How to Start an eCommerce Business

Do you want to start an ecommerce store from scratch? If YES, here is a detailed guide on how to start an ecommerce business with no money and no experience; plus a sample of an ecommerce business plan template and ecommerce marketing plan.

Starting an e-commerce business isn’t easy and requires many steps and decisions that would have to come together to ensure that the business works. The first step to starting an e-commerce business is to know the products that you would like to sell online, and the strategies you can use to find product opportunities that will appeal to your customers.

Once you have gotten an idea of the products you intend selling, you would then need to carry out an evaluation of the product itself, as well as the market for your product choice. After the evaluation, you would then need to look into how you would obtain the products you have finally settled on.

Carrying out a research into the industry is vital, as it would help you out in writing your business plan. Your business plan is the road map that will bring your ideas and thoughts together, and it is very vital as it would determine how to best move forward and most effectively compete.

Another thing that should be done after writing your business plan is in determining your Business Name and choosing an appropriate and available domain name, and registering the domain before crafting your logo.

A good e-commerce site will know that Search Engine Optimization (SEO) is very important, as it helps your site come up in rank when customers are looking for your products or even similar products. A search engine optimization optimizes your site for Google and other search engines.

Building your store has many critical elements to it, as you would need to write or get someone to write captivating product description for the products you plan to sell, and a photographer to help with shooting your products so they could appear beautifully on your store.

As you prepare to launch your store, there are several essential elements that you should prepare for, such as your shipping strategy, as getting your products to your customers shouldn’t be inconveniencing for them. You would also need to define your key performance indicators upfront, so that you know what measure to use in tracking your success.

After launching your product, you will need to find your customers, and should have perfected your sales and marketing strategies, that will help in driving traffic to your store, and converting this traffic to sales.

Steps to Starting an ECommerce Business from Scratch

1. Understand the Industry

The expansion worldwide of the internet has contributed greatly to the transformation of trade and store transactions. E-commerce means buying and/or selling products through the internet and is commonly associated with shopping online.

Interesting Statistics About the Industry

E-commerce makes use of regular technological maintenance so as to ensure the smooth functioning of online store sites, monetary transactions, as well as everything that has to do with the provision and delivery of products. There are several types of e-commerce, and the most prevalent being business to business, and consumer to consumer.

40% of internet users worldwide have bought products or goods online via desktop, tablet, mobile, or other online devices. This amounts to more than 1 billion online buyers, an amount that is projected to grow continuously. Various e-commerce platforms hold sway depending on the type of e-commerce market.

For example, while Amazon is one of the leading e-commerce platforms within the business to consumer market, e-bay is more popular within the customer to customer e-commerce.

Another exciting trend in the e-commerce industry is the mobile commerce, and this is due to the popularity and widespread use of smart phones and the growing usage of tablets and phablets. In 2013, the revenue from mobile commerce in the united states amounted to more than billion. This type of e-commerce includes mobile media and content, retail services, travel purchases and various other services.

Digital payments are also closely connected to e-commerce. Alternative payment methods such as digital wallets or online payment providers have seen increased adoption rates as well as a rapid growth in the past few years. PayPal which is owned by E-bay generates more than $14 billion on mobile payment volume alone.

Digital payments are not only used by mobile shoppers but also by those who love to stream music, online videos subscriptions and apps. Global mobile app revenue for instance, is projected to surpass $30 billion.

The vast base of high speed internet users encourages businesses to innovate in order to offer an ever-evolving array of online services. Sectors that are rapidly growing online include the sale of entertainment products, event tickets, travel, and apparel and consumer electronics. Even groceries are also in the fast lane, as online grocery sales are growing in the United States, which is mostly due to an ever growing list of same-day delivery options.

With regards to the average spending per e-shoppers, North Americans are clearly in the lead. The consumers in North America spent an average of $2,674 online in 2014, as compared to $2,888 in America, $2,070 in Europe, and $1,472 in Asia-Pacific. In 2014, the online turnover of e-commerce in the United States grew by 11.7% and reached $482.7 billion, with China leading by 63.8% and having a turnover of 8.1 billion.

The most powerful trends include access to the internet via wireless devices, migration of entertainment to the web, and cloud-based software as a service. Today, consumers are more focused than ever on finding the best prices, especially as consumer attitudes and shopping habits changed dramatically as a result of the 2007-09 recession. E-commerce firms that offer high value at low prices are in a good position to prosper.

