How to Start an E-Commerce Business (Beginner Friendly Guide)
Are you interested in learning how to start an e-commerce business? It doesn’t matter if you are looking to start a drop shipping website or create your own brand and turn it into the next billion-dollar e-commerce success story like Kylie Cosmetics. This article will help you get an e-commerce business off the ground.
There is no better time than now to start an online business. You can get started without investing a lot of money thanks to several advantages, like the drop shipping business model and plug-and-play e-commerce platforms like Shopify.
We are seeing new brands disrupt industries that were once dominated by household names. These new brands and taking a creative angle and making a huge splash.
This article is designed to help you understand what steps you need to take in order to build a successful e-commerce business.
From creating a brand and setting up your e-commerce store to marketing your products. This article is a great place to begin for those truly interested in learning how to start an e-commerce business.
How to Start an E-Commerce Business
Every e-commerce business, regardless of what direction you go, starts as an idea. An idea for your own product. An idea to drop ship a popular trending product line. An idea to create a niche-specific store and sell multiple products.
Whatever you decide to do, you have to be fully committed. It’s going to take work. You’re going to be faced with obstacles and difficulties. It’s not going to be a smooth ride.
Don’t believe all the hype you see online. You have seen the ads before. The ones promising to teach you how to build a six-figure monthly e-commerce store if you simply enroll in a course for $297 (or some other guru price point).
The majority of those courses and programs are just guides — the same information you can get from this blog for free — they are just packaged up with a fancy bow and accompanied by a price tag.
So, if you are prepared to put in the work (and understand nothing is easy) then keep reading. There is a certain level of satisfaction you get when you build something from the ground up. It makes all of the sacrifices, late nights and hard work worth it.
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There are several reasons why so many entrepreneurs want to learn how to start an e-commerce business:
- No physical storefront is required
- You can drop ship if you don’t want to warehouse inventory or fulfill orders
- You can have an e-commerce website launched and live in a day thanks to platforms like Shopify
- You can market your e-commerce store to a highly targeted audience thanks to Facebook and Google Ads
- You can validate an e-commerce idea without spending a lot of money
- You can duplicate your success formula and expand to include additional brands and e-commerce stores
Many assume that all you have to do is come up with a great brand name, throw a website together and watch the sales roll in. It’s not that simple. You need to figure out how to drive nonstop traffic to your website, and that traffic needs to convert.
You could have the best product and the best price. But if you don’t have a solid strategy to put your offer in front of the right audience the business will fail.
How to Start an E-Commerce Business: The Basics
It’s important that you fully understand what you are getting into. Starting any business, whether it’s a brick and mortar location or an e-commerce business, is a major undertaking.
There are two different business e-commerce models. Drop shipping and building your own brand. You have to decide what is right for you, as not everyone has the same capabilities and/or resources.
When you fully understand each, and what it entails, you can then make an educated decision based on what is going to work best for your particular situation.
How to Start an E-Commerce Business: Drop Shipping
Drop shipping is a fulfillment option that doesn’t require you to stock inventory or ship the orders. When your e-commerce store sells an item, you purchase it from a manufacture who then ships it to your customer.
As a drop shipper you never see or physically touch the item.
Now, there are multiple pros and cons related to drop shipping, which are outlined below.
Pros of Drop Shipping
Low Barrier of Entry: When you don’t have to worry about manufacturing, warehousing, order fulfillment and inventory level management, it allows you to get started much easier.
Less Startup Capital is Needed: The biggest advantage of drop shipping is not having to invest thousands of dollars in upfront inventory. You are only purchasing items after the sale is made on your store. This eliminates the risk of having your capital tied up in inventory that doesn’t sell.
Low Operational Costs: Without the cost of a warehouse, fulfillment employees and inventory, you can literally run your e-commerce business from your laptop via any location.
Location Freedom: You can run a drop shipping e-commerce business from anywhere in the world, provided you have an internet connection. This gives you complete freedom and flexibility.
Ability to Offer a Wider Selection of Products: Since you don’t have to tie up your money in inventory, you can offer a much wider selection of products. As long as your drop shipping manufacturer produces the item, you can offer it.
Unlimited Scalability Potential: The majority of the work is done by the drop shipping partner. They handle the manufacturing and the fulfillment. This allows you to focus on the marketing and customer service. When you are able to focus the majority of your attention on sales you can scale much faster.
Cons of Drop Shipping
Lower Margins: Since the barrier of entry is so low, you are going to have a lot of competition. It can get extremely cut-throat, and some stores will operate with the goal of volume, electing to make just a couple dollars per sale.
