E-commerce has continued to boom, before the pandemic the space was steadily growing each year and 2020 saw a huge explosion of e-commerce businesses. To compete with the attractive e-commerce business model, brick and mortar stores had to move their offerings online to stay in business offering shipping, delivery and curbside pickup options for their no longer, store only, e-commerce model.
E-commerce continues to see huge successes. In 2021 total e-commerce sales were estimated at $870.8 billion by the U.S Census Bureau and are expected to continue to rise. Not only are people shopping online for convenience but also the ease of comparing and researching products, quick and easy check out processes, delivery options, coupons applicable to their shopping carts - the list goes on. E-commerce is a great way to get your business out of the local and into the global market, giving more people access to your brand and product, and bringing you greater success.
This is not easy, get a rich quick fix. E-commerce takes time, effort and a scalable strategy that leads to a profitable outcome. If given the right amount of attention and investment an e-commerce business can be a great additional income source or turn into your sole money maker. Whether you’re looking to quit your day job or are just here for a good time, let’s dive into the e-commerce business model and how you can optimize your business for success.
Types of E-Commerce Models:
There are a few things to consider when starting your e-commerce business and deciding on the best e-commerce models for you. One size does not fit all here so this first step is crucial in how you will build out the rest of your business.
Dropshipping or Print on Demand
If you want to sell online without having to house, touch or send out your product, dropshipping or print on demand might be a good choice for you. Print on demand is where you have a white label supplier and a product with a design, shirts or hats, for example, you then will order from the supplier as the orders come to you, instead of ordering a large amount upfront.
Wholesale or Warehousing
Wholesale or warehousing is a good idea if you want to invest in a lot of products up front and stock and send them out yourself. You’ll typically purchase these products directly from a manufacturer, house them in our warehouse (or home garage, you decide!), and then list them on your website for resale.
White Label or Private Label
White label and private label products are when you have a product made by a third party to your specifications and with your branding on them. A white label is a product to that you can attach your name and “label” to personalize it. These are also called “generic” products. For example, Walgreens branded ibuprofen.
A private label is a product that is customized solely for one company and sold exclusively to them. This product can’t be reproduced with a different brand's label and resold.
Affiliate marketing is another unique way to sell a product via e-commerce. Affiliate marketing can be done one or off Amazon (there are pros and cons to both), and is a way for business owners, influencers, and regular sellers to build site or storefront traffic and profit through content creation and marketing tactics targeting their consumers.
Choosing the right e-commerce model for you is a personal decision that will be based on many personal preferences and needs. Don’t think you need to be quick in your decision, research each e-commerce model and pick the one that makes the most sense for you.
Step 1: Research Research Research!
Once you find the e-commerce model that is right for you, finding your niche is essential to having a successful e-commerce business. Researching the type of product you want to sell will help you in deciding what best fits your business style. Questions you will want to ask yourself include:
- How will you source your product?
- How will you get it to your customers?
- What are the start-up costs associated with an e-commerce business?
- What legal entities will I need to properly run an e-commerce brand?
- Are there regulations that your product will need to follow? Do they vary by state or country?
Step 2: Pick your Name and Legal Business Structure
Choosing a business name is one of the most important parts of starting your business. How you want to be known to the public and your customers are vital to your outreach, marketing, and brand recognition. Choosing a name that’s unique yet relevant to the kind of business you have is a great start. Make sure to check if it is owned or trademarked by anyone else and if the domain name is being used or available for you to purchase.
You’ll then need to research and choose a legal structure for your business to operate under. This will have important both legal and financial implications for you. Typically, an e-commerce business would fall under a sole proprietorship, general partnership, LLC, or corporation – each having its pros and cons.
Step 3: Your EIN
Your Employer Identification Number or EIN is useful for keeping your personal and business finances separate. This is a nine-digit number that is used for banking and tax purposes for your business that you can apply for from the IRS. Nowadays, some sites help you set up your legal entity and will often have an EIN service as well.
Step 4: Getting your Business Licenses and Permits
You will want to look into your local and state laws to find out what type of business licenses or permits are required for your operation if any. If running your e-commerce business out of your home to start, you won’t require too many permits. Business licenses and permits that may apply to you in the beginning are:
- Sales and tax permits
- Health, safety, and environmental permits
- Professional and trade licenses in certain industries.
