Ecommerce is becoming more and more the preferred way for consumers to shop. It’s a 24/7 shopping marketplace with access from the convenience of your phone, PC, or table. Amazon estimates that over 2 billion people worldwide buy goods and services online through ecommerce. And it’s looking like it will ultimately overtake brick-and-mortar stores as the preferred way to shop.
What Is an Ecommerce Business?
Ecommerce or “electronic commerce” is online retail, or the selling and buying of goods over the internet. It allows businesses of all sizes to sell products at scale and reach customers all over the world 24/7. While some Ecommerce involves shipping for pickup in a store or local locker service, we’ll focus on the sale of physical products that are shipped directly to the consumer.
Why Should You Start An ECommerce Business?
Whether you’re an investor with some extra money to start a new enterprise, have a passion for a particular product or vertical market, or tired of the corporate grind and want to become an entrepreneur and start a new business, Ecommerce can be a rewarding avenue for both the business-to-consumer and business-to-business markets.
1. Consider these statistics:
- Ecommerce accounts for 16% of all purchases
- Ecommerce sales in the fourth quarter of 2022 grew 6.2% to the highest level in history to nearly $300 billion
- Total Ecommerce sales in 2022 rose to over $1 trillion dollars
- Since 2001, online sales have grown by 300%, while department store sales have dropped by half
- 67% of millennials prefer online shopping to in-store shopping
- 73% of consumers use multiple channels to shop and 80% of companies are investing in an omnichannel experience
- By 2040, it’s estimated that 95% of purchases will take place via Ecommerce
2. Global 24/7 Reach
With brick-and-mortar businesses, convenience of location can make the difference between failure and success. And sales are primarily limited to local customers, unless you invest in multiple stores. With Ecommerce, however, you can set up a storefront using your own domain name and sell your products worldwide – it’s one storefront with global exposure.
While brick-and-mortar businesses are only open for certain hours and often do more business during evenings or weekends. Selling online is a 24/7 enterprise that is always open. In essence, you can make money even when you sleep.
3. It’s Easy to Get Up and Running
There are a wealth of tools and technology to help you – from online selling platforms, business plan creation, to marketing automation and SEO tools.
4. Over 80% of the Web Population have Made an Online Purchase
If you have a viable business idea, come up with a product idea that consumers will buy, build an attractive and easily navigable website, drive traffic to your website via marketing and social media, create content that helps your customers, and earn customer trust, you can succeed. As quoted in the legendary baseball fantasy movie, “build it and they will come”.
5. You can Build a Loyal Following with Repeat Business
Reducing friction is important for selling online. By continually optimizing and tweaking your Ecommerce site, you can minimize cart abandonment and maximize conversions. Capturing email subscribers to alert them about sales and promotions, creating customer loyalty programs, promoting relevant value-added content, and retargeting will keep your customers coming back to your site.
The key point is Ecommerce is here to stay and will continue to dominate. For anyone wanting to remain competitive and reach consumers where they buy, starting an Ecommerce site is a smart business decision.
Steps to Starting an Ecommerce Business
So how do you start your own Ecommerce business from scratch? Fortunately, we’ve provided a step-by-step roadmap to help you succeed. The steps you need to take include:
- Deciding what types of products you want to sell by doing research
- Sourcing products
- Choosing a business name and entity
- Writing a business plan
- Getting a business license and other permits
- Applying for an employer identification number
- Figuring out logistics, including:
- Choosing manufacturers to work with; either large scale manufacturers, independent artisans, or importing products from overseas
- Getting warehouse space
- Choosing a shipper/fulfillment partner
- Consulting a lawyer to review registrations and paperwork
- Hiring employees
A great starting place to start is to determine the customer’s pain point or problem and come up with product ideas to address this need. You also need to find out which types of customers or target market(s) will be most attracted to the solution you come up with. Another avenue to explore are trends or niches that haven’t been addressed sufficiently.
Other tactics include:
- Finding a way to improve a product that already exists
- Talking to potential customers about their challenges with currently available products
- Checking out the competitive landscape
How to Decide on a Business Model
There are a few things to consider when deciding on a business model:
- Do you want to focus on a single product or many products?