2. Conduct Market Research and Feasibility Studies

• Demographics and Psychographics

When it comes to e-commerce, demographic and psychographic composition of consumers matters a lot. Customers’ demographics depend on the product in question, as there are end users – which comprises of male and female customers, either purchasing for themselves or someone else, and wholesale accounts – which comprises of stores buying in bulk to sell as retail.

As a new comer to e-commerce, getting the kind of people who would want to patronize you is by looking at your biggest competitors as they would help fill in the blanks for the type of customers you should be on the lookout for. This can be done by using software to analyze the traffic of your competitors.

3. Decide Which Niche to Concentrate On

Before starting off an e-commerce business, the first step is in researching, and deciding what niche you would love to go into. If you intend to thrive in today’s competitive e-commerce world, you would need to build a sustainable brand.

There are many niche ideas that an e-commerce entrepreneur can go into. However, no entrepreneur should rest on their oars after finding out their niches, because there are competitors in every niche, which is why you should invest in your brand and constantly acquiring new customers, while exploring new business or diversifying and expanding your product offering ahead of the competition.

The Level of Competition in the Industry

E-commerce industry is highly diversified, as there are commercial companies, social networking companies, and search sites.

Commercial sites have a bit of advantage over others because consumers mostly anticipate the experience to be gotten from such sites, which is shopping, however social networks and search sites do not have this advantage, as they generate revenue using indirect methods, and therefore face greater risks that the adverts and other monetization efforts on their sites will impair the user experience.

The success of the powerhouses in the e-commerce industry will to a large degree, define the future of the global internet economy, and may eventually crown one of the giant e-commerce competitor as the world’s most valuable company.

4. Know Your Major Competitors in the Industry

The e-commerce industry has existed for a long while now, and while most companies have continued to excel throughout the years, others have failed miserably. It is for this reason, that those who have had successes and striven to remain relevant have been known as brands in the industry. Listed below is a list of some of the major well known brands in e-commerce industry in the United States:

• Amazon
• eBay
• OLX
• Google
• Flipkart
• Alibaba
• Facebook

Economic Analysis

Before venturing into the e-commerce industry, entrepreneurs have to be really sure it is what they desire to do, and then make a thorough research about the industry. If venturing into commercial sites, you can use Amazon’s Business model which operates as the online version of a retail operation or that of eBay and Alibaba whose business models are based on operating online marketplace. This means that the latter partners. Rather than compete with a vast spectrum of merchants, wholesalers, and manufacturers.

The demand for e-commerce goes hand in hand with technology. As more devices are created, so are more people able to use the internet, either to use search sites, interact on social networks, or shop online However, people will only purchase more from this industry if the economy is healthy. Any entrepreneur going into this field will need to keep operating costs low as revenue for start-ups isn’t immediate.

5. Decide Whether to Buy a Franchise or Start from Scratch

Starting a business from scratch is not the easiest of venture, as not only would you be required to focus on the purpose of the business, but you would be required to aggressively get your own clients, while mapping out short and long term strategies that are intended to bring in the targeted customers and also help you grow; but it also has its advantages as you get to work on growing your vision and not that of someone else.

Buying a franchise also has its advantages, as it means you get guidance from those that you are buying the franchise from, and also get to worry less about getting customers for the business. The ultimate decision of what an entrepreneur wants for his or her business, lies in what vision about the business he or she has, which will lead to either deciding to buy a franchise or not.

6. Know the Possible Threats and Challenges You Will Face

Every new business faces challenges and threats from the environment and from competitors. For e-commerce the key challenge for startups is the cost of customer acquisition especially when trying to fulfill marketing objectives. Given limited margins, and in the absence of scale, it is nearly impossible to run profitable campaigns as this is only possible through the overall life time value of the customer.

Also, there are too many niche e-commerce players in the market, this, insecure payment gateways, customer service, raising fund for scale and improper logistics and supply chain costs can be very challenging for new e-commerce business startup.

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

Many new Online business owners do not know if they should incorporate or not; what their business structure options are, what incorporation might mean for their business, or even what needs to be done to form a company. Incorporation is the process of creating a new business structure where your business becomes a recognized entity or person under the law.

Once created, the legal entity can then be treated separately from its founders; thereby reducing the liability for you as an entrepreneur and gaining other benefits that would help the business grow and thrive for a long time.

There are six primary business structures that a company can choose from in the United States. This includes a sole proprietorship, a Limited Liability Company (LLC), a partnership, a cooperative, a corporation, or an S corporation. The sole proprietor business is the most common and popular form of business in the United States.

