Starting an eCommerce business is a challenging project, and we want to help you plan for success on your commerce journey!
The Commerce Journey of a Thousand Miles…
We all know eCommerce has dramatically changed the way people shop, and the way eCommerce is impacting shopping habits is increasing daily. COVID-19 has shifted eCommerce more than at any other point in history. 😷
Even though the demand is high, it still takes a well-thought-out business plan to execute on a successful business startup. Have you thought about your business goals? How you will source inventory? How much money you will need to get started?
…Begins with a Business Plan
A business plan will help you get all your thoughts in one place and identify any gaps. It will help you determine your business goals, set business expectations, and provide a roadmap to get started and grow.
Here are the 10 critical steps to starting an eCommerce business in the United States. Let's walk through them together. 🚶♀️
1. What Are You Going to Sell?
If you want to be successful in eCommerce, you’re going to need a product or service that will sell. The best products are those that provide a solution to a customer’s problem. Some people decide to sell something they enjoy, and although your passion may benefit you, if you want to make money, it is more important to find the right product that is going to sell.
Finding What Sells
Platforms, including Shopify, and other online resources, provide guidance on product ideas and trending items. This is a great time to talk to your social network to find out what they are buying online.
An essential component of choosing a product to sell in your eCommerce store is understanding the competitive landscape. You don’t want a product that is overcrowded or one where you will be competing with major brands.
Commoditized and Niche Products
There are two categories of products and services to consider: commoditized and niche products.
- Commoditized Products and Services – Commoditized products and services are essential, popular, or in demand. This category makes up a large portion of online sales and includes items such as food, clothing, sporting equipment, or toys. Although commoditized products have a wider audience, there is a lot of competition and many alternative options.
- Niched Products – The other route you could take is to sell a niche product. This would be a good or service that is specialized and targeted. Niche products would include unique, personalized items, or handmade products. They are typically sold in smaller quantities and have a lower demand.
Niche items as a category may experience lower sales, but they are more likely to be unique and not replicated elsewhere. You can become profitable in this category as interest grows.
- Combination of Niched and Commoditized Products – Some eCommerce businesses will provide a mix of commoditized and niche products.
Whatever you decide to sell, you need to keep in mind that you can’t be all things to all people. The products you sell should be in demand and fulfill a need. Most eCommerce businesses that fail do so because they didn’t offer the right product mix. And it is okay to learn along the way!
Go Slowly as You Learn
Just because you start offering one product doesn’t mean you can’t pivot to another. So, before investing everything in one product, start small to test the waters. This is also the upside if you are bootstrapping your own business — you can go slowly.
2. When Starting an eCommerce Business, Where Will You Source Your Products?
Part of your decision making process when starting an eCommerce business should include how you will source the products you want to sell. They should be readily available. You wouldn’t want to start selling a product only to find you can’t source the needed inventory.
Wholesale, Resale, and Dropshipping
There are several of ways eCommerce businesses can acquire inventory. Some of the options are making the product yourself, sourcing through a manufacturer by buying wholesale and reselling, or dropshipping.
Let’s dive into those categories:
Home-Made Products and Services
If you have a hobby that you think could translate to sales, eCommerce can open many opportunities. If you plan to sell a product you are creating, you will likely need to source the raw materials. Ensure you have access to all the elements necessary to produce your product or service. Contact the suppliers you have selected and discuss your anticipated needs before you start out.
Your next step is to breakdown the production process to determine the volumes, cashflow requirements, and timelines. Prepare for success by creating backup plans to meet demand if it’s higher than expected.
Shipping and Delivery
When weighing up your product options, you will need to consider shipping requirements. Does your product require special packaging to reach its destination safely and undamaged?
If you are providing a service, remember to factor in the extra time needed for any additional tasks that are routinely required to prepare you for delivering the service. Also, consider the requirements or information you will need from the client to complete the service. You will really want to think this part through in detail when setting up your online store.
Sourcing Your Goods From a Manufacturer
If you are selling items manufactured by another company, thoroughly research sourcing your product. Take steps to understand the manufacturing process and any hurdles that could impact receiving the product on time, and in the quantities you would need it.
Check that your manufacturer is reputable and provides a quality product. Also be aware that if you are sourcing your product internationally, this can take longer, and you will need to familiarize yourself with United States custom and transport laws.
This is when you take the order for the product, and the manufacturer fulfills the order. One of the benefits is not having to handle inventory, packaging, or shipping. If you plan to sell a physical product, then dropshipping is an easier route to take when starting an eCommerce business than committing to create the product yourself.
3. Have You Created Your Business Identity?
Branding your business is extremely important. Your brand identity will shape the way customers view your entire business. A good starting point is to brainstorm a list of words that sum up your brand. This can help spark ideas for names that truly reflect your business.
Build Your Brand
- The Name of Your Business – The first identifier for your business is its name. When choosing a business name, aim for a unique name that describes the nature of your eCommerce business.
🔍 Search the U.S. Patent and Trademark database to ensure your name isn’t already being used.
