In the last decade or so ecommerce businesses have imploded the online market scene, and it is estimated that by 2022, ecommerce businesses can alone generate revenues close to $6.54 trillion.
There is no doubt that online shopping has become the new norm of shopping. Today, major retail outlets and many local businesses are not hesitating to put themselves online and sell their products.
Due to an increase in digital diplomacy, it has become inevitable for every business idea to expose itself to the online first and grow as the market responds.
The best part about setting up online stores is that they are easy to set up compared to the old brick-and-mortar stores, and also most online stores don’t require tens of thousands of dollars to set up.
Therefore if you have a good business idea that involves selling products, then you should step into this game of ecommerce to leverage the ongoing trend. In this article, I will help you with how to start an ecommerce business as a beginner.
Before we dive deep into the concepts and steps to launch an ecommerce business, I will break down what ecommerce is actually is and how to start an online business in the right way with an ecommerce website.
What is an ecommerce business?
Electronic commerce also called ‘e-commerce,’ is a business model where consumers buy products online and get their orders delivered without ever having to connect with sellers physically. As you know all transactions are done online, and the whole business revenue is dependent on that.
People from the 21st century are pretty much familiar with drop shipping-commerce products and ecommerce sites. This is majorly due to the emergence of online marketplaces like Amazon, eBay, and many others.
Note that, an ecommerce business is not limited to a particular business model/type. Any legit business body (or) organization can eventually build their own ecommerce stores and sell whatever they want.
Ecommerce as a business can be operated in all major market segments like:-
- Business to business
- Business to consumer
- Consumer to consumer
- Consumer to business
How does ecommerce work?
Today, ecommerce being damn important for everyone, it is like an open book for everyone and also access to websites like Amazon and Walmart has made people realize what happens when they order something online and how the actual business is done.
But even though ecommerce is pretty transparent, there are still some moving parts that you need to figure out before starting your own ecommerce business, and this understanding of the basic concept will help you with how to start an e-commerce business.
To explain me better, here I walk through what happens on our normal/usual ecommerce sites when a customer orders online:-
- Firstly as a customer, you order something online, and that order will be registered in the database. You will be given a tracking ID to track that order, which will be created in the system.
- While all this happens in a database, businesses need to buy their own cloud servers to create a site and store all that data
- For your every order, the data is shared with the seller (or) with the individual who will fulfill your orders.
- Next, as the seller receives your order, the invoice is generated within the system, and the product from the inventory is packaged along with your invoice, packing materials, and shipping details.
- Once the packing is done, your order is taken on board with shipping. Meanwhile, the online transaction done by you will be on hold until the delivery is successful
- In this process, a shipping partner (or) the logistics partner is responsible for the delivery, on order completion seller gets his money deposited and the order is marked as completed
- Usually, sellers bear all the costs for shipping and taxes, and they are responsible for updating this info in their legal docs.
- If ecommerce business is done through Amazon and eBay, then sellers will be charged additional costs like Amazon fees and eBay fees.
So far I guess the above points were good enough to explain how ecommerce works and those points were meant to shed some light on what you can expect when you start your own ecommerce business.
By now, you have learned the concepts of ecommerce and I am ready to share the exact steps to start your own ecommerce business. Thus I have divided this guide into five phases, and I hope this makes it easier for you to skim through and understand the process of how to start an ecommerce business on your own.
Phase 1: Research your niche and find products
I hate to say this, but research is the one thing which you need to do continuously even though if you’re still selling tons of products because there is always room for improvement. Let me also tell you that the research we do beforehand to clarify our niche and products is not the only research that needs to be done.
As you go along with running your ecommerce store, you do need to continue your research which requires innovating the products, do effective marketing, and selling them.
Therefore, get ready to do a lot of research and in fact, it is something that many love to do, and there is a possibility that you might spend way too much time only on research.