Most e-commerce businesses or merchants with a low risk of liability use the sole proprietorship model of business structure. This means that the company does not need to file taxes, and the owner has complete control of the business. However, this business type can be evolved into another business structure later.

There is however no easy answer to the legal entity that a new start up can use. Most e-commerce businesses start out as sole proprietorship or partnership, and only incorporate when the company’s potential liability makes protecting their personal assets attractive.

8. Choose a Catchy Business Name

• BooBoo
• OpenKart
• ePort
• KIndMart
• Quay

9. Discuss with an Agent to Know the Best Insurance Policies for You

Three decades ago, the e-commerce business barely existed. Today, millions of businesses engage in buying and selling of products online. The reason why it is advised that you get an insurance policy is for eventualities that would always be out of your control, such as health or a problem with the contract of your clients.

An e-commerce business faces risks different from a brick and mortar company, and therefore your insurance policy should be one that addresses these concerns. It is best you speak to an insurance agent, as they will be able to guide you on the policy or coverage that best suits your e-commerce business.

Here are some of the basic insurance covers that you might have to consider getting if you want to start up your e-commerce business in the United States of America:

• Transportation Coverage
• Contents Coverage
• Workers Compensation
• Directors and Officers Insurance
• Intellectual Property Insurance
• Liability Insurance

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

Intellectual property protection depends on the type of e-commerce business you are running, if you work with intangible property such as data, software, or gaming operations, you could get sued for the rights. Also, if you ship globally you could look into intellectually protecting your brand, and registering the rights to either your intangible items or u=your brand logo.

However, most e-commerce businesses do not concern themselves with intellectual property protection, especially when they deal with tangible goods.

11. Get the Necessary Professional Certification

If you decide to start an e-commerce business in the United States, you would not need to have a professional certificate, especially as you are basically providing a kind of service either through sales or other means. You might be required to get certification for handling certain cargoes and packages, especially if you are going into a niche like medical equipment or if you would be shipping out.

It is however essential for an entrepreneur going into this field or any other in the United States of America to check what will be required of him or her in the state or municipality where they want to operate their business from.

12. Get the Necessary Legal Documents You Need to Operate

Below are some of the basic legal documents that you would need to successfully run a courier business in the United States of America?

• Certificate of Incorporation
• Business License
• Business Plan
• Non Disclosure (Confidentiality) Agreement
• Contract Documents
• Insurance Policies
• Partnership Agreement
• Terms of Sale of Goods online
• Website & E-mail Legal Notices
• Terms of Business for Advertising Online
• Operating Agreement
• Patent or Copyright Registration

13. Write a Business Plan

A typical business plan takes about 15 to 25 pages. The length usually varies on a number of factors such as whether it is an existing business with a new product, or an entirely new business. Your business plan should include these important sections:

Executive summary, which explains the fundamentals of your business and which states in clear terms what your ecommerce business is all about, and also includes the concept of your business, the financial features and what will be required of your business. Business description gives a brief description of your industry and its outlook. The description of your business operation’s structure has to be described also.

Other aspects that must be included includes, market strategies, competitive analysis, operations and management plan, and financial factors. These components are the essentials that need to be ready, should you want to give out a quick presentation to an investor.

14. Prepare a Detailed Cost Analysis

When starting an ecommerce business, there are some costs which you would incur even before you make your first sale. Your online store is a sales channel and so acts like a sales person would for your business. Online selling can be cost effective as there are less human resources and infrastructure costs, than there are for traditional ‘bricks and mortar’ business.

Most new entrepreneurs might be wary of going into this industry due to the fact that it seems the industry is dominated by a few big names, but in this business you can start off in your area, and still make as much as you should, but do not be fooled into thinking selling online is free.

Below is the basic checklist that you would need to launch your own ecommerce business without the products you intend to sell in the United States of America and most likely in other parts of the world;

• The total fee for incorporation – name check and filing – would cost $200
• Liability insurance and business license would cost $500
• Business cards, fliers and handbills would cost $100
• Having a vehicle for delivery would cost $800
• Launching of website would cost $100
• Equipping the office with computer, phone, file cabinet would cost $500
• Warehousing would cost $4,000
• Logistics would cost $400
• Other operating expenses would cost $100

The report from the above checklist shows that on a small scale, one would need at least $7,000 to be able to start an ecommerce business.