No Control Over Inventory: When you are stocking inventory you have control. If an item is getting low, you order more. But, when you are sourcing from drop shipping manufacturers they are fulfilling the same item for multiple stores. If they plan poorly and are out of stock there is nothing you can do. You have to hope they manage their inventory correctly. Their mistake quickly becomes your problem.
Shipping Nightmares: Most customers purchasing a product online expect fast shipping. If your items are being fulfilled overseas it’s not uncommon for the customer to receive their order in 15 to 45 days. This can cause severe customer support backlog as well as refund and chargeback issues. If you are sourcing from several drop sipping manufactures it can become even more sticky.
Manufacturer/Fulfillment Errors: Be prepared to take the blame for things completely out of your hands. If your supplier ships the wrong product or ships a damaged item, you are the one that will hear about it. There are a lot of low quality suppliers, which can instantly ruin your e-commerce store’s reputation and rating.
How to Start an E-Commerce Business: Building Your Own Brand
When you build your own brand you are selling an item with your brand name on it and your own branded packaging. You handle all manufacturing, warehousing and order fulfillment.
You handle the entire process, from start to finish. Just like with drop shipping, there are pros and cons to building your own brand, and they are outlined below.
Pros of Building Your Own Brand
Higher Margins: When you manufacture your own products your cost of good sold (COGS) is going to be lower per unit. This is very helpful if you are competing in a niche with a lot of drop shipping competition. Even when you price-match your margins will be higher than theirs.
Full Inventory Control: You will never have to worry about your supplier running out of stock when you maintain complete control over your inventory. You can use forecasting and past sales data to make sure you always have product on hand and ready to ship.
Fast Shipping: If you are warehousing and fulfilling your own inventory then you can ship out the same day an order is received. This type of lightning fast shipping is what the consumer demands.
Quality Control: If the wrong item is shipped or a damaged product is sent out you have nobody to blame but yourself. When you have your own brand you have complete quality control.
Cons of Building Your Own Brand
Sufficient Startup Capital is Needed: When you are manufacturing your own product you will often have to purchase in large quantities in order to have it fully branded and to get the cost down low enough that it leaves you with a margin you can work with.
High Operational Costs: You are going to need a warehouse to store your inventory and a team to fulfill the orders. This requires a physical location, which can cost a lot of money. Or, you will have to rent space at a fulfillment center and pay a high cost per order to fulfill.
Limited Product Selection Starting Out: If you want to offer multiple products in the beginning that is going to result in a much higher cost. Each item you produce adds to the initial cost.
Limited Scalability: You have more responsibilities when you have your own brand, which limits the time you can dedicate to just sales and marketing. Naturally this limits the speed at which you can scale the business.
E-Commerce Product Research
One of the biggest mistakes entrepreneurs make when learning how to start an e-commerce business is trying to go too wide. They have a website filled with several product categories and endless items.
It lacks direction and focus and it ends up pushing website visitors away. Listen, you aren’t going to create the next Amazon. The best approach is to get laser focused.
There is nothing wrong with starting with one product or a very narrow product line. This will help you market the store and build a loyal customer base.
You need to identify a niche and product that is in high demand without being overly saturated with competition. This isn’t easy. If it were, everyone would have a profitable e-commerce business.
There are a couple places you can turn to during your initial e-commerce product research.
Google Trends allows you to search a product or topic and see the search demand for that specific keyword over the past few years. In total you can view this data from the previous 15 years.
Use this free tool to compare several ideas. Make sure you also pay attention to the geographical data provided.
DHgate Popular Products
DHgate is a popular wholesale website where you can find suppliers. If you visit their website and scroll down a little you will see a “Popular Products” section.
Scrolling through the options will give you a good idea of what is popular. You don’t want to necessarily copy these ideas, as there will be a lot of competition. But, you can use them to help inspire some thoughts, as well as identify what niches are currently doing well.
Amazon Best Sellers
Amazon Best Sellers is constantly updated and a great source to see what is selling on the most popular e-commerce storefront.
You can search any product category and instantly see the top selling products. This can also help you research specific categories, determining whether or not there are enough possible offerings to expand into down the line if the e-commerce store becomes successful.
When you niche-down and create a hyper-focused e-commerce store you will convert more traffic into sales. Additionally, it will be much easier to market the store when you have one focus. You will also have a much easier time attracting affiliate partners when you are niche-focused.
How to Start an E-Commerce Business: The Basics
Once you have identified how to start an e-commerce business and selected the model you want to use (drop shipping or your own brand) and a product you want to sell, it’s time to think about building the branding.
