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How to Start an Ecommerce Business From Scratch: Your Guide to Creating a Thriving Online Store
If the thought of creating an ecommerce store produces more confusion than confidence, don’t worry. We are here to help guide you through the process of constructing an online store. But we also know you don’t want an ordinary ecommerce store. It needs to be a prosperous online business that is tailored to both a product you’re interested in while meeting consumer needs.
We also know starting an ecommerce business can feel like an overwhelming prospect. From selecting products, to shipping, to customer service and websites. There are several factors that take an online store from fledgling to phenomenal. So how do you get started?
Let’s get into the specifics so you know how to start an ecommerce business, and put an end to the mystery surrounding the process.
Why start an ecommerce business?
Most of us already knew the power of ecommerce and how convenient it can be for numerous shoppers. We’ve all watched the numbers. In the United States alone, e-commerce has grown from $1.3 billion in 2014, to over $4.2 billion in 2019.
But once COVID-19 hit on a global scale, the world became even more dependent on the convenience of shopping from online stores, and the growth took on a whole new meaning.
How much of an impact has COVID had on the growth of ecommerce? Turns out, more than we may have ever guessed.
In a recent study of 15,000 global respondents from Salesforce.com, 58% of shoppers said they expect to do more shopping online after the pandemic than before. On the business side, 80% of business buyers expect to do more business with online sales after the pandemic, versus before.
The demand for ecommerce doesn’t appear to be slowing down anytime soon. Prior to the pandemic, global ecommerce sales were projected to reach $5 trillion by 2021. What do these statistics mean for you? It means now may be the best chance for you to capitalize on your business idea to open up an ecommerce store.
Types of ecommerce stores
An ecommerce business is simply a business where you have transactions taking place online. But what you may not realize is there are numerous types of ecommerce businesses under this huge umbrella. So while the internet may be this vast place of endless information, it can also provide a chance for a business to niche down and focus on a specific business model.
There are various business models within the ecommerce world. Your business can fall under one or more of these categories:
Business to consumer (B2C): This is when a retailer or business sells directly to the consumer. An example of this is when a clothing store sells clothes to a Mom who is purchasing clothes for her children to go back to school.
Business to business (B2B): When one business sells directly to another business. For example, when a coffee distributor sells supplies to a coffee shop.
Consumer to consumer (C2C): This is when one consumer sells an item directly to another consumer. For instance, this occurs when a private seller lists an item on Ebay or Etsy and another consumer purchases it.
Consumer to business (C2B): When a consumer sells their own product or service to a business. An example of this is when an independent jewelry maker makes items and turns around to sell them to a local boutique.
Deciding the type of business you’re going to concentrate on is the very first step to get you down the ecommerce road. But as you can imagine, there are numerous other decisions you’re about to make.
In addition to the business models, the type of transaction can take on many different forms too. You can choose to sell via:
- Retail. Where you sell your product directly to the shopper via a website or store.
- Wholesale. Where you sell your products (usually in bulk) to a distributor, who turns around and sells it to a retailer.
- Subscription service or direct-to-consumer. Where you skip the retail location and ship directly to the shopper. An example of this is a monthly subscription service.
- Dropship a product. Where you have a third-party responsible for shipping the product to your shopper after the shopper purchases from you.
- Digital products. Think of this category as an item someone downloads. It could be e-books, printables, calendars, templates, online courses for example.
- Sell of services. An ecommerce business can sell services via the website. Services can include anything from graphic design, writing, or photography to digital marketing or bookkeeping
The amount of flexibility with ecommerce is one of the reasons it continues to grow in popularity among small business owners. Not only is an ecommerce store a great option for a shopper, but it creates a number of possibilities for a store owner too.
Ecommerce begins with the product. At the core of this online business is the product a shopper wants or needs. This means one of the biggest decisions you’ll have to make is deciding which product to sell. The problem is, there are a countless number of options.
If you’re stumped on what product to focus on with your ecommerce store, start with the broad categories and then narrow it down.
