There’s no limit to the potential of eCommerce to bridge the distance between sellers and buyers around the world. You no longer need to own or rent a physical store and have access to the limited number of people who walk past it to attract customers. You no longer need significant amounts of money to pursue internationalization strategies.
To help those who are new to eCommerce, Zebracon has created a guide that includes all the steps to start an eCommerce business.
1) Find the Right Target Market and Understand Who Your Competitors Are
The first step when starting an eCommerce business is to answer the following questions:
- Who are my target customers?
- What am I going to sell them?
- Who are my competitors?
The goal is to select a group of customers who are willing to buy something you can provide with better conditions than your competitors.
For example, you may have come up with a new, cool t-shirt design and obtained very positive feedback from young people aged 18-25 who are willing to buy those t-shirts at a lower price than what it takes to produce and ship them. You may then assess that not many current online t-shirt retailers sell similar t-shirts, which would make the competition not very difficult to overcome.
An eCommerce business can also be centered around services rather than physical products. You may have determined that there is an increase in the demand for online flute lessons by music amateurs and that the current competition is very weak and doesn’t offer a lot.
You also need to make sure you are in the position to provide that type of product or service, either because you are able to produce it yourself, or because you have a reliable supplier or a combination of both (a T-Shirt producer may design the clothes and then outsource the production process).
It’s essential that you narrow down the target market enough to achieve excellency in that specific niche. For example, a small eCommerce business cannot compete with platforms like Udemy or Coursera with a general online learning website offering all sorts of online courses but it can compete with Udemy’s Portuguese language lessons or Coursera’s Public Speaking skills courses if you develop an offering that is attractive enough in that specific niche.
When analyzing the competition, it’s important to consider your immediate competitors first and foremost. If you plan on starting a small-scale coffee grounds business, it doesn’t make sense to see Nescafé as your primary competitor.
You should rather focus on smaller online coffee ground retailers and determine whether the competition is low enough to justify operating in that target market with your current resources and which is the best way you can best differentiate your offer from your current competitors. By differentiation, we mean offering a product or service that is either cheaper or qualitatively better or more innovative than what the competition offers.
It’s very important not to overlook this step. Some eCommerce beginners don’t undertake sufficient preliminary market and competition analysis and think they can sell anything to anybody without any competition from any other business. This is not how the market works and it’s important to have a clear idea of what can you sell effectively before putting things into action.
Tools like Google Analytics, Think with Google, Google Keyword Planner, Google Trends and Answer the Public can give you some very precious insights regarding the demand level, demographics, and internet behavior of your target customers.
It’s also useful to analyze your target market and potential competitors on both popular online marketplaces like Amazon or eBay and on social media platforms like Facebook. If you are selling services, it is also wise to consider people who are buying and selling those services on freelancer platforms like Fiverr, Upwork, and so on.
Not all eCommerce businesses use their own website as the main channel to sell their products and services. You may set up an online store, but your biggest competitors may be promoting and selling those same products mainly through Amazon or through their social media pages.
2) Set Up All the Legal Aspects of Your Business
Legally, an eCommerce business is a business like any other, meaning that you must take care of all bureaucratic procedures involving business registration, tax bureaucracy, and so on.
These requirements tend to differ from country to country but they usually involve all of the following:
- Choosing the legal form of your business: some small entrepreneurs start with a sole proprietorship, while others prefer to register a limited company right from the start
- Choosing your legal business name: this name may or may not be the name you will use as a brand for your eCommerce store (or stores). It’s the name that you will use for all administrative purposes.
- Choose your brand name: it’s important that your brand name is not a registered trademark. It’s also wise to register your brand name as a trademark to protect yourself from the possibility of another business imitating your name.
- Obtain all the necessary permits: these usually include a business operation license, a seller’s permit, a sales tax license, an employer identification number, a DBA (Doing Business as) License if your brand name is different from your official business name and, in certain cases, an occupational license and a home occupation permit.
Some of these requirements are one-time tasks, some need to be renewed regularly or involve filling periodical tax returns. It’s important to not overlook this aspect of your eCommerce business setup as it may lead to fines or legal actions.
3) Choose Your Business Model, Your Sales Channels, and Promotional Channels
This is another important set of decisions you must take early on in the setting up of your business. This will give your eCommerce business clarity and will prevent an excessive compartmentalization of your energy.
When choosing your business model, you can pick one of several options based on your resources and market evaluation. Here are some examples:
- Dropshipping: this business model allows you to sell a wholesaler’s products without managing inventory and warehouse but by simply setting up a store and then having the wholesaler send the product directly to your final customers. This greatly simplifies the daily management of your business and minimizes financial risks, as you will buy the product from the wholesaler only after having already received a payment from the final customer. For this model to succeed is important that you select a reliable wholesaler, as low-quality items or late delivery will end up hurting your reputation in the eyes of your final customer.