- Your Business Logo – Your logo should attract and resonate with customers. Since it will be used on your website, make sure the design, font, and colors look good in your online store. If your branding will appear on a product or in publications, make sure it displays well in all the ways you will use it.
- Your Domain Name – Part of your brand will include your domain name. You’ll want to choose a domain name that is synonymous with your business. Confirm that the domain name you are looking for is available and if you are buying a pre-existing domain name ensure it has a high domain authority.
Taking the time to thoroughly think through your name, logo, and domain name when starting an eCommerce business will save you from the hassle of having to change them down the road.
4. What’s Your Business Structure?
When setting up your business structure you will need to decide whether to be a sole proprietor, partnership, or limited liability company (LLC). There are pros and cons, including tax implications, to each type of business structure.
Three Common Business Types
Here is more information on the three most common small to mid-size business models.
- Sole Proprietorship – This business is owned, controlled, and operated by a single individual who is responsible for all the risks associated with the business, as well as all the profits and losses. A sole proprietor setup requires little paperwork. This is a popular option for many online merchants; however, it leaves you exposed to risk.
- Partnership – If you’re running the business with a friend or another person, a partnership will likely be your best option. It is similar to being a sole proprietor but with multiple individuals. In a partnership, you can assign different levels of accountability among the members. The three types of partnerships are General, Limited, and Limited Liability.
- Limited Liability Company (LLC) – It takes more time to set up an LLC but provides members with greater insulation from business and personal risk. If you want to maintain control over your brand while limiting exposure, this is definitely the business type to consider and is worth the extra effort required to set it up.
If you are not familiar with the process, the Small Business Association has plenty of resources to help. This is a great time to learn from others by consulting with friends or colleagues who have set up a business before.
You will also want to consider investing in software such as Avalara that will provide automated tax compliance. :
5. Do You Have the Necessary Licenses and Permits for Starting an eCommerce Business?
There are several licenses and permits you will need to investigate before opening for business. Depending on what you are selling and your location, they may not all be necessary.
- Business Operation License – Look into your city, county, and state regulations to see what tax or home business licenses you may need. This information can generally be found on state and local government websites. Your local chamber of commerce is also a good starting point for information and resources.
- Employer Identification Number (EIN) – An EIN will be needed to open a business bank account and file your business taxes. This number is important even if you don’t plan on having any employees. The unique identifier is helpful in separating your personal from your business finances.
- Seller’s Permit – This is a requirement of most businesses that are selling products and services online. Check your state’s licensing office or Department of Revenue to ensure you get the proper permits. Almost all states will require some type of seller’s permit before you start selling products.
- Doing Business As (DBA) License – This license allows you to conduct business under a name other than your own. This is not required but will help with opening business bank accounts. It will also be important if your business dealings involve signing contracts.
- Sales Tax License – If you are a home-based business selling taxable products and services online, you will need to pay taxes on every item sold. Sales tax varies by state, so ensure you understand the tax regulations for the region you will be conducting your business.
- Occupational License – This license will depend on the type of industry you work in and the work you do. The National Occupation Licensing Database is a good starting point to view requirements.
- Home Occupation Permit – If you are conducting a business out of your home you’ll need to find out if your neighborhood is zoned for business activity. Check your city’s or town’s government website for further information.
6. Will Your Business Be Online Only or Also Have a Brick and Mortar Shop?
When starting an eCommerce business, you need to decide if it will only be online or if you will also have a brick and mortar store location of some type.
These options don’t have to be exclusive. You can find a combination that works best for your business and where it is in its lifecycle. Your business strategy could include starting out as an eCommerce business and eventually expanding into a storefront. Or, if you currently have a storefront presence, now is definitely the right time to move online into the eCommerce arena.
Talk to other business owners to understand how they expanded from one format into another.
7. How Will You Host Your eCommerce Business?
When hosting your eCommerce site, you can choose between two options fully hosted or self-hosted.
Fully Hosted Platform
A fully hosted site is a platform where all the hosting and software is handled on one platform. Everything is accessed through the cloud and you don’t have to install any special software.
There are a variety of options that let you build your online store without needing advanced tech or coding skills. Most host providers have simple drop and drag options to create your store. They also have an established shopping cart and payment experience. You will have access to lots of resources and examples.
One advantage to a fully hosted site is that they are less expensive to maintain than self-hosted. Most fully hosted sites require a flat fee and subscription plan. They are typically a better option for small to medium-sized businesses with a limited budget or minimal IT experience. Keep your strengths in mind. If you don’t know much about IT, don’t worry, this may be a great option.
A few options for a fully hosted platform include Shopify and Squarespace.
- Shopify – This well-known platform excels if you are selling ten or more products. Shopify is easy to set up and use. The platform offers the software and hosting that is needed for launching the website. Some other benefits include the fast loading speeds and security features. They offer monthly subscription plans.
- Squarespace – Squarespace offers fewer options, but users find the overall look to be higher quality. They have basic and advanced plan options based on your eCommerce needs. Although Squarespace offers a little less creativity, it includes web hosting, domain, payments, web statistics, and responsive design for mobile all on the same platform.
