A Guide to Starting Your Own E-Commerce Business
by Anders Hjorth | Updated Aug. 5, 2022 - First published on May 18, 2022
E-commerce grows at a rate of 20% per year according to data from Statista. And e-commerce only represents 14% of global retail commerce, so e-commerce is likely to maintain double digit growth rates for years to come.
The opportunity is huge, and to many, e-commerce is the dream of a home-based business: no boss, no strict working hours, selling to a market with no limits.
But online business is different from traditional commerce by the lack of a physical storefront, through dematerialized structures and processes, and with additional costs for transportation and delivery. And most important of all: the user can’t touch and feel the product.
Luckily, to face the challenges, the creator of an online e-commerce business is empowered by globalized tools and services that make almost anything possible, even with a limited investment. Let us take you through 10 steps in this e-commerce guide, to take you from idea to launch.
Here are the steps to launch a successful e-commerce business:
- Business idea
- Market research and preparation
- Business plan
- Company registration
- Designing the company identity
- Product development
- Manufacturing and packaging
- Online store
- Storage, logistics, fulfillment, and customer service
- Sales and marketing
Overview: What is an e-commerce business?
An e-commerce business is a company that sells products online. It can have many shapes and sizes depending on the type of product it sells, and on the level of subcontracting involved.
You can feel a little overwhelmed when you first go through some of the e-commerce basics that you will need to master: manufacturing, packaging, storage, delivery, customer service, and of course, the online store.
A fully-fledged e-commerce business will manage the majority of these steps, but even so, you will outsource transportation and delivery, and perhaps storage to external partners.
And in the extreme case of drop-shipping, your entire product cycle is outsourced and all your e-commerce business does, is to sell and market a product online. In the case of a virtual product like downloadable software, the challenges of storage and logistics disappear.
In essence, the steps you need to take depend on the product you sell and the model you choose. There are tools and partners for each stage of the process that can help you take your product to market. Let’s have a look.
How to start an e-commerce business from scratch
When you are starting an e-commerce business, the first thing you need is a business idea. Put the constraints aside and think with an open mind about the product or service you want to create and sell.
Whether it then turns into a home-based business funded out of your own pocket, or a global brand funded by investors, will be secondary.
Once you are set on the idea, you will research the market, the target audience, and the concept, in order to build a business plan: the blueprint for your business from an economic standpoint.
You can then register the company, design its identity, and develop your product. Set up the manufacturing and packaging, set up your online store and find the right storage and fulfillment solution. And finally, you launch your sales and marketing.
Step 1: Generate a business idea
So many things depend on your e-commerce business idea, and it is the first thing to define. If you are thinking about setting up an online business, you probably already have the idea. Ideas can be very simple or very complex.
They can require a lot of preparation or none at all. The easier it is, the more competition you are likely to have. The harder it is, the more you will need to invest. A good business idea is one that turns into a profitable business.
You can’t really know in advance, but if you do your market research and build your business plan, there is a good chance your business idea will already have evolved into something feasible.
Tips for brainstorming business ideas
Your business idea can be a lifelong project or something that pops into your mind when taking your shower. You can brainstorm, you can read magazines, and you can search on the internet. Just remember to be ready to evolve and improve an idea on the basis of input you get from research and feedback.
- The pub test: Go to a bar, order a drink, explain your idea to a stranger. Does it fly?
- The grandma test: Can you explain your idea to your grandma? If you can, your concept is sufficiently clear and understandable.
Step 2: Market research and preparation
For some people, getting ideas is really easy, for others it is hard. Once you have found the idea for your business, you need to test and refine it. For that purpose, your first step is market research and feasibility studies.
The objective is to define the size and characteristics of the market for your product. Is there a market for your product idea? Can the product actually be produced? You should also project your business into the future. What will be the product life cycle, and are there risks or time constraints related to your product?