- Will you sell your own products or sell products of existing manufacturers?
- Are you going to sell direct to the consumer or become a wholesaler?
- Will you maintain your own inventory or dropship them?
- Is a subscription business model the right way to go instead of a purchase model?
- Do you want to operate as a sole proprietor or LLC?
Your Product Ecommerce Options
Determining the number of new products, you sell on Ecommerce is strictly a matter of personal choice. Do you want to focus on a single product or many? Are you selling mass-produced goods that you or someone else can personalize? Is each item handcrafted or unique?
Single Product Ecommerce
There are many single or unique product Ecommerce stores that are successful online. Having a flagship product early on can make it easy to build a large following. And companies – both large and small – can achieve this.
The benefit of going this route is a one-product Ecommerce store is often easier to create. However, a positive fulfillment experience is vital; all orders must arrive accurately and on time, otherwise customers have less reason not to cancel.
Many business owners choose the multi-product avenue because it’s easier to attract a broader audience. It’s a great way to address different tastes, budgets, and preferences. It’s the one-stop shop principle.
In terms of fulfillment, you need to ensure you have a reliable partner. As the number of your SKUs increases, so does order complexity, so you need to find someone who can accurately track inventory, guarantee order accuracy, and guarantee that things are shipped on time.
You might consider selling one-of-a-kind products. Each hand-crafted item represents a lucrative opportunity, but trust building here is key.
If you’re an Ecommerce business owner selling a product on your website manufactured by someone else, you have the option of dropshipping it, or fulfilling the product ordered by having it shipped directly to the consumer from the manufacturer or wholesaler. The benefit is dropshipping eliminates maintaining inventory and its accompanying costs; you only pay for merchandise when consumers buy your product.
Other benefits include:
- You can start a dropshipping business with minimal capital as you don’t need to research and develop a product, manufacture it, or stockpile inventory
- This business model allows you to test or validate if the product will sell without investing in inventory
- You can test the quality of a new supplier; if the products tend to be defective, you can drop the supplier and won’t be stuck with hundreds of units of defective merchandise
- If you partner with a supplier that handles returns, you can manage your business from anywhere without facilitating the returns yourself
- Private label dropshipping can help you grow your brand as some dropshipping suppliers allow you to develop a distinct brand through custom printing and on-demand production
Subscription Business Model
It’s one of the fastest growing sectors in Ecommerce. The subscription business model is one in which products are delivered on a regular basis (usually monthly). It benefits both you and the consumer. Consumers don’t have to scramble to shop or place orders for products – especially refills of consumables. The subscription products arrive on a regular basis. The benefit to you is that you have a steady and predictable revenue stream so you can manage production more efficiently and reduce operating costs.
Opening A Wholesale Store
One option to consider is opening a wholesale storefront. As a wholesaler, you’ll provide products to other companies for a profit. Most wholesalers focus on a single group or category of products as it’s easier to manage. Some wholesalers serve as channels between manufacturers and retailers, and others sell direct to consumers or other resellers or distributors.
Creating a wholesale business can be done reasonably fast using an Ecommerce platform like Shopify. You can quickly create a unique storefront and then a second one, so you’ll have several online marketplaces. Shopify has a tool that lets wholesalers sell their products through specific categories and direct them to the right audiences.
There are several benefits to opening a wholesale storefront, including:
- Because you ship large orders to a small number of customers, you have more of an opportunity to develop relationship with them
- Wholesale customers can provide you with predictable revenue from repeat sales
- Dealing with fewer customers saves money and time spent on customer service
- You have lower fulfillment and shipping costs
- Volume sales may allow you to increase manufacturing volume, decreasing cost of goods sold and increasing your sales margin
- Sales tax is the responsibility of the wholesale customer, not you
- Selling wholesale can expand your market reach as your customers do much of the marketing for you
How to Build a Website
While it may seem like a daunting task, with the right preparation, it’s possible to build a straightforward Ecommerce website by yourself. The key steps involved include:
- Choosing a hosting provider
- Selecting a domain name
- Choosing a site template or layout
- Creating product pages
- Building relevant content pages
- Establishing a payment section
- Testing and fine tuning your site
- Promoting your site
Choosing an Ecommerce Platform
One of the first decisions when you start your Ecommerce site is the look and feel of your store. You need to decide which Ecommerce platform is best for your site, and how much time and money you must spend on customization. Another important decision is your choice of so your customer can interact with your site easily.