Even if you are drop shipping a generic product with no label or visible branding your website needs to have a brand that your target audience will connect with.
Your brands needs a persona that your target customer will instantly connect with. This is not something to just throw together without much though. Your brand’s persona can make or break you.
Establish a Legal Business Entity
You are going to need to set up a legal business entity, and whether you setup a Corporation or a LLC, is something you need to discuss with an expert.
What works for and what is right for one person, might not be the same for someone else. Speak to a legal and financial professional when deciding this.
Pick a Brandable Name Available on All Platforms
This is something very important that many brands fail at. You want to make sure that you are able to register your brand’s name in the form of a dot-com domain name.
There are many different TLDs (top level domains) but anything less than the dot-com is not something to consider. The majority of consumers automatically associate website addresses with dot-com and most are not aware of all the other extension alternatives.
Also, you want to make sure your brand name is available to register on the top social media platforms. At the very least make sure you can get the Twitter, Instagram and Facebook handle (@YourBrand).
Design a Logo
Your logo is important, but don’t let it slow down your momentum. You need to have a nice logo created that works well for your brand.
Don’t spend a fortune on logo development, as there is a good chance you will revise it down the line. Spending your money on marketing and advertising in the beginning is a better use.
A great logo on a product with zero marketing and advertising behind it won’t magically sell the product.
Design Your Product Packaging
If you are drop shipping then you have no control over the product packaging. If you are building your own brand then your packaging is key. It’s what a potential customer sees on your website before he or she clicks on “add to cart.”
Everything from the colors used to the fonts and their location, plays a key role in how your product is perceived. Product design is much different than logo design and website design. Make sure you work with an experienced product package designer, and one who has experience designing packaging for your specific niche.
Build Your Online E-Commerce Store
Once you have your product identified, your business model determined and your domain name registered, it’s time to build your e-commerce store.
You can hire a web design agency to design and develop you a custom solution from the ground up, or you can use a proven platform that you can have set up and operational within a matter of hours — Shopify.
Not only do you get a free 14-day trial, but there are plenty of themes and apps you can use to be fully functional right from the start.
You also don’t have to worry about setting up a payment gateway. Shopify comes integrated already. You literally just have to go into the settings and configure your store.
You could have your store fully built-out and ads driving traffic to your website, resulting in sales the same day. You can follow this guide to learn how to start a Shopify store and have it up and running in a matter of hours.
A lot of people put too much thought into this step. You are never going to launch with a 100 percent perfect website. Over time you are going to make changes and optimize its performance.
One of the reasons Shopify is so attractive to those looking to learn how to start an e-commerce business is its ability to scale.
In the beginning of this blog post Kylie Cosmetics was mentioned — the e-commerce brand started by Kylie Jenner, which is now valued at nearly $1 billion-dollars. It runs on the Shopify platform, and it’s a great example of how Shopify can handle scaling better than any other e-commerce platform.
Shopify also has an extensive App Store, allowing you to easily integrate your email marketing software and take advantage of features designed to increase your conversion rates and the average order value in your cart per order.
With Shopify being the leading e-commerce platform, that results in developers and software companies building specific applications for the platform. If there is a feature you can looking to add to your e-commerce store there is a very good chance there is an available solution in the Shopify App store.
How to Start an E-Commerce Business & Drive Customers to Your Website
Many entrepreneurs launch an e-commerce website and expect customers to find it without any marketing muscle behind it.
When you are just getting started there are a few online strategies you need to include in your marketing effort.
Social Media Marketing
You should have social media accounts for your brand — Facebook, Instagram and Twitter at the very least. You will want to post organic content, but in the beginning be prepared to run paid ads to generate sales. Facebook ads give you the best targeting options and offer unlimited scalability.
Often times you can identify influencers that share the same audience you are targeting. Having them advertise your product is a great way to help drive initial sales when the brand is new.
It’s never too early to start thinking about search engine optimization. It’s a long-term play and it will take time to see results. If you understand this and allocate your resources accordingly you can see the benefit and value of organic traffic increase over time.
Take a look at these SEO tools you can use to help improve your organic search visibility, driving targeted traffic to your e-commerce store. You can also spy on your competition, and quickly identify their best performing keywords using SpyFu. It’s a great tool that will show you, without a doubt, what the most profitable keywords your SEO campaign should be targeting.
Google Ads is the pay-per-click option with the most traffic potential. This is also a great way to test certain keywords and search phrases in terms of how they convert, before you invest the time and resources targeting them in your SEO campaign.