So to conquer that and come up with a good research strategy. I am here to share my personal research formula, which you can use to find a profitable ecommerce niche for your business and sort out your niche products.
1) Settle on one business model
Today internet has made it easier to start any business online but at the same time, it also leaves us with multiple options to choose from.
As currently, every industry is jumping into ecommerce. Be it selling saas products, physical products, or any other digital products. The options to sell something online have become endless.
To do it right, first you need to mentally visualize where you want to be and what you would really love to sell online.
Let’s say if you want to sit at your home and operate a complete ecommerce business without touching any products. Then drop shipping is for you. For records, there are already thousands if not millions of people doing dropshipping, and only 10% of those businesses succeed online.
Well, per se, if you have an excellent product idea and want to sell it to people with your own branding while letting the manufacturers do their work. Then white labeling is the ecommerce business model for you. This ecommerce model is considered by experienced drop shippers.
If both dropshipping and white labeling is not for you, then you can create (or) manufacture your own products, may it be any digital (or) physical product where you take care of everything from manufacturing to shipping. The particular business model will come under wholesaling and direct selling business.
There you go, now you have all the options right out in the open:-
- Dropshipping (If you want to start and operate an ecommerce business from your home)
- White labeling (If you have a good product idea and wanna sell it through your branding without ever having to manufacture it by yourself)
- Whole selling (or) direct selling (If you like creating the whole product from scratch and wanna take full responsibility of everything from manufacturing to selling)
Let me stick to you a note, today most of the ecommerce owners and stores you find are actually into the drop-shipping business model.
Even though the success rate for dropshipping isn’t high enough, but it is considered one of the easiest and most convenient ways to get into ecommerce.
2) Toggle around to find your niche and products
Right now, on the internet, there are multiple places where you can start your research on products and niches.
But people always seem to get distracted in this research phase, and they also often fall prey to starting an ecommerce store with multiple categories and sell multiple products on one store.
However, if you’re planning to do ecommerce in multiple categories. Then let me tell you that, if you seriously wanna know how to start an e-commerce business in the right way, it makes much more sense to understand that nobody has enough budget and funding to start the next Amazon (or) eBay and it is always a safe bet to go after laser specific niches and brand yourself around them.
For example, you can look at billion-dollar ecommerce stores like Dollar Shave Club and Gymsharkwho sell within their specific niche and they have made enough revenue to mark themselves as successful in the ecommerce industry.
The secret sauce to your first e-commerce store success is finding a promising and profitable niche. You can start doing your research through these platforms:-
- Google Trends
If you know anything about ecommerce (or) dropshipping, then you’re most likely to have heard of Aliexpress. It is the hub for most ecommerce products globally.
Name any crazy product which you bought online, and I am sure that it must have come from China and precisely from Aliexpress/Alibaba.
Enough of me talking about Aliexpress, let me share with you how to start your search on Aliexpress.
Go to Aliexpress.com, click on your favorite and desired categories where you think you would be happy to sell that stuff. To make sure I explain my research strategy correctly, I will carry out example research for you to practically show you how it’s done.
For my research, I choose the ‘home office’ category, since due to the recent lockdown, people have shifted their mindset to home offices and I feel that any product related to home offices and computers should sell hot right now.
So for at least 10-20 mins, I toggled with electronic categories and finally, I landed on these two products, which I found promising and quite frankly interesting.
Aliexpress – 3D Printer
The best part about Aliexpress is that you can see every little detail about the product and also the number of orders a product received.
To make sure your product is one of the best selling items, compare the selling numbers with other products in your niche, later you can conclude a top seller based on no. of orders placed.
In the end, once we have a clear winner, we need to validate its online niche visibility using Google Trends.
In Google Trends, I have compared three terms 3d printer, cooling fan, and CPU cooling fan.
According to the charts on Google Trends, it shows our niche and product have shown promising searches over 12 months in the USA, and among the three terms, 3d printer is the apt winner.
