Starting an ecommerce business
The Covid 19 Pandemic more than anything has underscored the point that a brick and mortar only retail business strategy is no longer sustainable. Therefore, now is time for brick and mortar retailers to embrace other channels of delivery like ecommerce and mcommerce. The reason is not far-fetched: Go where the traffic is. But how do you develop an ecommerce business? Build an ecommerce business shouldn’t be a rocket science. So how do you start an ecommerce business?
HOW TO START AN ECOMMERCE BUSINESS
- Step 1: Choose your ecommerce business model
Since you’re here, we’ll assume you already have at least the faintest stirrings of an idea. What are you passionate about? What, exactly, are you going to sell? Who will you sell it to?
We’ll get to developing those ideas in a bit more detail soon, but first you’ll need to look at the how. We’re talking, of course, about your business model and logistics – the very foundations your startup will be built on. So which ecommerce model is right for you?
The traditional business models are as follows:
- B2B (Business-to-business): Businesses selling services or goods online, directly to other businesses. Examples of big ecommerce businesses that rely on this model include VoIP phone provider RingCentral and CRM software company Salesforce.
- B2C (Business-to-consumer):The most common form of ecommerce, this involves online sales from businesses to individuals. Jumia, Konga are all examples of successful B2C brands.
- C2C (Consumer-to-consumer):This form of ecommerce involves online transactions between consumers. It’s usually facilitated by an intermediary platform, such as Etsy, PayPal, or eBay.
- C2B (Consumer-to-business):Popularised by freelancer hiring platform UpWork, this ecommerce model refers to consumers that provide services to businesses.
Starting an ecommerce business
Deciding on your business model is the first step towards navigating that lucrative highway to ecommerce success. It is the right business model is like the car that’ll drive your business forward.
But before you can start putting some miles underneath your wheels, you’ll need an engine.
- Step 2: Select your value delivery method
That engine is the value delivery method you choose.
Value delivery refers to how you’ll connect your customers with the products you’re selling. It’s an important part of supply chain logistics; the process by which you source, store, manage, sell, brand, package, and deliver your products, all the way from the supplier to your customer.
Essentially, it’s how you’ll deliver the value you promise when your customer first hits that hallowed ‘Buy Now’ button. So… how are you going to do it?
The best value delivery options in 2020:
Drop shipping represents the most hands-off approach to running an ecommerce business.
You set up a website, and a form of taking payments through that website. Simple enough. What makes it even more straightforward, though, is that you won’t have to store, handle, or pack any of the stock you’re selling. Orders made through your site go to your supplier, who then ships the product straight off to your customer.
Because you won’t handle any stock yourself, drop shipping is a handy way to sidestep the logistical side of things. However, it comes with risks.
If your supplier damages goods, ships to the wrong address, or loses an order, it’s on your head – and it’s your reviews and brand reputation on the line. Plus, when all your business’ packaging duties are handled by someone else, you lose control over your product’s branding, and are unable to implement your own quality control standards.
Wholesaling and warehousing
This approach involves having products shipped to your own warehouse, which you’ll use to store, package, and ship your products from. Wholesaling and warehousing offers a more flexible, dynamic alternative to drop shipping, and comes with superior profit margins to boot.
However, it’s more work, and there’s a greater initial outlay involved.
You’ll need your own warehouse space – and as your business grows, a team of staff to run it, too. Plus, you’ll have to pay for all your inventory outright, from the word go – not to mention shell out for the costs of getting it shipped from the wholesaler to your warehouse.
That’s probably why many growing ecommerce businesses choose to outsource this particular step in the supply chain, known as ‘order fulfilment’, to a third-party logistics (3PL) provider.
A private label solution involves engaging a manufacturer to create a unique product for your business to sell exclusively. You send your prototypes and product specifications over, the product gets made, and then you elect to have it sent either straight to the customer, or back to you to be distributed.
Private labelling is best-suited to companies that have an idea for an innovative new product, but lack the equipment, space, or funds (or even the motivation) to make it themselves.
This approach involves applying your own business’ name and branding to a generic product, purchased from an online distributor.
A good way to get started is to look at products already being sold successfully online. If they offer a white label solution, you can order a shipment of stock carrying your own branding, then market and sell it through your own sales channels.
The only issue with white labelling is that, because you’re buying in bulk, you’re stuck with the stock you’ve ordered. If you can’t sell it, you won’t be able to return it to the supplier.
Subscription models rely on billing customers on a recurring basis. Amazon, Netflix etc are all notable examples of ecommerce businesses successfully using a subscription model.
In more niche areas, startups such as Beer52 and Cornerstone demonstrate the extent of the public demand for the convenience that subscriptions provide.
Now you have a better idea of your ecommerce business’ basic framework, it’s time to do the groundwork, and get to grips with your market and competitors.
Starting an ecommerce business
- Step 3: Do your research
It’s time to put your research hat on, and dig up as much information as you can related to your chosen niche.