Selecting an Ecommerce platform is an essential step in setting up your online business. Essentially, an Ecommerce platform is the software platform you use to build your online storefront. It’s important to understand which platform will best provide you with a successful foundation for sales.
Integrating Your Website with Order Management
Ecommerce integrations are the ways you connect your store with customers and partners; it’s the automatic sharing of information. Integrations automatically make updates so that every system works with the same information, such as how many products you have in stock. In Ecommerce, you not only need integrations for order and warehouse management, and resource planning, but you also need integrations for sales tools to:
- Track inventory
- Set sales rules
- Provide customers accurate shipping cost and time estimates
Integration is important because they make it easy for you to continually update information via automation, so you have an accurate understanding of your business.
They also benefit your business by:
- Eliminating manual data entry so you reduce errors
- Ensuring accurate inventory counts in real time
- Enabling automatic notifications such as letting a customer know when an order has shipped
- Simplifying business management
- Improving reports and analysis
- Making it easier to grow and adapt your business when markets change or your business scales
Outsourcing So You Can Focus on Your Strengths
To ease the load of building your Ecommerce business, you might want to consider the outsourcing and automation of certain aspects. The main benefit is that you won’t be diverted as much by infrastructure so you can focus on what you do best, selling. And you can ramp up your operation faster and accelerate scaling.
Third-party Ecommerce solutions are a great option, if you don’t feel like you can invest enough time in running and growing your operations. These services from other companies can help you better prioritize what’s important and where you excel, while handing off challenging activities to experts. One such example is Red Stag Fulfillment, which offers third-part Ecommerce fulfillment and order support.
Potential third-party Ecommerce solutions include:
- Order fulfillment
- Web development and apps creation
- Ongoing technology management
- Social media management
- Content marketing
- Customer service
- Bookkeeping and accounting
- Product information management
Optional But Useful Integrations
Success in today’s highly competitive marketplace can depend on how you efficiently leverage software integration in your Ecommerce business. An integrated software solution can help you save both time and money while increasing efficiency; these are all important facets of growing your business.
The challenge is in finding the right software integrations to take your business to the next level. So, which optional but useful integrations should you consider?
- Marketing integrations to help boost brand awareness, increase sales, and improve customer experience
- Payment processing integration to allow you to process credit card payments
- Order fulfillment integration to help you manage the entire process from picking and packing to shipping, storage, and product return operations
- Shipping and logistics integration which is a must have for any Ecommerce store since shoppers want to easily track their orders and know how much it will cost; it should have built-in integrations with the most popular carriers such as UPS, FedEx, and USPS
- Email marketing integration is one of the most effective ways to grow your Ecommerce store; it should have built-in integration with popular email marketing providers such as Mailchimp, ConvertKit, and Drip.
- CRM (Customer Relationship Management) integration and functionality so you can track and manage interactions between you and your customers such as sales and shared customer data
- Accounting software integration so you can automate accounting tasks and save time and money
- Social media integration so you can post and share content on Facebook, Twitter, or Instagram, and connect your Ecommerce platform to your social media account
- Web analytics integration so you can better understand how customer engage with your store and optimize product listings or your promotional campaigns
- ERP (Enterprise Resource Planning) integration so you can automate many of the tasks involved in running your Ecommerce business; it lets you streamline processes such as receiving orders from customers, processing payments, shipping products, and providing customer service
How to Fulfill Orders
You need to decide how you are going to fulfill orders; it becomes even more important as your online business grows. The first decision you need to make is are you going to do it in-house, and how much are you capable of handling in-house, or how much you want to handle in-house.