There are several trends that emerged in 2020 for online shopping. According to Wix.com, the Top 10 categories for growth in online shopping during Q2 of 2020 were:
- Food and Grocery
- Home and Garden
- Pet Supplies
- Games and Leisure
- Clothing and Apparel
- Flowers and Plants
- Health and Beauty
- Arts and Crafts
While this is only the Top 10, it’s interesting to see the categories consumers were gravitating towards as they rushed to get the essentials and find new activities. It’s also a great starting point as you’re brainstorming for product ideas.
But these are not the only categories you can choose. If you stop to think about trends in homes and workplaces — especially post-pandemic — then it won’t take long to start zeroing in on your product choices.
And again, look at the list above on the different types of transactions. Is there a subscription service you could bring to life? Or another service you could sell via your website.
How you will deliver your product
Once you have a few ideas about your product, it’s time to start working through important details. One of the most important product details is how you will get your product into your shopper’s hands.
Questions on product creation and shipping might be how you will:
- Make or manufacture your own product
- Dropship it to your shopper
- Sell it as a wholesaler to a business
- Can it be a print-on-demand service?
- Do you need to find a supplier for your product?
- Will your product require the use of a local delivery service?
If you already have a brick and mortar store, your product ideas will likely come together sooner. But you still need to answer the questions surrounding how your shopper will receive the product.
As you can tell, there’s much more involved than just adding products to a website. Once you start formulating ideas on the products you’ll focus on and how you’ll get it to the shoppers, then it’s time to start researching it further.
The business plan and the research
One step that is critical to the success of your business is to create a business plan based on your thorough research. An ecommerce store demands a business plan the same way a brick and mortar store would. Whether you have investors or are applying for a business loan or not, a business plan helps solidify your initial research. Most importantly, it helps you identify potential gaps in your plans before you launch.
If you’re adding an ecommerce site to an existing brick and mortar, and you’ve already created a business plan, then now is the perfect time to go back and update your existing plan. Business plans are changeable and meant to be maintained, even after a business has launched.
A business plan requires several steps, and each step is important. A thoroughly-researched business plan may seem a bit daunting, but it will actually help you sift through your ideas. It will also get you a step closer to launching your ecommerce site.
Statistically speaking, a 2017 study conducted by Francis J. Greene & Hopp showed businesses that created a business plan prior to launching had a 7% higher likelihood of high growth, versus those without a written plan.
At a bare minimum, a business plan should outline the answer to several important questions. Think about the following as you’re pulling it together:
Determine your target audience for your plan
The first step in creating your ecommerce store business plan is to determine who your target audience is. You may even need to put together a plan for each of the different groups of people.
- Internal Only: This is the type of business plan that speaks to the employees about goals, performance, and any other aspects you need employees to be aware of.
- Stakeholders: Stakeholders are the ones investing or financing your business. You would likely have the plan more focused on the financial aspect of your online store.
- Shoppers: A business plan that is focused on your shoppers would focus on the services you offer, new technologies you plan to implement, and anything that highlights why a potential shopper would purchase what you sell online (great product selection, easy return process, helpful customer service).
Define your target market for your online business
Once your target audience for your business plan is identified, you need to define the target market for your online store. This is how you establish which types of shoppers you want to attract and who you think will be purchasing what you sell online.
Is your ideal shopper for your product:
- Male or female?
- Located in a specific area?
- A certain income level?
- A narrow or wide range of ages?
You may not have a firm grasp on who will visit your store and make a purchase quite yet, but you can research this area in order to provide direction for your ecommerce store.
By defining your target shoppers, you can go to work on your own marketing campaign and create specific goals on how you will reach your shoppers. These are marketing goals such as the use of social media, email marketing, even your brand name.
Once you have completed your entire analysis, make sure your target market aligns with the goals you’ve set for your online store.
Clearly define goals for your ecommerce business based on real numbers
Not everyone loves to work with statistics or formulas. Fortunately, you don’t have to be a statistician to crunch numbers to add financial substance to your business plan. Think of the numbers and statistics as giving you fact-based support to your ideas.