You’ll need to find out about:
Competition is a good thing – in all probability, no competition means no market. You can even see it as an advantage – though you’re entering the market as a less established business, you’re actually in a better place to exploit the gaps in your competitors’ service.
What do they do well? What are they not offering that you could be? What can you do better? Do your research well enough, and you’ll be in a position to hit the ground running.
You’ll also need to understand exactly who you’re selling to. What demographic are you targeting? What’s their purchasing power? Why do they want your product?
Creating buyer personas will help with this. A buyer persona is a generalized, fictional representation of a demographic you’re looking to market to. You can inform these by reaching out to potential customers, and to people in your wider social circles.
A buyer persona should include that ‘individual’s’ background, key identifiers, goals, and challenges. It should also include a few bullet points as to how your product or service will meet their needs.
Getting familiar with your audience also sets your ecommerce business up for success further down the line.
Understanding your target audience is absolutely key to the success of an ecommerce website. Colours, themes, designs and content should all be created to appeal to exactly the right consumer.
“Begin by focusing on growing a social media following – learning about our followers’ shopping habits, and which brands they already lean towards. Getting to know our customers has been a valuable process, and our brand has developed the more we have been able to learn about them.
You can’t set up an ecommerce business if you don’t have anyone supplying you with stock to sell. Now’s the time to research potential suppliers – collect as many quotes as you can, and decide which ones might be the right fit for your business model and value delivery method.
If you’re drop shipping, you’ll need information about a suppliers’ packaging and delivery methods, and the exact costs for these. If you’ve opted for a wholesaling approach, you’ll need somewhere to store your stock.
If your front room doesn’t qualify, you’ll need a warehouse (or at least some kind of space) to manage it all from, you’ll also need to balance any rental or storage costs against your business’ total budget.
When you’ve chosen a supplier, you’ll then need to select the specific items you want to make available via your own ecommerce store. In other words, pick products your users will be interested in!
Small-sized, higher value items generally have the best margins. They take up less space in a warehouse, where space = money – and if they can be sold at high volume, they make for a profitable product catalogue.
Once you’ve nailed your niche, sourced out the suppliers (and the competition!), and picked out some products, it’s time to put together a business plan.
- Step 4: Write an ecommerce business plan
Now you’ve got an idea about how your embryonic ecommerce business will look (and hopefully a few notes, too), it’s time to document it all in a formalized plan of attack.
This is called a business plan, but you can also see it as the blueprint for how you’re going to turn your idea into a fully-fledged enterprise. A business plan should lay out your mission and vision; it should outline exactly what you’re planning to do, and how you’re going to achieve it.
If your ecommerce venture requires finance to get it off the ground, a business plan is crucial in helping you secure this. So, make it concise, make it meaningful, and don’t skimp on the details – or the passion – that investors want to see.
Starting an ecommerce business
- Step 5: Choose a legal status for your business
Now, you’ll need to decide what shape your fledgling ecommerce venture will take in the eyes of the government. This means formally registering your business with the UK authorities – declaring who’s in charge, where the profits will go, and who’s responsible for paying those inevitable taxes.
Your options here are to register as a:
- Sole trader(you’re solely liable for all profits… and all losses)
- Partnership(you’ll share management and profits with another person)
- Limited liability partnership(a partnership in which the company and its finances are a separate entity to your own)
- Limited liability company(A private company in which shareholder assets are protected, and shareholder liability to the company’s creditors is limited by the extent to which they invested)
- Step 6: Register and trademark your company name
Next, you’ll need to decide on a name, and design a logo that reflects your ecommerce business’ brand values and ethos.
When that’s done, you’ll have to register this information – plus details about your legal
- Step 7: Build your ecommerce business’s online shop
It’s time to build your online shop. This step of the process is, understandably, a crucial one. It’s how you’ll find customers, and where you’ll convince them to part with their hard-earned cash.
In most cases, it’ll be the first, most significant (and probably only) point of contact a potential customer has with your brand. You’ll need your ecommerce business’ site to be easy to use, nice to look at, and well-optimized for the customer journey.
So, how do you create an online store that sells? Let’s break down your options.
We recommend you build a responsive, user-friendly and scalable ecommerce platform with good user interface.
with great UI/UX design.
Once you’ve built your website, you’ll be able to manage stock and orders through it, and analyze your sales. You can add products to your site’s virtual catalogue, and install shopping cart functionality to enable users to browse it.
You will need to buy a domain, hosting and SSL for your website.
- Step 8: Start taking payments
So you’re all set up with a website, and are ready to start selling. To do that, though, you’ll need some way of accepting credit and debit card payments.
Long story short, that means obtaining a merchant account. All businesses looking to process card payments will need some form of merchant account. This is where funds go to be cleared and verified, before they’re deposited into your business account.
You can get a dedicated merchant account from a bank, or from a third-party provider. These companies process your business’ payments through a merchant account that’s solely yours, and are a reliable option in the long-term.
Another option is to partner with a payment facilitator, a type of company that offers aggregated payment processing. This means they’ll process your payments in batched lots with those of other merchants – saving you money, but forfeiting many of the benefits a dedicated service offers.