There are two fulfillment strategies you can employ:
- Use CRM (Customer Relationship Management) tracking software to organize your customer data to ease fulfillment by:
- Processing orders
- Storing shipping and tracking information
- Creating and managing transaction documents
- Tracking inventory
- Running reports
- Use a third-party fulfillment (3PL) company
- 3PL providers offer solutions in warehousing, packaging, assembly, and distribution under one roof, so you can leave some, or all your order fulfillment to supply chain experts. They can provide a range of fulfillment services, from setup to shipping, to customer service. Most can integrate with existing Ecommerce systems, manage inventory, optimize transit time, process returns and claims, and provide the data you need on your KPIs. And you don’t need to invest in warehouse space or expanded technology, and you don’t need to hire, train, and retain more internal employees.
Small Business Order Fulfillment
Ecommerce shoppers do not discriminate when it comes to size – they have high expectations for both small and large online stores. That means as a small Ecommerce operation, you need every tool in your box to compete with bigger businesses. And nowhere is this more the case than in Ecommerce fulfillment.
To create an order fulfillment operation that will impress your customers and keep them coming back, you need to be aware that:
- Speed matters
- Accuracy is critical
- Low cost or free shipping can help drive sales
- Fulfillment needs to be fast, accurate, and reasonably priced
There are several methods you can use to manage your fulfillment as a small business. The best method or combination depends on your operation’s size, preferred sales channels, and growth trajectory.
- Fulfillment by Amazon
- Third-Party Logistics (3PL) which can free your time to work on other aspects of your business as you grow and scale
Deciding What to Do When Scaling Order Fulfillment
While it’s common for an Ecommerce business to own and run their warehouse, it’s another fixed cost which means you need to sell enough to cover it. Have a bad month, and you’re vulnerable.
It becomes more of a burden when fixed costs rise more than what you’d pay using a variable fulfillment cost model. As your business outgrows fulfillment in a garage, or necessitates a second warehouse across the country, you might want to consider outsourcing your fulfillment. As a variable cost, outsourced fulfillment allows you to enter the market with lower capital cost – especially if you’re a small- to mid-sized business. You only pay for labor, storage, and order fulfillment, as you use it, so you eliminate a fixed cost such as leasing space and can keep more of your revenue.
Moving to a Third-Party Logistics (3PL) Company for Operational Efficiency
As an Ecommerce business trying to get off the ground, you need to maximize your time resources. You want to be able to concentrate on growing your company as quickly as possible. And your time is precious. By outsourcing your inventory management, you can get back some of that time to focus on sales and growing your business, while saving money at the same time.
Inventory management handled internally can be complex and time consuming. Keeping track of ordering, storing, using, and the selling of your company’s inventory requires detail-oriented systems to ensure your company’s operations are handled correctly and run smoothly. A 3PL is dedicated to fulfillment; it thrives on detail and operates through already established systems to accurately track and manage your inventory.
By handing over your inventory to a 3PL, you alleviate the burden of order fulfillment from your company.
Choosing an Appropriate Location for Your Fulfillment Warehouse
When you’re first starting out, your first fulfillment warehouse might be a bedroom, a spare room, or your garage. But as you grow, you may rent warehouse space and hire staff to pick, pack, and ship your orders. Eventually, you’ll likely need to outsource your storage and shipping to a 3PL partner.
Once you’re ready to make the jump to a 3PL provider – and as with brick-and-mortar stores – what matters is location, location, location. You need a fulfillment warehouse or warehouses close enough to your customers so you can deliver orders quickly. However, you don’t want to spread your products among too many warehouse locations as that will add complexity to your inventory management and increase carrying costs.
If you only need a single warehouse, you don’t need to choose a 3PL provider near you. However, as your business grows, you will likely want to place your inventory in multiple warehouses. There’s an upside to splitting your stock between two or more national fulfillment warehouses, including faster order fulfillment and lower shipping costs.
How to Grow Your Customer Base
New to Ecommerce? You may want to start small and scale up. One option is to sell on your own domain; that’s assuming you have the time and resources to customize your website, create a frictionless online experience, and compete on the internet. Another option is to start out on an established Ecommerce website or through social media platforms like Facebook.