This is not an exhaustive list, and they vary by state. Be sure to check with your state and local governments to find out which applies to you and your business.
Step 5: E-commerce Platforms and the Creation of Your Website
Now comes the fun part! Choosing your e-commerce platform and creating your site. Imagine you’re scouting for a property for your brick-and-mortar store, but instead, it’s on the web. Creating your website is of course a pivotal part of setting up your e-commerce business. Your site represents your brand, your mission, and what your business has to offer. The site has a site that will be your storefront and what the consumer will see when they view your brand and products. Your domain name is how consumers will find your business, like a street address, and should be the same name as your company or as similar as possible to it for your consumers to find you quickly.
The top platforms to sell on are:
The e-commerce giant has a couple of different options for business owners: Fulfillment by Amazon, Fulfillment by Merchant, Amazon Retail, and Wholesale. Again, each has its selling points and drawbacks, but we’ve seen huge success with the fulfilment by Amazon (FBA) service. FBA allows the seller to stock and sells items directly out of Amazon’s warehouse. Amazon handles the logistics of selling, allowing the seller to focus on marketing and other aspects of the business. This is a great option for those who don’t have a lot of extra room to store products or want to sell multiple products at high volumes with little hassle.
One of the most popular options for a direct-to-consumer site (DTC), Shopify is a subscription-based platform and store builder tool to sell your products. Shopify can be strictly online or also allow for in-store presence via their Shopify POS. You can easily customize your online storefront from the ground up in their app or online.
Squarespace is a subscription-based host platform for websites and e-commerce sites. It is fairly easy to build out a website as it uses a click and drag feature for text boxes and widgets allowing for those without coding and web development experience to build a beautiful, customized site.
BigCommerce is an e-commerce platform that hosts startups to midsized businesses. It gives business owners the ability to build out storefronts and customize them to their liking. Like many others, it is subscription-based software where you pay a monthly fee. It allows integration into PayPal and other popular payment gateways.
WooCommerce gives its users the ability to sell through their WordPress site. It is a platform that is better suited to those who have a better technical knowledge of site building as it has a more technically involved setup.
Step 6: Sourcing and Listing Your Products
With your budget and logistics in mind, next, you’ll have to source your products. By now you’ve decided the type of business you want to have. Then comes the product question - Will you be wholesaling your products? Are they white-label? What is the minimum amount you need to buy?
Once you’ve sorted out what you’re going to be selling on your site, it’s time to get these products listed online. Keep in mind who your target customer is and how you want to reach them. Applying detailed descriptions to your products and reviews will aid in legitimizing your site and give you better site traffic to acquire sales.
Step 7: It’s in the Marketing
As we talk about your target customers, we enter step 7. You will want to find out as much as you can about who it is you want to buy your product. What is your ideal demographic? What are their interests? Where are they hanging out online? Is there a specific platform they like to use? Instagram, Facebook, Tik Tok? These questions will help inform you on where and how you can reach them. If they are mostly spending time on Instagram, then focusing a lot of your marketing efforts and budget on Instagram content and paid ads will help you reach them easily and draw them to your website and product. Optimizing your product listings and website for search engines (aka search engine optimization aka SEO) is a great way to make sure your brand is getting hits online Research different marketing tools that are out there that can help analyze site traffic data and click counts on your posts (Google Analytics and Google Search Console are great places to start). This will help you keep track of what is working and what isn’t.
Associated Costs and Budgeting
As with any type of business, there are startup costs. Things you will want to budget for and think about are:
- Business license and permit costs
- E-commerce platform costs
- The domain name and hosting costs
- Payment processing costs
- Inventory storage and shipping supplies/ shipping costs
- Marketing and advertising costs
Thinking about these ahead of time can help you budget properly and avoid sticker shock in the future or overspending on your business. There are a lot of moving parts so having an organized system and budget will go a long way in the building of your killer e-commerce business. And there you have it! The ultimate step by step guide to starting an e-commerce business. It may feel overwhelming, but it’s a great way to spend your free time, start a side hustle, or create a whole new stream of proprietary income. Once you get the hang of it and dedicate your hard work and time to this new business endeavour, you’re on the path to success.
Already have an e-commerce business, or know someone else who does? Have more questions on how to better optimize your brand for success? Ready to exit your business but don’t know where to start? We’re here to help. Fill out our ready to sell form, or email us at firstname.lastname@example.org and one of our experts can walk you through all of the above.