🛍️ If you go with Shopify, check out our archive of advice and resources for getting the most out of your Shopify storefront. 👈
Self-hosted eCommerce platforms will require you to host the site yourself and install software. Files will be saved on your own server. Some self-hosted platforms include Magento and WooCommerce. Since you will be hosting the platform you will need to understand security and fraud protection. This option is often better for businesses that want more control and have more IT experience.
If you decide to self-host, you will need to start with a domain name and a web host provider. There are several ways to secure a domain name and web host and you can purchase them together or separately. If you currently don’t have either it’s easier to buy them together.
- WooCommerce – This is a great option if you have already started or are familiar with WordPress. WooCommerce is modular and gives you the ability to choose from a variety of plugins and themes. If you have some technical experience this platform is a good option.
- Magento – If you would like to create a customized shopping experience, Magento may be your best option. If you have the technical background this allows for complete brand flexibility and options. Many of their features add to your overall fee.
🛒 If you go with WooCommerce, check out our archive of advice and resources for getting the most out of your WooCommerce site. 👈
8. How Will You Design Your eCommerce Business Website?
An eCommerce website is unlike other websites in that it serves a purpose, and that is to sell a product or a service. We have all been frustrated at some time or another when trying to buy something online, now is the time those frustrations will pay off. Think about all the obstacles you encountered and use that knowledge to create a seamless checkout experience for your customers.
User Experience and User Interfaces
When building an eCommerce website, you need to consider both the user experience (UX) and user interface (UI). Both UI an UX can impact the overall shopping experience and the likelihood of a customer purchasing your product.
- UX – is how your customers interact with your website's elements and their experience as they progress through the steps necessary to buy a product or service. Good UX funnels people into a conversion activity. Organize your shop based on how people shop, or how you anticipate them to shop for your product. Think through how customers will use the search bar, shopping bag, product descriptions, and other areas of the site.
- UI – While the UX is about the function of the site, the UI is about the look of the site. This includes colours, graphics, images and the design of the individual elements, for example, the styling of your call to action buttons.
You will also need to choose a payment processor, which could include Stripe or PayPal.
Once you feel your online store is ready, have family and friends test it out before you launch. This can help you work out any glitches and see how your customers will interact with your products.
Even after launching your eCommerce store, continue to test and optimize your website consistently to keep an eye on what is and isn’t working well for customers.
9. How Will You Market Your Business?
Now that you have done the foundation work you can start marketing your online business. A good marketing strategy will help generate consistent sales.
- Be Visible on Social Media – Your customers are on social and it makes sense for you to have your brand front and center where your potential customers are looking. Be there, and be visually present. Use your logo and unique, real photos rather than stock photography when possible.
- Be Consistent – When starting an eCommerce business, you need to be marketing consistently. This will set you apart from your competitors. Keep learning and pay attention to your customer and their online retail habits. This will help you to improve your product pages and provide information that is relevant to your shoppers.
- Personalized Experience – Successful eCommerce sites provide a personalized experience to every shopper. Leverage technology to provide content, product recommendations, and offers based on each customer’s browsing history. Pay attention to previous customer actions, prior purchase data, demographics, and other data points.
Social media platforms and search engine tracking tools let you extract tons of personal data about your visitors and buyers. You can find information on search queries, page visits, purchase history, and more. Research shows that customers spend 48% more when their shopping experience is personalized. Get to know your customers and why they are shopping with your business.
- Email Campaigns – Email is an essential and inexpensive way to reach customers. Consider starting an email marketing campaign to drive customers to your business. If you have been selling locally you may already have a database of names as a starting point. There are also ways to grow your email list with techniques like pop-ups and lead magnets.
10. What is Your Business Goal or Dream?
Patience is important when starting an eCommerce business. You need to play the long game. Create a compelling vision of the future for your eCommerce business. Understand and determine your specific business short and long-term goals. Keep these in mind when you are building your plan.
You can link up with other eCommerce business people through a mentorship network. These can often be found locally or online. Lean on these mentors to help you as you start and grow your business. Learn from the mistakes of others to help you avoid wasting time and effort.
Know Your Key Performance Indicators
You should also determine your key performance indicators (KPIs) or targeted milestones. KPIs will vary depending on your business and include the following categories: sales, customer service, marketing, project management and manufacturing.
Here are some metrics to keep track of:
- Sales – This category includes the number of orders you receive, average order size, gross profit, conversion rate, and number of new customers.
- Customer service – Including your average resolution time, active issues, customer satisfaction score, and customer service chat count.
- Marketing – The amount of time customers and prospects are spending on your website, website traffic, number of new and returning visitors, email open rates, and number of unsubscribers.
- Manufacturing – This would include your product cycle time, yield, manufacturing cycle time, and first time through.
Now that you have a checklist, do you feel ready to start your eCommerce business? Join us in the Commerce Journey Facebook Group to share your challenges and wins.