You can employ a wide range of Ecommerce marketing tactics that can help you start and grow your online business. Running marketing and promotional campaigns can help you reach a broader target audience. Some of the tactics you can use include a mix of:
- Digital advertising
- Content marketing
- Email marketing
- Social media marketing
- Apps creation
- Search engine optimization (SEO)
- Traditional advertising including direct mail
Digital marketing is advertising and content distribution via a variety of digital channels, including search engines, social media, email, apps, websites, and other digital channels that you can advertise on. It’s a great brand strategy to attract new customers and increase conversions.
The top 10 benefits of digital marketing are:
- It’s the most cost-effective marketing medium
- A great choice for small businesses
- Ideal for lead generation
- Easily measurable
- Achieves better conversion rates and ROI than traditional media
- Is an easy way to monitor the competition
- Helps you target ideal buyers
Social Media Marketing
Social media marketing is a powerful tool to help Ecommerce business of all sizes reach both prospects and customers. People discover, learn about, follow, and shop from brands on social media, so if you’re not on platforms like Facebook, Instagram, and LinkedIn, you’re missing out. Effective marketing on social media can help foster success for your Ecommerce business, promote brand loyalty, create devoted brand advocates and influencers, and even drive leads and sales. Remember, the more you put your Ecommerce business in front of consumers via social media, the easier it is for you to get them to know you and build brand awareness and trust.
Email marketing is an affordable and effective way to market your business. You can send emails about promotions and sales to prospective customers by first procuring lists and then developing your own customer dataset. You can also use email marketing for retention campaigns to foster customer loyalty.
On social media platforms like Facebook or Twitter, you can publish sponsored social media posts. These posts can be targeted to your ideal customer’s demographics, which is what makes social posts an asset to your marketing strategy. For instance, you could target a post toward individuals of a certain age and with a specific job title in your business’s area, to ensure that the people seeing your post are more likely to become potential customers.
Optimizing Your Website
You should make sure that your business’s website is user-friendly, is UX (user-experienced) optimized, and well-branded, so that current and potential customers can use it as a resource. You should also have your business’s contact information clearly listed and provide information about your products and their typical delivery schedules, so that customers can be informed of what to expect prior to placing an order.
And don’t forget to use SEO to help drive people when doing an organic search to find your Ecommerce site easily.
Using Product Reviews
Studies have shown that shoppers are more likely to trust products with review than those without. In fact, consumers attach the same weight to them as a recommendation made by a friend. Product reviews are instrumental for Ecommerce in generating more online sales.
Some of the techniques to help include:
- Automating the process of gathering reviews
- Make reviews look authentic by collecting photos
- Incentivize customers with a referral program
- Ask for reviews in post-purchase emails
- Use chatbot software on your site to help collect feedback data
- Ask for a review at the right time
- Consider using the Shopify review app to help boost sales
Running direct mail campaigns is an affordable, yet effective way to market your business. You can send mail to prospective customers with information about your latest promotions. Make sure that your mailed campaigns are attention-grabbing and that they boast incentives that customers will want to take advantage of.
Scaling Your Ecommerce Business
You’ve developed a great product line and created a website. You sell your products on Ecommerce platforms like Amazon, eBay, or Etsy. You’ve got your Ecommerce fulfillment in place, and you’re starting to build a base of repeat customers. How do you make your brand take off? Scaling your Ecommerce business from a startup to an established brand takes consistent effort.
Here’s some important tips to help:
- Base your marketing strategy on customer data; use a toll like Google Analytics or Mixpanel to analyze customer interactions with your website and Ecommerce platforms like Shopify or BigCommerce to learn more about your customers
- Social media is essential to building any Ecommerce brand as it connects with your customers on a personal level; use YouTube or Instagram to post stories that give insight into your products
- Use email marketing as 85% of people have it and the technique is proven to work; use it to let customers and prospects on your list to know about sales, promos, and new product
What to Know to Succeed in Ecommerce
It’s relatively easy to get an Ecommerce business up and running but there are some things you need to know so you don’t have factors eating into your revenue.
