How to Start an e-Commerce Business

In 2020, it couldn’t be easier to start an e-commerce business. With experts forecasting global e-commerce sales reaching $4.13 trillion this year, there has never been a better time to get in on the action. In this article, we explore the steps to take (in chronological order) when building an e-commerce business from scratch.

1. Choose a business model

First of all, it’s important to figure out the business model that will work best for you and your current circumstances. E-commerce stores often need a physical place to keep stock, as well as someone to manually pack and ship the orders. Whether or not you have the room for stock and shipping can be one of the big considerations when choosing the right model for your store.

When it comes to business models, there are two key considerations. First, your business classification. Are you B2B (Business to Business), B2C (Business to Consumer) C2C (Consumer to Consumer) or C2B (Consumer to Business)? For newer e-commerce stores, B2C is usually the route that’s taken.

Next, it’s extremely important to get to grips with your business revenue model. There are a few options to consider here, which we explore below.

  • Drop-shipping – setting up an online shop and having a third-party supplier deal with inventory, stock, posting and packaging
  • Wholesaling – this route involves you managing inventory, shipping and, more than likely, investing in a warehouse to keep stock
  • Private Labelling & Manufacturing – this option works well if you have an idea for a product, but don’t have the initial capital to invest in the manufacturing process
  • White Labelling – Choosing a product that’s being sold successfully elsewhere, but allows you to design your packaging, labels and sell the product yourself. This option does still involve minimum order quantities and holding stock
  • Subscription – Growing in popularity over recent years, this route involves delivering regular packages at pre-scheduled intervals. This option generally works well for FMCG

So before building your brand or coming up with a name, it’s important to start by getting to grips with your e-commerce business model, as this will help inform many of the other start-up decisions along the way.

2. Find your niche

Once you’ve established your business model, the next step is finding your niche. With the e-commerce market bigger than ever before, your best bet when creating a profitable new store is to sell a niche product, with a low (but not non-existent) level of competition. Here are some tips on the things to consider when validating a niche:

  • A margin of at least 20% on your product
  • Regular searches for this niche and related products on search engines (using Google Trends or Keyword Planner are a good starting point)
  • The levels of competition – including industry giants such as Amazon

Once you’ve decided on your niche, you can move to the next step of the process –competitor analysis.

3. Research your competitors

Competitor analysis is a step that’s instrumental when building your e-commerce business. Not only does it give you an overview of the volume and scale of the competition in the market, but it’s a great way of identifying gaps in the market, allowing you to leverage your niche.

To start your analysis, create a list of competitors based on those who are doing well in your market, those with a similar niche and any similar companies who regularly perform well on search engines.

Once you have your list of competitors, create a document or spreadsheet and start answering some of the following questions by accessing company websites and social media profiles, or reading customer reviews.

  • How many staff do they have?
  • What’s their annual turnover?
  • What are their price points and profit margins?
  • How long has the business been running for?
  • How do their products or services compare to yours (think specifically about pricing, business model, product options, cost of manufacturing, and so on)?
  • How does their customer service and sales aftercare process work?

Once you have this, it’ll be easy to extrapolate trends and best practice within your market, as well as identifying any opportunities your new business can exploit, such as lack of product options, unclear pricing or poor customer service. It also gives you a good idea of whether or not your product is a viable alternative, or whether there is too much competition and it’s a race to the bottom on price. If that’s the case, now is the perfect time to find out.

4. Build your target audience

Luckily, your competitor analysis helps with this step. Your product is unlikely to be suitable for everyone on the planet, so who is your target audience? Consider demographics such as location, age and gender, but also behaviours and interests. For example, do you need to be a dog lover to purchase your product? Do you need to own a car? Is your product only suitable for people who exercise? By answering these questions, you can start to build an idea of your target markets.

Don’t forget that your competitor analysis can help with this – who are your competitors targeting with their advertising? Who do they engage with and appeal to on social media? Keeping tabs on audiences as part of your competitor analysis is key, and will help you when making marketing and communications decisions as you’re building your brand.

5. Create a brand

Next, the fun part – it’s time to create your brand! Using the options available based on your business model, your competitor analysis and your target audience, you can now start to create your name, colour palette, logos, tone of voice and more.

If you’re stuck on where to start, use your competitor brands to help you make an initial list of what you do and don’t like about each name, colour scheme and logo – this will help you to create a starting point for your own branding.

Once you’ve created your brand, be sure to apply this to your product, packaging, marketing, social media platforms and more, to keep your brand memorable and to create a consistent experience across all customer touchpoints.

6. Build and launch your online store

The final piece of the puzzle is to create and launch your online store. There are a plethora of online store templates and products online such as Shopify, Magento and WooCommerce, so make sure to do your research on what will work for you and your business model. Don’t forget to consider the future of your business, too, and use a service that will let you scale your website as your product offering and traffic grow.

Once you’ve got your platform, make sure you apply your branding and use engaging (and well-optimised) product photography and descriptions to convert as many of your visitors as you can. When this is set up, you’re ready to launch your online store!

Starting an e-commerce business is now easier than ever. By putting in the groundwork in the beginning by truly understanding your customer, the products they need and the competitor landscape, your new business has every chance of being a success online.

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