Note: For this research, I choose products according to my instincts and likes and there is no limit to which product you want to sell.
But remember you only need one product to get success, so don’t go after multiple products to sell.
Phase 2: Validate your business idea and know your target audience
This phase is as crucial as the first one because in the first phase you found some excellent products via research on Aliexpress and you checked on their trends on Google Trends but now it’s time to test whether our products could be profitable or not.
You can ask these questions to yourself to validate it by yourself.
Does my product solve any problem?
Is my product providing any sort of value?
Who will buy this from me?
What will my brand look like around this product?
Are there people already selling this and making real money?
Probably the answer to all those questions will help you validate your idea and also the product. But to validate it practically online, we need to get some data online to back up our products.
The two best places to validate your ecommerce business ideas will be:-
- Facebook Ads
- Your own circle/network
How to use Facebook ads to validate your ecommerce idea?
Facebook ads manager is a great place to research and validate any idea because Facebook is among the world’s top five most visited websites and it has all the data you need, and there’s your opportunity to validate.
Follow these steps to validate:-
- Log into your Facebook ads manager.
- Create a sample campaign and then go to the ‘ad set’ level
- In the field of interests, you need to add specific terms overlapping your products and target audience.
- For example, I have searched for ‘3D Printer world‘ which is a printer company and there is a possibility that people who are interested in that company could also be interested in our printers too.
- If in any case, you don’t find an interest directly related to your product. It would help if you can visualize who would be your right customer.
- Here I searched for interests like a computer keyboard and computer graphics.
- Remember that don’t go for any broad audience. Only choose those interests where there is a probability that people have either heard about your product (or) have used it before.
According to Facebook ad data, our interests can potentially reach 13M people (From the above screenshots)
Now all you need is logic to validate; ask yourself can you sell your product to at least 1-2% of the potential audience. If yes, then multiply your product’s cost per sale with the possible audience number.
In this case, I will price my product at $500 (3d Printer Kit)
Calculations: My selling price ($500) * 13,000 (0.001% of 13M i.e, the potential audience) = Net Sales ($6.5M)
There you go, you have a million-dollar ecommerce business idea.
How to use your circle/network to further validate and test your product?
If you don’t want to risk it all by starting your ecommerce business way too soon and also if you wanna avoid stuff like setting up your website, placing a checkout page, generating traffic, etc before knowing whether you would get real/actual sales.
Then you’re gonna like what I am about to share here.
To test your idea and get some sales before launching your actual ecommerce business, you can approach someone within your circle, who fits right into your target customer persona and ask him/her whether they would be interested in buying from you?
All it takes is a text (or) a call to someone and talk about your product.
It’s not like pitching to your friends. Here all you would do is approach the right person who might need your product and is also willing to buy from you.
If you think asking your friends/network is a waste of time, then you need to realize that there are startup owners, who’re spending way too much time on cold emailing to strangers, and here you are; even before launching something, all you gonna do is hit your network with a text and wait for a guaranteed reply from them.
To truly test and validate your ecommerce business idea, you need is attention and interest from 5-10 people in your network and ask them what amount they would be willing to pay for your product and also let them know that it will take 1-2 weeks to ship.
I hope you do get at least 2-5 orders from your network, if it happens you can consider these orders as pre-orders for your ecommerce store.
Remember if your network is willing to wait for weeks and is paying upfront for the product.
Then, my friend, you’ve got the right winning product which people need and would buy from you because it’s solving a problem (or) helping them in a way.
Phase 3: Legalize and protect your ecommerce business
E-Commerce is for the people who are in this for the long haul, and there is nothing better for any business than building its own brand to stay and sustain itself for the long term.
Your brand should be something that resonates with your products and needs to get identified by your customers.
To start a real ecommerce business, you need to legalize and protect your ecommerce business by following a few steps before launching it online.
Let me tell you, this guide on how to start an e-commerce business is incomplete without this phase.