If one intends starting a medium scale an ecommerce business in the United States, one would need at least $15,000. And if one intends to start on a large scale in the United States, one would need at least $30,000. This goes to show that it is an easy business venture to start up.

15. Raise the Needed Startup Capital

It has always been challenging for small businesses to get financing much less ecommerce business. Also, circumstances became worse when banks tightened their lending criteria five years ago. Now most banks lend only to businesses with an established operating history. For those that are starting up an ecommerce business, they might find the traditional loan terms too stringent for them.

Most times, your personal savings might not cover a quarter of the financial requirements for a start-up, and it is then your business plan can be used to get funds from other places. This is why it is always insisted that your business plan is clear, providing concise strategies on how you intend to run and grow your business. Without a business plan, no serious investor would take you seriously, and might feel you are wasting their time.

There are several financing options available if you intend to raise money to start your ecommerce business, and some of the options are:

• Personal Savings
• From friends and family
• Credit Cards
• Peer to peer Loan
• Home Equity Loan
• Traditional Bank Loan
• Small Business Administration (SBA) Loan
• Online Lender
• Venture Capital
• Crowd funding

16. Choose a Suitable Location for your Business

One of the hurdles faced by any startup business is in getting a suitable location for the business. Where you locate your business is important as it can either lead to your business’s growth and further expansion, or to the death of your business.

Your location has to answer the storage space, as you would need a place to be able to keep the packages or products as they wait to be delivered, except you run an intangible service ecommerce business. To go into this business, one must be prepared for the location challenge and must look into issues that might possibly crop up.

Leasing a property is okay, especially if you live in a tiny apartment that might not be much of a convenience to you whilst carrying out your business. Thankfully, you can start off small, and as soon as you are progressing can look out for an appropriate location.

This is a business you can run from home. Some entrepreneurs also use their vans as their locations too, this is very okay too, especially if you have a van that is reliable, and large enough. Your van and the contents in the van will also need to be insured, as the threat to a mobile office is higher than that which is in a traditional brick and mortar building.

This therefore means that you don’t have to break the bank looking for money to rent or lease a suitable location. This business can be started by any focused entrepreneur it isn’t a business that can be tied to one location, except you want to start a medium or large scale ecommerce business.

17. Hire Employees for your Technical and Manpower Needs

There is little technicality required for the ecommerce business, except being proficient online and in the use of software. Also most of the equipment that would be used like a van or motorcycle for logistics and computer can be gotten for cheap either as fairly used or in online stores.

And if you manage these two tools well, you might not need to get another in a long period. For those intending to operate from an office facility or even from home on whatever scale, here are some of the equipment that would be needed:

• Computer
• Van
• Phones
• Files
• Contract documents
• Printers

Due to the nature of this business, the ecommerce business can be run from home. If you want to get an office facility, it should be if you are handling a high volume of packages and products, and would require a place to store them as they cannot fit into your house.

The number of people that would be needed to run an ecommerce business is one that can be decided on by the entrepreneur as the business grows, as one person can effectively run the business at first.

However, if you are looking to run a medium or large scale enterprise, you could employ between 4 to 6 people and above, such as manager, logistics people, and call handlers. The office would need minimal and functional equipment such as computers, phones.

The Service Delivery Process of the Business

E-commerce involves business processes that span the entire value chain such as electronic purchasing and supply chain management, electronic order processing, customer service, as well as business partner collaboration. The production process in e-commerce business includes the procurement, ordering and stock replenishment, processing of payments, and electronic access to suppliers as well as production control processes.

A successful ecommerce business involves typical operations management tasks or activities such as purchasing and inventory management.

18. Write a Marketing Plan Packed with ideas & Strategies

The aim of having marketing ideas and strategies is so that you could define and direct the marketing activities that are intended to build customer base, while increasing revenue. It is something that encourages an organization to look both inwardly and outwardly, so as understand the impact of marketing decisions and the target market.

A marketing strategy will create goals, whilst encouraging a business to expand. For businesses where owners work from home, especially ones that deals in service delivery, marketing is very essential, because you do not have the advantage of a storefront that will advertise your business to anyone that passes.

Marketing for ecommerce is very tricky and you would need to determine your marketing budget. Starting a new business, you might be required to use more money than an already existing business would need, due to that fact that potential clients aren’t yet aware of your services. When your ecommerce business has become known, your marketing budget can always fall to a smaller percentage of your revenue.

