Business Basics
How to start an e-commerce business

How to start an e-commerce business

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Starting an e-commerce business gives you the opportunity to tap into the ever-growing digital commerce ecosystem. Over the next several years, the e-commerce market is projected to experience a growth rate of at least 8%. As such, you should have no trouble finding your place in the world of e-commerce.

That said, before starting an e-commerce business, you need a game plan, a marketing strategy, a website, and, of course, some products.

In this checklist for starting an e-commerce business, we'll cover the basics of creating an e-commerce business plan and provide actionable tips for marketing e-commerce stores so you can accelerate your digital retail journey. Here's how to start an e-commerce business.

What is an e-commerce business?

An e-commerce business is any company that generates revenue from selling physical products, services, or digital goods online. For instance, a company that sells software or web design services and a brand that sells housewares are both considered e-commerce businesses.

How to get into e-commerce

The basic premise of e-commerce is simple.

Under the e-commerce business model, the internet connects you (the seller) with prospective buyers via various channels, including social media, search engines, and your e-commerce store.

They find the products or services they're interested in and make a purchase. You're then responsible for getting the products to them. In more straightforward terms, an e-commerce business sells products online.

If your online store deals in digital goods, delivering your product to the buyer is fast and efficient. However, if your business model focuses on physical goods, you must be conscious of shipping costs and fulfillment timetables.

Different approaches to e-commerce

The physical goods business model can take two forms. The first approach involves running your company exclusively through an online store. Alternatively, you can sell goods in brick-and-mortar stores and your own web store.

While the second approach is more complex, it allows you to better connect with your target market and reach a wider audience.

How much does it cost to start an e-commerce business?

Starting an e-commerce website can cost as little as a few hundred dollars if you build your site yourself and use a budget-friendly hosting platform like WordPress.

You can also source or design and produce products relatively cheaply. That said, if you're selling a product that's too complex to produce yourself or hard to source, you may need to invest more in each round of inventory.

The bottom line is that the cost of starting an e-commerce business can range from surprisingly affordable to quite expensive.

Whether you want to know how to start an e-commerce business on Amazon or you'd prefer to run your own website, you need to get a clear picture of your upfront costs. The last thing you want is to pour thousands into an online business only to realize you need more capital to get it off the ground.

How to start an e-commerce business in 6 steps

Learning how to start an e-commerce store is far easier than you might expect. To make the process even simpler, we've broken it down into six easy steps.

1. E-commerce business plan: Defining your e-commerce business idea

If you want to know how to start an online e-commerce business, it all begins with a great idea. Your idea should cover the basics of your business model, including your potential customers, your business name, and what you want to sell. Remember that you can sell products, digital services, or a combination of the two.

Your business plan doesn't need to identify specific products just yet, but you should include some general product ideas. For instance, do you want to sell products in the home goods space, or are you more interested in health and wellness items?

When creating your business plan, you must ask yourself tough questions. Think of this as an opportunity to put your business ideas to the test in a low-risk environment. Some questions to ask include:

  • What will my marketing costs be?
  • Why do I want to start a new online business?
  • Will I set up an Amazon business account or manage my online store?
  • Will I need warehouse space?
  • What business licenses or permits will I need?
  • What is my brand identity?
  • Will I make my own products?
  • Am I ready to become a small business owner?
  • Will I sell directly to consumers or business-to-business?

Do plenty of market research before you attempt to start selling online. Also, define your sales process in your startup strategy.

Once you know why you want to start an e-commerce company and have a basic framework for creating a profitable business, you're ready to move on to step two.

2. Registering your e-commerce business

Now, you're ready to register your company with your state. As part of this process, you'll need to do the following:

  • Choose your business model/structure: Determine whether you want to register your business as an LLC, sole proprietorship, or other type of organization.
  • Name your business: Choose something intriguing and relevant to your potential online customers, and make sure another business hasn't already registered the name.
  • Apply for an employer identification number (EIN): An EIN can help you separate your business and personal finances, making life much simpler come tax season.
  • Open business checking and savings accounts: Creating separate bank accounts for your online store will help you differentiate business expenses and customer purchases from your personal financial transactions.
  • Get licenses and permits: You'll likely need a business license from state regulators; check your state's website to find out what specific licenses you need to sell online.

You may only need to perform some of these steps to sell products online. However, registering your business, obtaining an EIN, and creating a separate business checking account will help protect your personal assets and make tracking your store's revenue easier.