This phase requires investment and time commitment; the following steps will help any new ecommerce business stay as a legal entity.
Firstly, Register Your Business:-
In any part of the world, this is the very first step that any ecommerce owner has to take before launching his/her business. Mostly these steps are involved:-
- Choose a business structure: You can either operate as sole proprietor (or) you can register as an ‘LLC’. This really depends upon the kind of business you’re doing and its best to consult an attorney (or) CPA before finalizing your business structure
- Register a DBA ‘Doing Business’ Name: It is simply the legal name of your business and this name will be mentioned in every other document of your business.
- Get a Tax ID: Regarding how you’re taxed is depends on in which country you’re selling and it also differs from state to state. So generate a tax ID beforehand by consulting your CPA.
- Get a Federal Tax ID: In USA, you need to register a business on the federal level first. On registration, you will be given an employer identification number (EIN) also known as a federal tax number. Note that, you can apply for EIN with a LLC completely for free.
Get a Business Licence:-
In the USA before completely legalizing and launching a business, you have to go through multiple steps. So after generating your EIN number, you will need to get a business license from your state authorities.
The requirements and eligibilities to request a business license differ from state to state. You can also visit the SBA website to understand the licensing and permit terms.
Once you get the license, you can fill in your taxes according to the revenue, and this allows business owners to claim their tax deductions.
Get a store name, logo, and application for trademarks:-
Your store name could be anything related to your niche (or) the product and it doesn’t need to match your legal business name.
But once you decide on your store name, you have to make a good logo for your brand, which personifies what you sell and who you’re as an ecommerce brand.
To be honest, a harsh reality about getting into ecommerce business is that there will be counterfeits who will copy your name, logo, and products, as you grow your business.
To be safe and protected, you can apply for specific trademarks at the United States Patent and Trademark Office (USPTO).
Registering trademarks on your ecommerce business will protect you from spammy companies which might copy your branding and marketing creatives in the future.
Thus by having the legal rights, you feel protected, and it helps you raise complaints against any copycats.
Phase 4: Build your own ecommerce website
Now you’ve all the ingredients to start an ecommerce store. But yet time and time again, I see people asking me, ‘how to build an ecommerce website from scratch?’
This is a very valid question because today, there are multiple platforms available that can help you set up an ecommerce store at your own convenience.
But as you’re now a serious ecommerce business owner who has all his ideas, products, and business name intact.
For the sake of that business mindset, I would recommend you not to compromise on any platform due to its higher prices (or) don’t go after ecommerce platforms that can barely support your e-commerce business.
Therefore I will only recommend you to choose — ‘Shopify’ the best ecommerce platform to build your own ecommerce website.
Because if there has been one ecommerce platform in the news ever since the lockdown, then it was Shopify. The company reported revenues of $2.9 Billion in 2020 and people who use Shopify know how simple, easy, and effective it is to build an ecommerce website using Shopify.
Therefore to realize how damn simple it is to set up an ecommerce website using Shopify. I will share a step-by-step approach that you can follow/use to create your own store in less than 24 hrs.
Yes, you read it right ‘less than a day. Actually, if you do it right it shouldn’t even take you half a day.
Phase 5: Market your products to get traction
The most tricky part of any business is marketing. No matter what sort of product you sell, you need to have a marketing play in hand, and it should be something that complies with the current user base online.
In this guide on how to start an ecommerce business and grew online, this phase of eCommerce marketing is everything that seller needs for success, it either makes (or) breaks your brand.
Doing marketing in the right way is really crucial as you can’t expect to get sales if you keep on implementing decade-old marketing strategies, which doesn’t make sense with today’s internet user base.
For example, in terms of the SEO of your store. You can’t stuff your site with keywords and expect it to rank as if it is the 2000’s.
Even though Shopify provides excellent features to optimize your site, in this 21st century, it all comes down to branding and selling something which is worth buying for your consumers.
