You've decided to start an e-commerce business and completed your research on the products you will sell. Now, you want to know more about the nuts and bolts of operating a successful e-commerce business. Throughout this guide, you will learn how to develop your own e-commerce business model.
Is Starting an Ecommerce Business a Profitable Idea?
Starting an e-commerce business can be a smart move, but you need to be committed, dedicated and serious about your objectives. In some cases, business owners have difficulty committing because they want to ensure a venture will be successful and worthwhile in the long run.
E-commerce has become increasingly popular as the world continues to evolve and shift towards online shopping, which is what has inspired entrepreneurs to start an e-commerce business.
What is an e-commerce store?
This is the practice of buying and selling products and services online. Customers use electronic payments to make purchases from a website or e-commerce store. The merchant sends the products or renders the service after receiving the payment.
E-commerce has been around since the early 1990s when Amazon sold books, and it is now a multibillion-dollar sector that has grown exponentially. In 2019, the global e-commerce market was valued at $9.09 trillion and has seen substantial growth as the pandemic fueled an already fast-growing segment of the global economy.
It is anticipated that business-to-consumer (B2C) will grow at a rate of 31.9% compounded annual growth rate (CAGR) and reach US$2.2 trillion by the conclusion of the analysis period.
Benefits of starting an e-commerce business
A lot of effort, concentration, and technical knowledge are needed to carry out e-commerce business procedures. There are many additional benefits to running an internet business that can streamline operations and help you achieve growth and sales goals. Here are a few key benefits of operating an ecologically friendly online business.
- Potential income as online shops are operating around the clock, 24/7
- Selling globally is simple for new brands with an international customer base
- Lower initial start-up costs
Establishing an e-commerce business creates an avenue to build the business you've dreamed of, often without the substantial start-up costs associated with brick-and-mortar stores.
How to Set Up Your Own E-commerce Business
Nothing is more satisfying than setting up an e-commerce business from scratch and watching it flourish. However, it takes more than just picking an e-commerce brand name, creating product listings, and opening an online store to build a successful e-commerce business.
Niche research
To manage a thriving e-commerce marketplace, you must narrow your focus. The most crucial part of starting an online business is deciding on a specialization. Examining successful companies already active in this industry is a good place to start.
A lack of competition can mean that there is only a small market for your products or services. Therefore, research to ensure that your business idea has a sufficient target market. Avoid picking a highly competitive niche and any market that well-known companies dominate.
These days, e-commerce is present anywhere you look online. Just before 2020, when the pandemic hit, many individuals were stranded at home and forced to do most of their shopping online, and e-commerce began to take off. The market has consequently expanded beyond all previous forecasts, and as an illustration, the below e-commerce start-up businesses are thriving in their e-commerce markets.
Jewelry sales
Consumers are driving demand for ethically sourced and custom-designed jewelry, creating a substantial demand for small jewelry makers. Large jewelry chains have lost a considerable market share to smaller retailers as consumers take more interest in ethical purchasing. For example, lab grown diamonds are growing in popularity as consumers enjoy the competitive pricing while feeling they are doing their part to support lowering their carbon footprint and the reassurance that the diamonds were not the product of destructive mining processes.
Tutoring services
During the coronavirus outbreak, the demand for online tutoring services exploded. Small enterprises offering online tutoring sprang up everywhere. The U.S. market is set to exceed $16 billion by 2025, despite the reopening of schools. Like many other e-commerce industries, the pandemic drove consumers to seek online solutions. Now that the worst of the pandemic has passed, researchers are discovering that consumers are not returning to pre-pandemic purchasing habits.
Understanding e-commerce business models
As globalization, consumption, and trading have progressed in a technology-driven world, there has been much discussion concerning four e-commerce business models.
The following business models underpin e-commerce enterprises:
- Business-to-business (B2B): your company sells to other firms.
- Business-to-Consumer (B2C): your company sells to consumers.
- Consumer-to-Consumer (C2C): your company offers a marketplace for consumers to sell to other customers (e.g., eBay)
- Consumer-to-Business (C2B): Your company provides a marketplace for consumers to sell to businesses.
Conducting research is an important step, and before determining what to sell online, you must understand standard e-commerce business concepts.
Dropshipping
This is when you offer a product on your website, and a third-party supplier fills it. The third-party supplier essentially does all the work while you take a share of the profits for offering the product on your website.
Wholesaling and warehousing
This entails selling a product on your website and fulfilling it through a wholesaler and their warehouse and systems.
Private labeling and manufacturing
In this concept, a manufacturer will create a product for you based on the specifications you give them. You will then purchase it in bulk and sell it to your customers for a profit.
White labeling
This is when you offer a product on your website while having someone else produce it. Still, unlike private labels, your product is not unique, as the manufacturer also creates it under other brand names.
Subscription
Here, you sell the product or service on a subscription basis on your website. The customer pays you every week/month/year.
Find out more: Need funding? Check out our guide on small business grants.
Your e-commerce business plan
When launching an online store, it can be tempting to get started right away without creating a business plan. Writing a business plan can save you time and money by better preparing you for the opportunities and obstacles you may encounter as an entrepreneur.
The following details must be determined to develop the finest e-commerce business plan for your product:
- What services/products are you selling?
