How to Start a Successful Ecommerce Business - A Simple Guide
The ecommerce industry is exploding. Global retail online sales are poised to touch $6.3 trillion by 2024. So, it isn’t surprising that most savvy entrepreneurs are contemplating starting an ecommerce business.
However, building a successful ecommerce business is not a cakewalk.
There are many variables that need to come together at the right time if you want to launch an online store successfully. You need to strategize a number of things, including your business model, product idea, market conditions, marketing and sales approach, and more.
Image via eMarketer
To help you start a profitable and scalable ecommerce business, I’ve put together this detailed blueprint. If you follow the plan I’ve outlined, you can get your store up and running in no time. So, let’s get started.
How to Start a Successful eCommerce Business: A 7-Step Strategy
Starting an ecommerce business means a serious investment of time, money, and effort. You shouldn’t operate off assumptions. From your business model to your logo, you need to research all macro- and micro-elements rigorously and not rush in without proper planning.
Here are the steps that you need to follow to get off to a great start.
Step 1: Research Business Models
Ecommerce business models are evolving at a fast pace. To identify the best model for your business, you need to consider factors such as your target market, timeline, and budget.
With all of that sorted, compare the traditional and modern ecommerce models explained below and pick the one that aligns with your goals best.
Traditional Business Models
Broadly speaking, traditional ecommerce business models fall into these four buckets:
- Business-to-Consumer (B2C)
B2Cs sell to end users directly. Their sales cycle is shorter and their average cart value is lower than that of B2Bs. Moreover, they spend less on marketing and have fewer recurring orders compared to their B2B counterparts. Typical marketing strategies include remarketing and app marketing.
- Business-to-Business (B2B)
B2Bs sell their products/services to other businesses. Sometimes their buyer is the end user, but often their buyers resell to consumers.
Generally, B2B transactions have longer sales cycles, higher order value, and more recurring purchases than B2C transactions. B2Bs use storefronts and niche B2B marketing to attract new leads.
- Consumer-to-Business (C2B)
C2Bs have individuals selling goods and services to companies. In this business model, individuals post projects/assignments they want to be completed on special sites like Upwork, and businesses bid for the opportunity.
The C2B model’s competitive edge is in pricing for goods and services. Consumers have the power to dictate their prices or have businesses compete with each other to meet their needs.
- Consumer-to-Consumer (C2C)
A C2C business is also called an online marketplace. It allows consumers to network with each other in order to exchange goods/services. Buyers typically make money by charging a transaction or listing fees.
Craigslist and eBay are pioneers of the C2C model. A key challenge in this ecommerce model is technology disruption and quality control.
Modern Business Models
Modern business models are value driven. They can be classified into five types:
- Direct-to-Consumer (D2C)
Online retailers like Casper and Warby Parker have cut out the middleman and pioneered a new generation of consumer brands called D2Cs. These online brands have garnered loyal audiences by virtue of their transparency and innovation.
- White Label and Private Label
White labeling is the application of your brand name to a product purchased from a distributor.
Private labeling means that a retailer hires a manufacturer to craft a unique product for them to sell exclusively. With both these models, you can go lean on your investments in design and add an edge through technology and marketing.
While wholesaling, a retailer offers bulk products at discounted prices. Traditionally a B2B practice, wholesaling has now become prevalent in the B2C sector as well.
Dropshipping merchants act as middlemen between manufacturers and buyers. Dropshippers like AliExpress and Printful maintain inventories of third-party suppliers in their warehouses. Suppliers just need to maintain storefronts to collect orders while the order fulfillment and tracking are done by dropshippers.
- Subscription Service
Some ecommerce businesses allow customers to subscribe to their services by paying a monthly fee. Magazines, periodicals, and subscription-based services often fall under this model’s scope.
Learn how to build an active user base for a retail app in our post.
Step 2: Start Niche Research
Unless you have a massive budget, you can’t hope to become the next Amazon or Target. You need to narrow down your niche and focus on a few products at a time. Selecting the right niche is arguably the most important step of starting an ecommerce business.
While researching niches, look for the ones that have a healthy market demand and growth potential. Don’t opt for overcrowded niches, but avoid niches with no competition either. Lack of competition can mean a lack of demand. Stay clear of domains dominated by too many powerful brands.
Niche-ing down will reveal “shoulder” niches - domains that complement (but don’t compete with) your main niche. You can collaborate with sellers in those niches for affiliate marketing or cross-promotion.
Pick a niche with at least 1000 associated keywords and a robust social media presence. Give preference to niches that are covered under Amazon’s affiliate system. This way, you can make a profit in commissions even if you have limited direct sales.
Step 3: Validate Product Idea and Target Audience
At this point, you might be tempted to start looking for products to sell. But that will be a bit premature. You need to crystallize your target market and validate your product ideas first.
Create precise buyer personas so that you know the kind of audience you want to attract. Using tools like Facebook Ads, drill down into your target market size. If ads in your niche get no more than 100K hits, it’s time to look for an alternate niche.
Image via Facebook Ads
Drill down into your audience demographics and inspect the channels where they are active. Is there scope for marketing in those channels? How much is the tentative ad expenditure? These are the questions you need to answer if you want to balance profitability with viability.
Once you’ve identified your target market, it’s time to validate your product idea. I recommend that you start with 1-2 product categories and evaluate their saleability through affiliate marketing on Amazon or similar platforms. This way, you can risk-proof your investment.