Therefore you’ll create that sense of need and emotion with your product.
You need to warm your target audience by showing up your products more frequently and share the Unique Selling Points (USPs) of your product to let them realize what’s in it for them.
To do marketing right away, try:-
1) Using PPC ads and Social Media Ads
It’s no doubt that we live in a world full of ads. Be it on a blog (or) any other social media platform, users are constantly targeted with advertisements on their screens, and due to this constant exposure to ads.
Internet users are adapting to having lesser attention spans, making marketing even more challenging for ecommerce businesses.
But the best thing about ads is that they still work only if you do it rightly. So to run ads, you can either hire an agency (or) you can learn to do it all by yourself.
Be it anyway but it won’t be easy to create momentum in the beginning. If there is one thing that can help you run successful ads online, it’s about visualizing your target customer and realizing what he/she does online.
For my product (3d printers), I would choose to target people who are into computers and do work from home. On Facebook, you can target users by assuming their interests, while on Google, I need to find relatable keywords in home-office space/computers to show ads in searches.
Once you find a sweet spot in targeting, it’s all about showing the right ad creative to the right people.
Be it video (or) image (or) just simple text, you need to find an ad that triggers your customers, and to do so, think about what will make them click on your ads.
Remember running ads requires a lot of research on targeting and testing.
But in the end, the main goal of running ads is not traffic, it’s only about sales. If your ads are not converting and there are no sales by the end of the day. Then you might need to look at your ad strategy and revamp it for better results.
2) Leverage influencer marketing to build an audience
Influencer marketing is right on cue with the current ecommerce business marketing strategies. If you have a product that is Instagram-friendly and if you’re not leveraging influencer marketing.
Then, my friend, you’re leaving too much money on the table. Today there are influencers everywhere for every niche.
Therefore it shouldn’t take you much time connecting with those micro-influencers in your niche.
To find them, you can hire a VA (Virtual Assistant) who can help you get the contact details of targeted influencers and once you connect with them.
You can either request those influencers to promote your products by paying them any upfront fees (or) you can create an affiliate program on Shopify where these influencers can join and promote your ecommerce product for commissions.
The best way to leverage any influencer marketing campaign is not to sell your products upfront. As an ecommerce business owner, you should offer a free ebook related to your niche and product.
To do it efficiently, you can create a landing page on your Shopify store and integrate an email collection form to collect emails of potential buyers and later target them with good email marketing sequences.
These days building an email list is considered way more powerful, and if you can bring in thousands of signs up for your ebook through influencer marketing, then you’re bound to make sales in the long run.
How To Start an Ecommerce Business (Infographic)
Ecommerce Business FAQs
How much does it cost to start an ecommerce business?
That’s a great question. But if you really wanna know how much it’s gonna cost to start an ecommerce business.
Then you need to live with the fact that it will cost you thousands, if not tens of thousands. If you want a specific number then it will be between $1000-$20000 depending on your choices.
Remember there are some cost which you can’t avoid and I wanna break it down:-
– Domain name: $20-$ 200 per year
– Hosting: $200+ per year
– Website design (Themes + Plugins): $0 – $1000 depends
– Logo: $5- $100 one time
– Business licenses – $50 – $250 one time
– Inventory costs + shipping: $200 -$500 minimum
– Marketing (Ads, Influencers…): $200 -$10,000 no limit
– Email Marketing: $200 – $500 per year
drop shippingmbers are pure estimates and realize that I just touched the surfaces with what it would cost. If you wanna have a look at the clear breakdown of costs of each element then check this article on AppSumo.
How do I start an ecommerce business from home?
It’s simple, just follow the phases that I mentioned in this guide: how to start an ecommerce business as a complete beginner. Let me break it down into steps:-
Step 1: Research Your Niche and Find a Product
Step 2: Validate and Test Your Idea/Product
Step 3: Legalize Your Ecommerce Business
Step 4: Create an Ecommerce Website Using Shopify
Step 5: Plan Your Marketing Play and Advertise Your Business
Can you start an ecommerce business with no money?