- Dropservicing: this model involves ordering a service from a supplier after receiving an order from the final client. Your online store may sell Korean-English translators to final customers and your suppliers may be several Korean-English translators who sell their services on freelance platforms like Fiverr. In a dropservicing business, a client would order a translation and pay for it. You would then hire a freelancer at a lower price to produce that translation and send it to the final customers.
- Affiliate Marketing: this model makes things even easier as it allows you to receive a commission for products sold by other companies after promoting them on your own website, online store, or social media channels. Numerous companies run affiliate programs and some do it through popular affiliate networks like ShareASale and Clickbank. Some affiliate programs are open to everybody, while others require an application process and usually admit people who have already made an effort in creating a quality content website or social media channel where they can promote those products and services
Other options include print on demand, private labeling, and of course the options to sell your own products if you are also a manufacturer or to use eCommerce as a tool to sell products you already sell through a physical store, thus reaching a much larger audience.
Another important step is to choose your main eCommerce sales channel (or channels). Is your primary sales channel going to be your own online store? Are you going to sell most of your products through general online marketplaces like Amazon and eBay? Are you going to use product-specific marketplaces like Etsy or Reverb? Are you going to use a combination of these different sales channels? When starting small, it’s advisable to focus your effort on one or two sales channels instead of dispersing our energy on too many online selling places.
The choice of promotional channels is partly different from the choice of sales channels. Let’s say you have decided to use your own online store as the main sales channel: how are you going to increase the visitors to your website? How are you going to increase the conversion rate (the number of visitors who buy a product/service)? How are you going to improve overall brand awareness and customer loyalty? There are numerous promotional channels and tools that you can use to achieve these. These include:
SEO (Search Engine Optimization): these are all the on-page and off-page actions that you can take to improve the organic ranking of your websites in search engines like Google, Bing, and Yahoo. By organic, we mean rankings that are not due to paid advertising.
PPC (Pay Per Click): these are all those strategies that involve paying search engines to rank higher. An effective paid advertising strategy involves selecting the right keywords, setting the right budget, choosing the right timeframes, and so on.
Content Marketing: this involves the use of free online content to involve your audience and indirectly promote your product. If you are selling tea, your website may include a blog that publishes regular articles on different types of teas, their benefits, and their features, while showcasing your offer of teabags to the reader.
Email Marketing: this is one of the oldest digital marketing techniques but it’s still very effective, especially when you want to generate a high customer loyalty rate by sending emails that are targeted to your audience’s specific needs and interests.
Social Media Marketing: some eCommerce business effectively uses their social media pages and profiles as main channels to promote their products. This can be done both freely, by publishing texts, pictures, or videos on social media and trying to maximize the number of followers who share them, or by paying social media platforms to advertise your page on target customers’ dashboards.
Again, if you are starting small, it’s advisable to focus mostly on a few promotion channels and then move on to the other ones as your business expands and more resources become available.
4) Analyze Costs
While running an eCommerce business involves a much lower initial investment compared to running a physical business, it’s important to determine right from the start what your business costs are going to be.
These may include administrative costs, hosting costs, tax consultancy costs, tax software costs, marketing software costs, freelancing platforms fees, and so on.
This will give you a clear idea of your break-even point, that is, the number of revenues you need to generate to cover your costs and start making a profit.
Some costs are fixed while others are variables and increase with your sales volume.
Many eCommerce businesses start small and wait until they generate a certain amount to add certain costs. For example, you may start using free digital marketing tools like Google Keyword Planner and then move on to more advanced paid tools like SEMRush when they are generating enough revenues to cover the costs without any problems.
It’s also wise to set up a business bank account that you can use for all your business-related expenses, as well as to receive money. In addition to traditional bank accounts, there are also companies like Wise that offer virtual bank accounts in multiple currencies and make it easier to manage payments from clients around the world.
5) Set Up Your Online Store and Analyze Your Performance
Some eCommerce retailers only use marketplaces like Amazon to sell their products, but most eCommerce retailers set up their own online shops, with their own domain.
While you may hire a developer to build an online store and help you manage the technical aspects of it, there are various platforms that you can use to set up your online store very easily and without incurring high costs, while also taking care of the hosting and domain registrations.
The most popular platform to build websites is called WordPress, and it also allows you to install several plugins to shape your website based on your needs and preferences. The most common eCommerce plugin on WordPress is called WooCommerce.
Other options include platforms like BigCommerce and Shopify that are aimed specifically at eCommerce businesses and not at website owners in general.
All these platforms are very useful and effective tools to kickstart your eCommerce business and include features that allow you to easily set up product pages, payments, terms and conditions, contact forms, as well as blogs, and free content for your visitors.
Once you have successfully set up an online store, it’s important to monitor its progress, by looking at how the number of visitors changes over time, what are the demographics of your visitors, how your visitors are behaving on your website. The main tools to do this are Google Analytics and Google Search Console, which you can set up right after having set up your online store.
Here is a summary of what we have discussed until now.