- Who are you selling the services/products to?
- How are you sourcing your services/products?
When you have finalized the strategy for your business, it is always a good idea to compose the executive summary last. This will guarantee that you include all the crucial information about your company and express your ideas clearly and thoroughly.
How to Fund Your E-commerce Business
You may decide to scale your business with the help of funding, but before you take that step, do your due diligence in researching your options beyond traditional business loans.
Online retailers can access the capital they require from e-commerce financing to launch or expand their operations. Numerous funding sources are available, including banks, angel investors, grants from the government, and even the general public. However, the best funding strategy for you will depend on the stage of your firm and the pace at which you expect it to grow.
Read our valuable guides for more information on small business grants and small business loans.
How to Build Your E-commerce Website
Register your business
State governments are responsible for forming business entities, so the state(s) where the business will be based must receive the necessary paperwork.
Your choice of business structure impacts taxes, owners' accountability for corporate debts, and the amount of work required to maintain the company's legal compliance. Popular business entity types include a sole proprietorship, partnership, or corporation.
What is your trademark?
One of the essential marketing and branding tools for an e-commerce firm is the company name, logo, and website. They convey your e-commerce brand identity.
Given the significance of a company's logo, you should register it as a trademark to safeguard it. Federal trademark registration with the United States Patent and Trademark Office (USPTO) offers the strongest potential protection for your logo. It enables you to assert and defend your trademark rights in the United States.
Content management system
You need a website that works how it's meant to and can easily be updated or changed. A content management system, or CMS, program makes it possible to create a website without having to start from the beginning with the coding. WordPress, Joomla, and Drupal are content management systems that make website ownership and maintenance simple and available to anybody with a laptop and an internet connection.
Setting up a payment system
In a progressively cashless world where payment services are predominantly performed digitally or through credit cards, a payment gateway can aid consumers and businesses by simplifying and expediting payments. The market's most popular payment gateway service providers include PayPal, Square, and Stripe.
Utilize e-commerce platforms
Building an online store with the features and functionalities required to drive visitors to your website, generate leads, and complete transactions can be simple and economical with the proper e-commerce platform. Squarespace, GoDaddy, Shift4Shop, and Shopify are some of the best e-commerce platforms that offer the tools you need to establish your website quickly and generate more revenue.
It is evident that the expansion of e-commerce has many benefits for a company's bottom line, but there are other reasons to start an e-commerce company. Businesses have many options to establish connections that stimulate growth owing to an internet presence.
Third-party logistics
Order fulfillment is an essential component of running an e-commerce business. As your company grows, you may discover that delivering customer orders in-house is no longer an option. This is where third-party logistics can help.
Third-party logistics (3PL) is an outsourced organization that handles a company's supply chain and logistics activities. In a nutshell, 3PLs outsource third parties' warehouse and distribution needs for their customers' inventory and fulfillment services.
How to Advertise Your E-commerce Website
The alternatives for marketing your e-commerce company are countless. Effective marketing will ultimately result in a flourishing e-commerce venture.
The methods listed below have a track record of working for online stores and are an excellent place for any e-commerce website to start.
Social media marketing
This form of online advertising uses the strength of well-known social media platforms to meet your branding and marketing objectives. The most effective social media marketing channels for businesses are Facebook, YouTube, Instagram, LinkedIn, Twitter, TikTok, and Snapchat.
Influencer marketing
This social media promotion uses product recommendations and endorsements from influencers or people with large social followings who are recognized as authorities in their fields. Influencer marketing is effective because social influencers have established high trust with their followers, and their recommendations provide social evidence to potential customers for your business.
PPC (pay-per-click)
PPC advertising helps drive traffic to your e-commerce website while you build up your search ranking. For the first few months of marketing your e-commerce website, you'll likely need to rely on pay-per-click advertising to drive traffic unless you're in a highly specialized area with lots of traffic and little competition.
If you choose the correct keywords, PPC ads can produce immediate results and frequently pay for themselves.
SEO (search engine optimization)
Customers need to be able to locate your website when you run an online store, and search engine optimization (SEO) can assist increase traffic to your e-commerce website.
You may boost traffic to your website by discovering and focusing on the keywords and phrases that customers use to find your products. Potential buyers will locate and browse your website more easily using e-commerce SEO.
Because clients are frequently prepared to make a purchase when conducting an online shopping search, SEO is particularly crucial for e-commerce businesses. E-commerce SEO enhances incoming leads and maximizes your earnings by making your website more visible.
Find out more: Want more advice on selling, buying, or starting a business? Explore our business guides for valuable insights and tips.
Starting an E-commerce Business Is Not Your Only Option
There are alternative ways for entrepreneurs to start an e-commerce business. If you are concerned about how to start a business from scratch, buying an existing business can be a smart investment. Many people prefer to buy established companies that are profitable and generate cash flow. You can find incredible e-commerce businesses for sale from around the world on our site. For more information on what to expect and prepare for when buying a business, read our buying a business guide.
The world of e-commerce is continuing to grow exponentially and getting started is an exciting process. This guide aims to help new e-commerce entrepreneurs get started and avoid costly mistakes. Whether you are starting an e-commerce business or buying an existing one, we are here to help. Reach out to us and we’ll do everything we can to support you!