You should start building an email list from day-one. Every email you collect is a chance to market to that individual without the cost of a social media impression or a Google Ads click. Offering a newsletter with special offers and discounts is a great way to start building your email list.
Klaviyo is hands-down the very best email marketing platform for e-commerce brands. Sign up for an account with them — you need to collect email addresses starting on day one. They have a free plan new users can take advantage of when just starting.
There isn’t a single e-commerce brand that became successful without a solid marketing strategy from day-one.
Online marketing is constantly changing, so it’s important that you stay up-to-date on the latest trends related to e-commerce marketing.
Read as many online marketing blogs as you can, subscribe to their newsletters, listen to podcasts, follow marketing influencers on social media, etc. You want to constantly consume information. It will help you guide your marketing strategy correctly.
How to Start an E-Commerce Business & Market Your Brand Online
Driving traffic to your e-commerce website is one thing, but you need to put in extra effort if you really want to grow your brand. Sometimes the simplest concepts can deliver the best results. Here are a few to consider and draw some inspiration and ideas from.
Giveaway Contests on Social Media
One of the easiest ways to built interest and engagement on social media is by announcing a contest. It’s easy to do and you can receive a lot of brand exposure for a relatively low cost — some free product.
Post on social media, announcing the giveaway. In order to enter, require the following:
- The individual follows your account
- They tag three friends in the comments
It is that simple. This ensures that they follow your brand on social media, allowing you to market to them on a consistent (and free) basis in the future.
By tagging three friends in the comment those people are now being exposed to your brand. If they like what they see, there is a good chance they will also follow your brand and enter the contest.
The right contest can go viral very quickly, giving you access to priceless organic exposure.
If you look at some of the more successful e-commerce brands’ social media profiles you will see that they do engagement-magnet contests on a regular basis.
Because they work very well.
Shareable Discount Codes
Sending out an occasional shareable discount code to your email list is a great way to not only trigger repeat purchases, but also to acquire new customers at the lowest possible cost.
Put together a simple email message, such as:
Hey (Customer First Name),
We wanted to do something very special for you. For the next 24-hours, if you use the code “THANKYOU20” you will save 20% on your entire order.
Also, you can share this code with your friends and family, and they will also receive 20% off! Click the links below to easily share the coupon code on Facebook!
This accomplished multiple things. It keeps your customers happy. It helps you acquire new customers at a cost much lower than it would be on paid social media or PPC.
Making it easy to share with their social media followers is also key — the easier you make it (like one-click) the more likely they will do it.
You don’t want to be predictable when it comes to when you send out discount codes, because if your customers spot a trend they will hold off purchasing until they get a discount.
Make sure you keep discount codes random in terms of days, times, etc. — if you develop a pattern it can do more harm than good.
Launch an Affiliate Program
Launching an affiliate program is very easy to do, especially if you utilize one of the available apps on the Shopify platform.
While you have to offer an attractive payout, you know that the acquisition cost you commit to is the only expense. There are no wasted advertising or marketing dollars because you are only paying for performance.
Some of the more popular Shopify affiliate options are:
There are plenty of affiliate marketers out there looking for top performing offers to promote. If your store converts at a high rate and your products are in demand you won’t have a hard time recruiting solid affiliate partners.
Offer Blogs and YouTube Channels Free Product
Identify popular blogs within your niche that have a large audience. You can typically gauge this by looking at the number of comments and social shares their content receives.
Then, reach out to them and offer to send them free product that they can review and publish a post on. Now, some blogs will only do this for monetary compensation, but you will find plenty that will do it for product alone.
The same applies to YouTube channels. Look for channels with decent subscriber numbers and strong engagement (comments and thumbs up) on their most recent videos.
You will find that a lot of bloggers and content creators are always looking for content ideas to stay relevant. Offering them product to review gives them a way to create more content.
You just have to be clear with what you expect in return. A link to your website in the video description? A link within the blog post?
You can even offer to enroll them in your affiliate program. This will often encourage them to put more effort into their review and the quality of the content, knowing they have the potential to earn referral income.
Are You Confident You Know How to Start an E-Commerce Business?
Hopefully after reading this blog you have a better understanding of how to start an e-commerce business. It’s not as easy as many think — but with hard work it can be done.
If you are willing to put in the time and fully understand that it will take a lot of work, then you have the potential to start an e-commerce store and turn it into a lucrative business.
Are you thinking of starting an e-commerce business? Have you built successful e-commerce websites in the past? I’d love to hear. Let me know in the comments below.