biggest cart abandonment trigger. High shipping costs feature quite prominently in 48% of the abandonment cases, while 22% of the abandonments are due to slow delivery.
It's in your best interest, therefore, to have a seamless, fast, flexible, and reasonably priced shipping system.
For starters, the shipping procedure ought to be aligned with your business model.
If you start an ecommerce business in dropshipping, for instance, your order fulfillment should be structured in a manner that automatically connects suppliers with your customers. Shipping in this case can be through a third-party distributor, and the entire fulfillment workflow should be automated based on custom rules.
Fulfillment by Amazon (FBA) is another perfect example of a well-coordinated shipping program. Once orders are made, Amazon swings into action and handles the collection, packaging, and shipping of products to customers.
That’s not all. FBA additionally incorporates a Multi-Channel Fulfillment program, which handles orders from both your Amazon storefront and online business site.
You can apply these same shipping principles even to independent self-hosted ecommerce businesses. Just set up a multi-carrier shipping strategy that not only offers customers different shipping options but also automates the underlying order fulfillment workflows.
8. Marketing your store
Now that consumers are exceedingly getting fed up with online ads, and brick-and-mortar stores have joined ecommerce businesses in scrambling for online recognition, you need a highly strategic marketing plan if you wish to hack the system and generate buzz around your new online business.
Don't be the type to randomly engage in all sorts of digital marketing campaigns while hoping for the best. You should, instead, invest your time and money in a well-streamlined omnichannel marketing strategy.
The marketing plan itself should form one continuous workflow from pre-launch to post-launch – with the constituent campaigns being sequenced systematically across multiple channels based on your business goals and customer journey.
Then considering 72% of consumers are only engaging personalized messages, you might want to granularly tweak the campaigns based on your target audience's interests and pain points. Only then will you set yourself apart from all the noise in the interwebs, and maybe connect with potential customers at an intimate level.
Now, at the pre-launch stage, you could try rocking the market with anticipatory marketing. Create a landing page with a curiosity-evoking "coming soon" message, promote it across social media, and then maybe request the targeted traffic to opt into your mailing list for exclusive giveaways.
The giveaways, freebies, discounts, and vouchers should subsequently come right before the big launch of your ecommerce store. These are meant to convert all the anticipation and excitement around your new business into some form of publicity.
And when the ecommerce store finally goes live, you can go ahead and deploy full-scale search engine optimization to run alongside social media marketing.
Keep in mind, however, that organic search engine optimization is a long-term plan that might take some time to generate results. In the meantime, you could spread brand awareness using paid search advertising, social media ads, influencer marketing, press releases, etc.
Otherwise, for lead engagement and conversion optimization, we'd advise tapping into more personable channels such as email and SMS campaigns. The automation here should even include post-purchase follow-ups – with the main aim being to turn customers into repeat buyers, plus encourage them to leave reviews as a way of building social proof.
9. Customer service
Aggressive ecommerce marketing will get you leads and conversions all right – but it's great customer service that ultimately drives brand loyalty.
77% of consumers agree, and they even add that good customer service could potentially turn them into brand advocates who'll champion your ecommerce business.
So, you could say that customer service is the key to not only retaining repeat customers but also generating recommendations from your customer base.
That said, great customer service begins with meeting all the buyer expectations across each stage of the customer's journey. This is best achieved by setting up an omnichannel customer experience pipeline, which addresses their key pain points in a personalized manner over a continuous engagement funnel.
You could bring in Customer Relationship Management software to help you manage the whole thing. Examples of some of the best CRM tools for the job include HubSpot, Salesforce, Pipedrive, and Zoho.
Whichever you pick, you should be able to set up automated omnichannel pipelines for the entire sales funnel in your ecommerce business – from brand awareness to post-purchase follow-ups. Throughout this journey, the CRM software will track your contacts across their experience touchpoints, and then add the resultant analytics to their digital profiles.
It's these contact profiles that your technical support teams will be referencing when assisting customers.
And speaking of which, we'd strongly advise you to set up well-defined communication channels for technical assistance. Your new business could especially do with phone, email, and live chat support channels. Then during off-peak hours, you could have a pre-configured chatbot standing in for the support staff.
💡Tip: CRM software can not only make your ecommerce experience better, but it also centralizes your customer data, increase customer retention rates, and helps you make data-driven decisions.
10. Fees and costs
Meeting all these ecommerce business requirements takes dedication, time, and, of course, money.
Before you get the chance to generate revenue from your ecommerce store, you'll probably have invested a significant amount of personal and business finances into the web-based venture.
If you're wondering how much, we're sorry to say that there's no absolute figure or range that can be quoted as the standard cost to build an ecommerce website. Your expenditure, rather, depends on a multitude of on-page and off-page factors.
Business model happens to be one of the biggest cost-differentiating factors – as it defines the strategy that you'll take to start the ecommerce business, as well as the type and scale of tools that you'll be leveraging while at it.
Other determinants include ecommerce platforms, ecommerce marketing strategies, CRM software, plus all the auxiliary add-ons that aid in selling online – such as payment gateways, order fulfillment services, on-site trackers, and so forth.
The pile-up of fees and costs doesn't end there, though. Keep in mind that in addition to on-page costs, you'll incur what we call business administration charges.
Such bills will start coming in from the moment you file for business name registration. By the end of it all, you’ll have paid statutory fees for company incorporation and all the accompanying business permits – including environmental permits, professional and trade licenses, etc.
Therefore, at the very least, you can expect to spend hundreds of dollars within the first year of business – with the possibility of stretching into the thousands. Planning ahead will give you a more conclusive budget to work with when you start building your new ecommerce business.
Our Parting Shot As You Start Your Online Business Journey
One final thing to bear in mind as you start an ecommerce business is, the online store won't be breaking even anytime soon.
Just like traditional business ventures, a new ecommerce website needs time to find its footing. It doesn't just start generating profits right off the bat.
By the time you get to earn any significant revenue, you'll have put a lot of hard work into growing the ecommerce business.
You might want to brace yourself for long hours of tweaking web pages, writing content, running promotions, taking product photos, updating social media posts, processing returns, building a knowledge base, testing various marketing strategies, composing emails, and so forth.
Ask any successful ecommerce business owner and they'll tell you that they went through the same journey with their online stores. 2-3 years is what it took some of them to start posting positive revenue growth.
They now advise aspiring entrepreneurs to remain committed to their business plan, keep monitoring market trends, and of course, progressively optimize their digital ecosystems with ecommerce-focused solutions.
What are some basic eCommerce business models?
Four basic eCommerce models include: - Business to Business - Business to Consumer - Consumer to Consumer - Consumer to Business
What steps do I need to take before starting an eCommerce business?
How much do eCommerce business make?