Tips for conducting market research and preparation
The internet is full of information and market data. You should be able to find most of what you need online. If you have to conduct some market research, then do it online too. Run a survey, do interviews with experts in the field you are entering, and check for regulatory requirements your product must comply with.
- Online surveys: While you are exploring the market, ask questions of future clients in a survey. See if you can reach them.
- Be critical: You are in the creative phase, and it is natural to be optimistic, and only see opportunity. However, at this stage, it is important to be critical of the data, and try to identify the risks associated with your business idea as well.
Step 3: Create a business plan
Here it is, the step you were fearing: the business plan. Let us be clear, there is not really any way around it. A business plan describes the quantitative dimension of your company, and will help you focus on value and avoid pitfalls, so that you can set up a profitable online store.
However, a business plan can have many forms and many levels of depth. It doesn’t have to be a painful exercise.
Tips for building a business plan
In a business plan, you will define your product idea from step 1, describe the market you researched in step 2 and build hypotheses for investment, sales growth, fixed costs, price point, gross margin.
- Use hypotheses: In the business plan, you will establish your hypotheses. The better you know the hypotheses you built your business on, the better you will be at evolving it.
- A business plan is a living document: The business plan evolves as your knowledge and experience evolves. It is a document you should revisit and improve continuously through the creative process.
- Use the KPIs for e-commerce: For the experienced entrepreneur, it can make sense to base the business plan on things like cost per client acquisition, average order value, conversion rate, customer retention, and customer lifetime value.
Step 4: Company registration
To do business, you will have to register a company at some point. On the one hand, the company should carry the costs you engage in the process of creation, and on the other hand, it actually costs money to set up and run a business. Once you have the business plan in your hand, you are ready to register a company.
Tips for registering your company
When registering a business, it is worthwhile checking different company types and considering in what state or country you should set it up. You also need to define the name of the company. Perhaps you already decided what to call it. Give it a positive name in relation with your own name or the product idea you had.
- Ask around: Entrepreneurs are surprisingly benevolent to each other. Ask anyone who has set up a business for advice and recommendations, and they will gladly give it. Don’t be shy.
- Keep the setup costs low: At this point in time, you have no guarantee of business success or even income, so you should keep setup costs as low as possible. Stick to basic service offerings at the lowest possible costs.
- Keep the running costs low: The time-to-first-sale can be long, so you also need to keep your running costs at a minimum. Be prudent.
Step 5: Designing the company identity
As part of the product idea in step 1, you probably already have ideas for branding, logo, and a name for your store. The objective of this step is to build those elements into company assets. It’s a good idea to get design help from specialists.
You can keep the cost low by using online platforms like 99designs, Upwork, or Fiverr, but you will probably spend less time with someone you can meet face to face and exchange ideas with.
Tips for designing your company identity
For your company identity, you can go through a full process of brand positioning, but it may be sufficient to work around the company name, to create a corresponding logo with a designer and define the main brand characteristics like colors and font types. Also register a domain name at this stage.
- Social media profiles: As soon as you are set on a domain name or store name, you should open social media profiles with those names. The profiles don’t have to be active, but if you book them now, you won’t get unpleasant surprises later.
- Register your trademark: If you invest in logo and branding, you should invest in trademark registration also, especially if you are in a competitive industry.
Step 6: Product development
You don’t have to finish step 5 to move to this step. Product development and design can go hand in hand. Depending on the type of product, there may be more or fewer steps in your product development process. What is essential is that you have your finished product at the end of it.
Tips for product development
Product development includes researching the feasibility, designing the product, making a prototype, and if the product is outstanding and using an innovative approach, perhaps filing for a patent.
- Crowdfunding: Once you have the first iteration of your product, an excellent way of taking it into a real-life market situation, is by doing a crowdfunding campaign. It can be stressful and challenging, but you will not regret doing it.
- Outsourcing: You are likely to use external providers in this step. You should use specialists, pay a decent price for the work they do, and establish contracts to protect your intellectual property.
Step 7: Manufacturing and packaging
For a physical product and with your prototype in hand, you are ready to set up manufacturing.