Even if you’ve chosen a business model like dropshipping, it’s wise to get a feel of the product you’re planning to sell through affiliate marketing. You can understand the good and bad of your product idea and prepare troubleshooting scripts for your customer service teams.
Last but not least, prepare a tentative list of suppliers and fall-back options in case your suppliers aren’t amenable to work at suggested profit margins.
Step 4: Register Your Business and Brand Name
Select a brand name and domain for your website. They need not be the same, but keeping them consistent has its benefits. With that done, register your brand name, which provides you with tax benefits and copyright protection.
Next, you need to get the requisite business licenses and a sales tax number. If you need clarity on the kind of licenses a small online business needs to procure, go through the Small Business Association website. You can sign up for their mentor-protege program, in which you will be assigned a mentor to teach you the ropes about licensing.
You will also need an employee identification number or EIN, even if you are a one-man team. Your EIN is like a unique social security number for your business.
The next step is to look for a robust ecommerce platform that offers server space, uptime guarantee, SSL, and standard ecommerce functionalities. Keep scalability in focus right from the start.
Step 5: Design Your Store
We come to the crucial step of designing your online store. If you don’t want the hassle of designing a website from scratch yourself, you can opt for managed hosting sites like WordPress.
These platforms provide server space, security, designing services, and website maintenance as a package. This way, you can leave the website-designing work to the ecommerce marketing expert while you go about preparing your product catalogs and vendor lists.
Even if you take advantage of the experts at WordPress or Shopify, you should be closely involved in your site’s theme selection, layout, and UX. it’s advisable to opt for familiar architectures and navigation plans so that new visitors don’t feel lost in your website and abandon it.
Design your product pages after studying your successful competitors. Implement the best practices and latest trends of ecommerce website design to get a contemporary look and feel.
Step 6: Launch Your Online Store
All your website designing efforts will be in vain if you don’t launch your online store correctly. Even if your product and website are top-notch, they will fail to make an impressive first impression in the absence of proper launch marketing.
If you lack the experience or resources for this, I recommend that you hire professional product launch experts. They will formulate a go-to-market plan after studying market dynamics, your USPs, and your target market. You can minimize the risk of failure by leveraging their meticulous planning and domain expertise.
But if you like to be more hands-on, you can launch your ecommerce business independently. You can check out your competitors’ strategies, and then stamp them with your unique style and brand voice.
Step 7: Drive Traffic to Your Store
Small online businesses need to attract traffic through organic channels like search engines. To rank high up on the SERPs, it’s critical that your SEO game is on-point. Optimize your on-site experience, backlink profile, and internal linking to score well on Google’s E-A-T algorithm (expertise-authority-trust).
Conduct keyword research and keyword-enrich your page titles, file names, and meta tags. This will help Google crawlers index and crawl your website easily. Ecommerce SEO can get really technical for newbies, so it’s better to leave it to the experts. Vet your SEO company rigorously and opt for the ones that have experience of working with ecommerce brands.
While SEO and organic search are great to build awareness and authority, you need to invest in other ecommerce marketing strategies to drive qualified traffic to your store. These include pay-per-click campaigns (PPC), social media advertising, and email marketing.
If you’re planning to leverage email marketing, it’s also important to invest in automating emails. This can take the manual effort out of the equation and help you execute your email campaigns at scale.
To avoid overspending on marketing, determine your business’ break-even point, in terms of unit sales and duration. Keep a modest profit margin and pump the rest of your earnings back into your business. Once you have an established clientele and industry authority, you can try more ambitious marketing plans.
As you might have guessed, building a successful ecommerce business is not child’s play. But with the help of my detailed blueprint, you can rest assured that you haven’t missed any critical steps.
Are you expecting to face hurdles in any of the steps mentioned above? Feel free to reach out to me through the comments section. I’m always happy to help my readers.
Shane Barker is a digital marketing consultant who specializes in influencer marketing, content marketing, and SEO. He has consulted with Fortune 500 companies, influencers with digital products, and a number of A-List celebrities.
FAQs about How to start a successful ecommerce business
How does ecommerce work?
Ecommerce means electronic commerce, which is essentially buying and selling done over the internet without the constraints of time and place. Ecommerce websites are like virtual storefronts where visitors can browse, save, and buy products and make payments without stepping out of their houses.
How much money do I need to start an ecommerce business?
For a basic ecommerce business, you will need to invest in hosting, website development, inventory, insurance, and store permits. The average cost break-down will be as follows:
- Hosting: $300 - $500 per month
- Website development: $5000 - $10,000
- Inventory: Variable, depending on industry and product
- Insurance and permits: Depends on the niche
How do I start a successful ecommerce business?
To start a successful ecommerce business, follow these steps in sequence:
- Decide on your business model
- Conduct niche research
- Validate product idea and target market
- Register your brand name and domain
- Design and develop your store
- Launch your store
- Start driving traffic.
Why do most ecommerce businesses fail?
Currently, the failure rate of ecommerce stands at 90% within 4 months of store launch. The rate falls to 78% after one year. After surveying ecommerce businesses, the main reasons for failure have been identified as: poor online visibility, weak marketing, little market demand, insufficient capital investment, pricing issues, out-competed by bigger players, poor customer service, and inaccurate targeting.
What is the best ecommerce business to start?
For 2021, the best ecommerce business ideas include custom apparel, dropshipping store, handmade goods/art, thrift store finds, curated subscription boxes, and niched products.