Here are the key analytics that are meaningful for a business to achieve growth and should be included in your business plan:
- Industry Analysis: What is the projected growth for the industry and product you are targeting to work with? What growth do you expect with your online store based on these trends?
- Customer Analysis: How many shoppers do you currently have? How many do you need to achieve your financial goals? What will you do to continue attracting and retaining shoppers?
- SWOT Analysis: SWOT is short for Strengths, Weaknesses, Opportunities, and Threats. You can use this research for both your own business and other big competitors.
- Financial Analysis: How much will your product cost? How much will shipping and warehousing cost? How much budget do you have set aside for marketing?
- Employee Analysis: Discuss how many employees you intend to hire and how much you will spend to recruit them to run your online business (if any).
- Create a sample budget. You can start to put numbers together on monthly and annual costs. This includes everything from employees and marketing expenses, to website maintenance and product inventory.
Pinpoint your product selection
After you’ve completed your analysis, it’s time to pinpoint your products that you will sell online. Keep referring back to your research and target shopper information if you are looking for direction on the exact products.
It’s important to note your business plan can be updated, adapted, and fluid. You won’t have all the answers for your online store right away. But at least you’ll have a direction and see what areas need the most attention before you launch your site.
The setup of your ecommerce business
You have your ideas all laid out and your plans ready to go. Now it’s time to actually set up your online store so you can begin selling products!
The first steps for your ecommerce business are a little more practical in nature. You will need to:
- Settle on your brand name. What will you call your online business?
- Purchase a domain name for your site. Ideally it will be the same name as your business.
- Create a logo. As you create a logo, focus on the color palette you can use throughout your site. This helps create a brand identity as your site continues to grow.
- Create content for your website. Content comes in many forms. One of the most important aspects of content is your landing page. What do your shoppers see when they first come to your site? Content also involves the different product pages to adequately describe what you’re selling.
- Work with professionals. You may need to get professionals involved with the setup of your online store. For instance a tax specialist or small business attorney to help you with the financial aspect, or a web designer to help you with your online store.
Choosing a platform
Next you have to decide which platform you’ll use to sell your products. A platform allows you to execute the sales on your website while integrating your operations (shipping) and marketing.
When it comes to platforms, you have three choices:
- Open-Source. Where you’re responsible for all compliance, hosting, security, quality assurance, customer service, and all other aspects of a site. This requires an enormous amount of technical knowledge and all tasks are manual. This is used mainly for businesses that have their own IT department.
- SaaS (software-as-a-service). This is where all tasks for the website are handled through software. This is much less expensive than the open-source options. Although SaaS is quite popular, the drawback of the platform is it’s not as customizable and flexible for some businesses, so depending on your goals, it may not be ideal. An example of this platform is a service like Shopify or Squarespace.
- Headless commerce. This platform is highly changeable and customizable. It can be used by both an IT department or a small business. Examples of this platform include WordPress and Adobe Experience Manager.
This is where the technical aspect of a website might get a little overwhelming. But the important note to remember is there are numerous resources available to you in order to make the best decision on a platform.
Choosing a platform depends on multiple factors, including:
- Budget (none of the platforms are free)
- Your target shopper
- The number of products you sell online
- Access to customer service
- If the platform can grow with your business
Whatever platform you choose, there are basic functions you’ll likely need as an ecommerce platform. You want the platform allow you to:
- Optimize your site for mobile and tablet
- PCI compliant — This is the Payment Card Industry Data Security Standard which sets the requirements and standards for websites to maintain a secure payment environment.
- Allow you to perform Search Engine Optimization (SEO) tasks. Tasks like this include allowing you to customize your URL so you can rank higher in Google search results, or adding keywords throughout your product pages.
- Offer you strong product catalog management
- Access to analytics
- Allow you to implement discounts and promotions
Once you have your platform and your site up and running, it’s time to customize the site further to appeal to your target shoppers.
Personalizing your site
Running an online store is much more involved than putting products, a shopping cart and a few descriptions on a page. With today’s digital-savvy shoppers, they are expecting more of a personalized shopping experience — even online. What does this mean for the average ecommerce business?