You’ll find more outsourcing opportunities than you would imagine, and the first decision to make is whether you will establish your own production, which is time-consuming and capital intensive, or whether you will outsource parts of, or the entire process.
You can consider packaging as an extension of the manufacturing process.
Tips for manufacturing and packaging
Write detailed specifications for the manufacturing of your product on the basis of your prototype experience. Define materials and set quality standards for the finished product, and finally, decide on your initial batch size.
For packaging, get specialist advice for the design, then decide whether packing is done at the time of manufacturing or at the time of delivery.
- Regulatory requirements: Depending on the type of product and on the market you are in, there may be regulatory requirements, or certifications your product needs to pass. Do some research.
- Labeling: For some products and for some markets, you will need to label your product to specify the ingredients.
Step 8: Set up your online store
You now have everything you need in order to set up your online store on an e-commerce platform. Pick your platform and start setting up your store by adding the product, designing the store front, connecting the payment solution with your company, and entering stock information. The best online store builders will guide you through the entire process.
Tips for setting up your store
First you need to choose your platform. If you already set up a website, you can upgrade the functionality of your site for e-commerce. You can also launch an e-commerce site as your main website, or even launch a store without one. Once you have chosen, the process is straightforward and guided by the platform itself.
- Choose the right platform: Do some research before choosing. Maybe even test a few. Usability is important, as this will be a tool you’ll be using daily.
- Marketing channels: Consider marketing channels at this stage. Some platforms are better connected to certain channel types, for example SEO, affiliate marketing, Amazon, Facebook, Instagram or Snapchat. If you already know your marketing channels, check the e-commerce platform for compatibility.
Step 9: Storage, logistics, fulfillment, and customer service
For a physical product you manufacture, storage becomes an important challenge. You may need to simulate your entire supply chain and know your inventory turnover in order to define the size of your storage needs.
Products that are produced and shipped on demand will not need to worry about storage, and you can move straight to the fulfillment challenge of transporting and delivering the sold product to the buyer.
At this stage, you also need to consider your customer service options. Your customer service needs to be able to pilot fulfillment, make changes to deliveries, and inform the client.
Tips for storage, logistics, and fulfillment
Once your manufacturing location is defined, it is time to find your storage location and provider. Next step is finding solutions for bringing your product from storage to the buyer and setting up information gathering points allowing for your customer service to pilot each step of the process.
- Storage location: Ideally, find a storage solution close to your manufacturing or close to your target market. Storage is readily available but can turn into an important cost component.
- Simplicity: The more steps you have in your supply chain, the more sources of errors you will have. Keep your setup as simple as possible.
Step 10: Sales and marketing
With manufacturing and supply chain in place, you can now launch your online store and begin marketing your e-commerce activity.
After so much time spent on evolving your idea, on perfecting your product and on finding solutions for supplying the product to customers, you will have the feeling that the most important piece of the work has been done.
But that’s not entirely true. Your most important challenge might be to sell the product, and you are probably the best person to do it.
Tips for sales and marketing
First define your sales and marketing channels and build as much visibility and reach as possible without advertising, as a soft launch. Then build a launch campaign for your business and find profitable marketing and sales channels for your product.
- Win or learn: You will inevitably try and test marketing approaches which don’t work. Collect data and learn from every campaign and every initiative you do, so that if an investment doesn’t pay off in monetary terms, you will have learned from the experience and do better in your next campaign.
- Email subscription: Email marketing is one of the best channels for e-commerce, assuming you already have subscribers to an email list. Email contacts are gold, so start collecting from the very beginning of your activity.
And now, conquer the world
When you have been through the 10 steps of this process, your e-commerce business is up and running with potential access to a world market of billions of consumers. Rather than the end of a process, this is the beginning of a new adventure.
You will market your product, people will buy and consume it, they will give you feedback and you will want to improve it, and expand your business. It may be a long road to conquering the world, but you have just taken your first step on that journey.
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