We recommend payment facilitators for their fixed, flat rate pricing, simplicity of use and setup, and the ease with which you can sign up – even if you have bad credit.
Once you’ve signed up (and been approved) for merchant services, your payment provider will equip you with the technology you need to make your site sing.
This includes a payment gateway and a virtual terminal.
A payment gateway is a secure piece of software that sits on your website. It authorises and verifies the transactions you’ll be accepting online, acting as a go-between that connects your customer’s bank with your business’ merchant account.
When it comes to turning a website into a profitable business, a payment gateway is the most crucial weapon in your arsenal… so don’t skimp on picking the right one.
Here are a few things to consider before you take that all-important payment gateway plunge:
- Does it integrate with your ecommerce website seamlessly, or will you require a software developer to do this for you?
- Does it offer synergy with your ecommerce website’s shopping cart?
- Is it affordable? Some payment gateways charge a monthly fee, others a flat rate. Depending on your sales volume, the wrong fee structure could have big implications for your bottom line
- Does it accept a wide range of card types? Not just Visa and Mastercard, but popular international brands, such as Maestro and JCB?
A virtual terminal is a secure, web-based portal through which you can take payments over the phone. You’ll get a virtual terminal either included as standard with your merchant account, or available as an add-on purchase.
Starting an ecommerce business
- Step 9: Market your ecommerce business
By this stage, you’re pretty much good to go. You have a stunning website that you can accept payments through. You’ve taken the sturdy foundations of thorough research and a solid revenue model, and built on it the makings of an ecommerce brand with serious potential. Nice!
Now, you need to let people know about it. We won’t go into too much detail here, but here are a few ways you can get your business’ name out there:
Advertise through social media
You should definitely launch social media accounts anyway (they’re free, and visible to a global audience), but you can also decide to pay for promoted Facebook or Instagram ads too, which target particular users.
You can also give pay-per-click (PPC) advertising a go. It’s essentially a kind of online auction, in which you ‘bid’ for your site to appear higher in Google for keywords relevant to your audience. You’ll pay a fee ‘per click’, for each visitor that navigates to your site via that particular ad.
Send sample products to influencers
If a blogger with thousands of followers showcases your product to your target audience, you might well see an uplift in sales.
Whether you get on the influencer bandwagon or not, you should still build social sharing into your user journey. Encourage customers to shout about you on social media, and to use dedicated hashtags if they like your products.
You can also run competitions which encourage social engagement with your brand, asking users to share your post and follow you to be in with a chance to win.
Make sure your site is search engine optimized
Developing a strong SEO strategy will help your shop to rank better (i.e. appear higher up the list) in search engine results. Get a range of professional-level SEO tools as standard.
Run special offers and deals
Rather than minimizing your profit margin with discounts, try up-selling or cross-selling your products.
‘Buy one get one half price’ or ‘if you like this, you might also like…’ are both good examples – and there’s plenty more where that came from. You can also promote these offers through third party Social Media Agencies, which allows you to build branded, targeted campaigns.
And remember, shopping can be seasonal.
Be sure to prepare well in advance for gift-giving holidays, such as Valentine’s Day, Mother’s and Father’s Days and Christmas. You should also prepare for big sales events, such as Black Friday, Cyber Monday, and Boxing Day, by tailoring your marketing and offering deals and special offers.
Adopt the right software
Integrating your website with a Customer Relationship Management tool can be a breath of fresh air for your sales and marketing efforts.
Starting an ecommerce business
- Step 10: Outsource your order fulfilment
Congratulations – you’re (just about) done! You have everything you need to launch a successful ecommerce business, and it’s time to start seeing it bear fruit… right?
Right… but the work doesn’t stop there.
As your ecommerce business grows and orders start to pick up, you’ll want to look not only at implementing new processes, but outsourcing the ones you do on a daily basis.
That’s why pretty soon, you’ll want to look at hiring a company to take care of your order fulfilment (also known as ecommerce fulfilment) duties.
We touched on order fulfilment earlier. In a wholesaling and warehousing model, it means the storage, selection, packaging, and shipping of your goods. When you outsource it (to a company known as a third-party logistics (3PL) supplier), they handle all this for you – freeing up time, money, and space.
Of course, outsourcing your order fulfilment may not be the right option for you right now.
Initially, most 3PL providers expect a minimum volume of around 200 parcels per month, so it’s more something you’ll look into when sales are going steady. But when you are ready to begin outsourcing (hopefully sooner, rather than later!), we can lend a hand.
You’re now the owner of a fully-fledged ecommerce business.
You did the research, carefully choosing your business model, value delivery method, and niche. You got to grips with your audience, your competition, and the seemingly interminable red tape that comes with registering an ecommerce business.
You took your creative vision and turned it into a functioning commercial website. Now you’re ready to drive growth with ongoing marketing efforts, and by refining and streamlining your order fulfilment process.
The only thing left to do now? Start selling.
All the best!
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Starting an ecommerce business