- Adding product suggestions
- Product suggestions are simply ideas you provide to your shopper to further customize their shopping experience. For instance, if you’re selling a necklace then your site would suggest the pair of matching earrings. Not only does this provide the shopper with a more personalized experience, it provides you with an opportunity to upsell.
- According to SmarterHQ, 47% of site visitors will turn to Amazon if the brand they’re viewing doesn’t provide adequate product suggestions.
- Add installment payment plans
- Nothing is more personal to a shopper than their wallet. You can offer greater flexibility to your shoppers by offering multiple credit card payment options as well as an installment plan. When you offer a service such as Splitit, you give your shopper the ability to pay for larger purchases over a period of time that works for their budget.
- Optimize your site
You can quickly chase away shoppers if your site isn’t optimized correctly. Optimization occurs on several levels including site speed, mobile and tablet-ready, and updated security features. More shoppers are purchasing on their smartphones, so make sure it’s an optimal experience for them.
Launching your ecommerce business takes careful consideration, both in the preparation and the actual execution. What are the other major details you need worked out prior to opening your online doors for shoppers?
You probably touched on marketing plans as you were building your business plan, but now it’s time to solidify your campaigns. Marketing plans are extremely important, how else will shoppers know you’re open for business? Marketing plans might include:
- Social media channels. Set up your social media accounts and start interacting with potential shoppers.
- Social media marketing, including Facebook or Google ads, or other forms of digital advertising.
- Content creation, such as blogs
- Influencer marketing
- Email marketing and newsletters
These are only a handful of marketing ideas. Depending on your target shopper, you may use one or more of these, or none at all.
Another idea is to think big and create an event for your launch. For instance, you could host a giveaway or create a contest. You could offer free shipping on your site for the first month. You could host a private event for shoppers you’ve already added to your email list. In other words, you can get creative and use the launch as a time to try something out of the ordinary.
Customer service expectations
Customer service is another key area of consideration. Before you launch, you should have your customer service plans in place. Shoppers now expect quicker responses to their questions or concerns.
You can implement customer service through several channels:
- Chatbot service on your site
- Social media channels — Facebook, Instagram, Snapchat, and Twitter are all platforms where shoppers may have feedback.
- Contact us form on your website
Whatever methods you choose to provide excellent customer service, make sure it’s easy for your shopper to locate the information.
Now comes the rewarding part: all of your hard work and energy has given way to a brand new ecommerce business and you’re starting to get feedback from shoppers.
One you’ve taken these multiple steps to launch your product and your online business, you may think you can sit back and relax. But the reality is, the work is only getting started. Now it’s time to analyze your product and site performance and use it to make your site even more amazing.
There are key metrics to consider as you’re launching and growing your online store. You want to pay attention to the following, and then adjust if you find you need improvement in any of these areas.
- Cart abandonment rate. This is the percentage of shoppers who add an item(s) to their shopping cart but then abandon it and fail to complete the purchase.
- Cart conversions. How many orders are completed versus how many are initiated.
- Average-order-value (AOV) This is how much your shoppers are spending on average each time they order from your store.
- Your shopper demographics. Your ecommerce platform should provide analytics for who is purchasing from your site. This can help you tailor the products and further customize your website based on what the demographics show.
- Average session duration. How long are your shoppers staying on your website? Do you have enough incentives to keep them browsing? Are you also creating a sense of urgency so they are reminded to complete their purchase?
Think of analytics as your tool to improve your ecommerce site. The data available to you might seem a little cumbersome at times. But data can also tell a meaningful story about what’s working (or not working) for your ecommerce business.
Starting an ecommerce business
As you can tell, there are multiple steps that go into the creation of an online store. From selecting your business name, building your business plan, to planning the launch or running analytics. It can get complicated and involve quite a few decisions.
But the reward is tremendous. Running an ecommerce business can provide shoppers with the most flexible experience purchasing from you, which in turn can lead to greater customer loyalty. And all indications are, shoppers will continue to rely heavily on ecommerce — which can lead to a profitable online store for you.