E Commerce is a serious business that needs all your time, money, and commitment. It’s obvious to say that little to no capital will not get any business off the ground.
But anyway if you’re looking to feel what’s it like become an ecommerce owner.
In that case, you can sign for the free 14-day free trial of Shopify and use all its features within that period you’ll understand why it takes investment to start an ecommerce business.
Other than Shopify there are multiple platforms that offer to help you start an ecommere business for free. But after helping them in the end you will realize that no money means no good for a career in ecommerce.
Is E Commerce profitable?
Ecommerce is definitely a profit-making industry because people are loving the culture of online shopping and it is here to stay and it’s gonna go nowhere.
In fact according to Statista, by 2022 there are gonna be 300 million online shoppers in the USA alone.
Going by that fact, you need to assume that ecommerce will always be in a boom. But there will be competition in the space as it is the trend and this should tell you that there is money to made here.
Is it hard to start an ecommerce business?
No, absolutely not, starting an ecommerce business is dead simpler than starting any physical store.
This major credit should go to platforms like Shopify which helps us start an ecommerce website from scratch and designing a website with Shopify barely needs any technical coding. So every non-techie junkie and newbie who wants to do e-commerce can now do e-commerce easily.
Also, all the tools and knowledge available on the internet are making people become aware of online businesses and today starting e-commerce is not at all any rocket science.
Especially after reading this article on how to start an ecommerce business online, you should be able to start your own ecommerce business within one to two weeks, if not less.
Do I need a license for ecommerce?
Yes, definitely you need to have a legit license to start an ecommerce business.
Doesn’t matter, if you own a digital business (or) a physical business, every business owner needs a license from the state/central government to continue the business.
License is the only thing that makes the business legit, legal, and real in the eyes of the government, and if you’re running an ecommerce business without licensing and permissions, then you might end up paying penalties and get yourself suspended for not complying with the business norms.
How to start an ecommerce business like Amazon?
Amazon is an ecommerce giant and it’s very tough to start something like Amazon. But to be honest, if you wanna replicate a business model just like Amazon then it’s not that tougher.
You can easily set up an ecommerce store just like Amazon by adding multiple categories and hundreds of products in the store.
Platforms like Shopify can help you create sites like Amazon and apps like Oberlo will help you import hundreds, if not thousands of products from Alibaba/Aliexpress to your store. Once the set-up is done, all you need is a good budget to advertise your store as much as you can.
Process of e-commerce business?
To understand behind the scenes concept of ecommerce businesses in a simple way, read these steps:-
1) Customer orders a product on the website
2) The order details will be saved in the severs while it will also be shared with a business software
3) This business software would help sellers get the appropriate order details
4) Once the order is packed and shipped, it gets updated in the servers from the seller’s end
5) Once the order reaches the buyer, it is marked as complete and the seller gets to keep the transactional amount.
What is Private label vs white label dropshipping?
Both White label v/s private label products have been always a part of the debate ever since the eCommerce industry started to flood with sellers.
In a general sense, private drop shipping is done by those sellers who own exclusive rights of the products and source it directly from the manufacturer who has agreed to their specific details.
Whereas white label dropshipping is the usual dropshipping route where you sell pre-made products where there are no customizations available and you buy a generic piece from the manufacturers and sell it as your own brand.
If you’ve stuck so far with my advice, I would assume that I did share some valuable content and if it was, then please share your thoughts in the comments.
My intention with writing such articles is to help people make money either with blogging or affiliate marketing, or ecommerce.
So I hope this guide on ‘how to start an ecommerce business’ was insightful and actionable for you.
If you’ve any other suggestions and other stories to share related to ecommerce and marketing. Do feel free to comment and reach me via my social media handles.