The things to know are:
- Software isn’t a panacea; there’s more to it than “setting it and forgetting it”
- Regularly review your expenses
- Everything is negotiable, especially rates
- Prioritize offers and value as it drives your ability to generate revenue and helps you to know when to expand and scale up your investment
- Simplifying helps you and your customers; making checkout frictionless can boost your order rate and offering an easy returns policy can help customers trust you more
Remember, you don’t have to do it alone. You don’t have to be a master of everything. Look to partnerships with third-party providers so you can leverage their expertise and focus on your core activities. Try dropshipping. Consider a 3PL like Red Stag Fulfillment to help with fulfillment.
Outsourcing tasks like shipping can make your growth trajectory a smooth one and not a chore.
Frequently Asked Questions
Is Ecommerce Profitable?
It is and is projected to remain profitable. It’s estimated that Ecommerce will make up to 23% of retail sales by 2025. In 2021, retail Ecommerce sales amounted to $5 trillion US dollars and by 2026 is expected to grow by 56% to reach over $8 trillion. You can make around 42.7% in gross profit margins and 0.64% in net Ecommerce profit.
How Do I Make Money with Ecommerce?
You can make a profit if you have a unique skill. Invest in your own marketing channels like your website and email, market in multiple channels, make personalization a priority, and consider dropshipping or outsourcing your fulfillment and other functions.
How Much Does It Cost to Start an Ecommerce Brand?
The average costs for an Ecommerce store include: a professionally built Ecommerce website is between $5,000 and $10,000; a domain name is between $2 and $20 per year; hosting is $300 per month; and expect to spend between 7% and 12% on your total revenue on marketing.
Can I Start an Ecommerce Business for Free?
Yes, you can with a platform such as Weebly and trying Shopify for free. Many ecommerce ideas don’t need upfront cash to start. Ecommerce business models like dropshipping, print on demand and self-publishing books take inventory and fulfillment tasks off your plate.
How Do I Start an Ecommerce Business with a Small Investment?
If you want to get your Ecommerce business off the ground with the greatest chance of success, you should commit as much money as you’re willing to part with. However, you can kickstart your venture without needing to spend thousands of dollars. Common ways of funding include taking out a small loan from a bank or credit union and paying it back over several months; sourcing investors to help fund your venture; or choosing an equity-based investment model, where you borrow money to purchase an equity stake in the company. Many successful Ecommerce businesses that start with under $1,000 do so with online ventures like selling print on demand products, digital products, handcrafted and homemade products, digital marketing, VA services, affiliate market sites, or dropshipping businesses.
What Is an Ecommerce Business?
Why Should You Start An ECommerce Business?
- 1. Consider statistics
- 2. Global 24/7 Reach
- 3. It’s Easy to Get Up and Running
- 4. Over 80% of the Web Population have Made an Online Purchase
- 5. You can Build a Loyal Following with Repeat Business
Steps to Starting an Ecommerce Business
How to Decide on a Business Model
- – Your Product Ecommerce Options
- – Single Product Ecommerce
- – Multi-Product Ecommerce
- – Unique-Product Ecommerce
- – Dropshipping
- – Subscription Business Model
- – Opening A Wholesale Store
How to Build a Website
- – Choosing an Ecommerce Platform
- – Integrating Your Website with Order Management
- – Outsourcing So You Can Focus on Your Strengths
- – Optional But Useful Integrations
How to Fulfill Orders
- – Small Business Order Fulfillment
- – Deciding What to Do When Scaling Order Fulfillment
- – Moving to a 3PL Company for Operational Efficiency
- – Choosing an Appropriate Location for Your Fulfillment Warehouse
How to Grow Your Customer Base
- – Digital Marketing
- – Social Media Marketing
- – Email Marketing
- – Content Marketing
- – Optimizing Your Website
- – Using Product Reviews
- – Direct Mail
- – Scaling Your Business
- – What to Know to Succeed in Ecommerce
Frequently Asked Questions