Below are some of the marketing strategies and ideas that can be adopted for your ecommerce business:

• Generate an automated email marketing campaign
• Diversify and make use of social media analytics that will help you know which social media works best for your business, so you would know which to concentrate on.
• Get a brand ambassador for your business and use your clients if need be
• Make use of contextual marketing, which means using your marketing in formats that will connect with your demographics.
• Implement a loyalty program
• Opt for user generated content
• Optimize for the mobile world
• Build authority with online discussion forums
• Make your delivery options better than that of your competitors

19. Work Out a Reasonable Pricing for your Services & Products

The factors that will enable you get the right pricing for your product is one that will be affordable to your clients, while not creating a price war between you and your competitors. The pricing should also not be one that will put dent in the overall revenue for your business.

You could comfortably start with prices that will favour you and your company, if you start by keeping your operational costs low and choosing a business model that isn’t likely to stretch out the resources of your ecommerce business.

20. Develop Iron-clad Competitive Strategies to Help You Win

For any business that has competitors, it is always imperative that you improve on the effectiveness and efficiency of your company by identifying structural improvements that will increase the speed of production, while striving to minimize cost. Overall, you have to choose the best tactics and circumstances that is right for your business.

Customers are drawn to incentives, ensure that you design your ecommerce business site in such a way that you can afford to give out incentives from time to time, like tagging your discounts to a special day, while still offering optimal service regardless of the workload.

You could also seek to make the lives of your repeat customers easier, by providing more convenient options by which they can use to check out. This means that instead of them going through the hassles that new customers will go through, they would have it easier, once they want to pay for goods on your site. Also ensure that you provide excellent customer service, and attend promptly to any inquiry or complaint.

21. Brainstorm Possible Ways to Retain Clients & Customers

In the business world, it is cheaper and easier to convince existing customers to patronize you than it is to attract brand new customers. By investing time and money on customer retention, you end up protecting your initial acquisition investment by increasing customer lifetime value. According to Marketing Metrics, the average conversion rate for a first time buyer is one to three percent, while for repeat customers it is a staggering 60 -70%.

You can increase your customer retention through email marketing because every business knows what it means to build lists and engage in e-mail marketing, especially as it is a cost-effective way for a business to drive conversions, especially in the ecommerce world. Other means are loyalty programs, easy repeat checkouts, special offers, subscription business models, customer service, and exceeding the expectations of your clients.

22. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

In the competitive market, it is important for an ecommerce business to have strong brand awareness so that they can be easily recognized by customers, which is why it is important to create strategies that will help you boost your brand awareness and to create a corporate identity for your business.

These strategies will help in expanding the number of people who know what you do and why in the market space, you are the obvious choice. Below are the platforms that can be used to boost the brand of your company as well as advertise your business:

• Organically expand your ecommerce business by making use of social networks, search engines, and targeted media outlets to improve your brand
• Constantly invest in your ecommerce business especially towards advertisement
• Stay true to your words and promises to your customers
• Be unique and different
• Have an easily recognizable logo
• Use the online directories to advertise your business.

23. Create a Suppliers/Distribution Network

Due to the significant continual growth in the ecommerce business activity, anyone who runs a standard ecommerce business that is into tangible goods and even services would need distributors or suppliers to ensure the business thrives. Even those manufacturers with e-commerce site would need to source for its raw materials.

If you are in a good business relationship with these suppliers and distributors, it will help your business run well without any hitches, as products would be brought on time. Apart from executing jobs for you without delay, these vendors can also help you get the items you need for your ecommerce business cheaper than you would get them directly from other online retailers, thereby saving your business some operating cost and improving the bottom-line.

24. Tips for Running an ECommerce Business Successfully

The e-commerce business is the type that allows entrepreneurs choose the kind of lifestyle they would love to live. Turning the e-commerce business into a massive one will require you putting in a great effort, by putting in the time and resources that would be required to scale it up.

If you intend running a successful e-commerce business, you would have to treat the business as if it were a thriving offline business, this might not seem easy especially if the business isn’t fetching in millions yet, however if you want your business to be successful, you have to act like it is already something that is bringing in the big bucks.

This means not living a lifestyle that will not allow you focus on the ongoing growth of your business. Another important factor, is finding the right software for your business, software that ensures that your store is secured, scalable, usable, as well as provide other marketing tools too.

Finally, having the right software and treating the business as you would an offline business are all nothing if you do not know your target audience or customers. After knowing your customers, ensure that you make them your brand ambassadors, through their testimonies, which would add more credibility to your business.