3. Sourcing and developing products

Of course, you'll need to source the products you plan to sell online. Choosing the right products and the most pragmatic sourcing strategy are central to creating a successful e-commerce business. You may struggle to generate consistent revenue if you have a great product but inefficient or excessively costly sourcing processes.

With that in mind, you have an important decision: Will you order products in bulk and maintain your own inventory, or would you prefer to shift the burden of managing inventory to the supplier?

If you plan to buy in bulk, you need to raise capital to cover the upfront costs of goods. You'll also need to lease storage space.

The benefits of this approach include good control over inventory, the ability to ship goods yourself, and better per-unit profit margins. That said, purchasing and managing your own inventory can be quite costly, especially at first.

Many entrepreneurs start a dropshipping business to avoid the headaches associated with managing inventory.

Under this business model, you still create and manage your own e-commerce store, but products are only manufactured or sourced when an order is received. While you'll incur fewer overhead costs, keeping up with your inventory and shipping processes is complicated since your supplier manages all products.

You can use one of several other sourcing strategies instead of dropshipping, including:

  • Retail arbitrage: This process involves buying discounted items from retailers and listing them on your own e-commerce business website at a markup.
  • Print-on-demand: Instead of maintaining inventory, you work with a print company to create products on demand and ship them directly to customers.
  • White-labeling: With white-labeling, you order goods in bulk from a manufacturer, then brand them with your logo and business name

These strategies are common among e-commerce businesses, as they allow business owners to reduce overhead costs and simplify the process of shipping goods to new customers.

However, many products obtained through white-labeling or retail arbitrage are generic. You'll have to differentiate your online store using dynamic marketing strategies and a great design.

4. Starting an e-commerce website

Your website will function as your digital storefront. It's the medium through which customers interact with your brand and purchase your products.

An online store builder is the simplest way to create your site. These platforms feature drag-and-drop tools to simplify the process of creating your website.

They'll help you purchase a domain name, manage your inventory, and process payments. Some builders even include digital marketing tools, shipping label printing capabilities, and analytics software to track key performance indicators.

Some popular online store builders include BigCommerce, Square Online, Squarespace, and Shopify. Thousands of e-commerce businesses rely on these platforms to manage their digital storefronts. Explore each option and choose the platform with the most straightforward setup process.

5. Setting up order fulfillment processes

Order fulfillment refers to the steps involved in getting your products into the hands of your customers. Most e-commerce website builders offer shipping-label-printing services, and many also allow you to add shipping costs to customers' orders at checkout.

When setting up your order fulfillment processes, take advantage of automation tools. Automating order processing, marketing, and billing will lay the foundation for a successful online store.

As part of this step, decide where you will and won't ship. If you only ship to customers in the United States, make that clear to avoid confusion and possible bad reviews.

6. Marketing your e-commerce business

After establishing your e-commerce platform, the stage is set for you to make your first purchase. However, before you do so, you must ensure that members of your target audience can find your products.

To connect with prospective customers, you'll need to employ a dynamic digital marketing strategy that uses search engine optimization, social media channels, and paid ad campaigns. 

Each channel will help you connect with specific segments of your target audience and encourage them to buy from you.

Let's take a closer look at some of the marketing techniques you can include in your strategy:

  • Search engine optimization (SEO): SEO involves optimizing your website to make it more visible on search engines like Google.
  • Paid ads: Running paid ads can differentiate your brand from other e-commerce businesses, especially when your store is new.
  • Social media marketing: Marketing on Facebook and Instagram is a great way to gain traction with your target audience and drive sales, but you can also use other social platforms, like TikTok and X (formerly known as Twitter).

A great marketing strategy will help you set yourself apart from other small online businesses and gain a foothold in the e-commerce industry.

Start an e-commerce business using BILL

Now that you know how to start an e-commerce business from scratch, it's time to get to work creating your online store.

As you begin your journey, investing in the right order fulfillment services, bill management technologies, and marketing tools is essential. Implementing the ideal set of tools and technological support will accelerate the growth of your online store and give you a better chance of success.

Having the right billing tools in place is crucial, as streamlining accounts payable and receivable will protect your cash flow and give you the capital to grow. While there are many bill processing solutions, BILL has a proven track record of success.

BILL has helped other businesses, including multimillion-dollar company Glamnetic, gain better control and visibility over its expense spending and cash flow. With BILL, Glamnetic gained the profit margin insights it needed to pursue long-term expansion.

Want to learn more about how BILL can help you create a profitable business? Sign up or contact our team today.

The information provided on this page does not, and is not intended to constitute legal or financial advice and is for general informational purposes only. The content is provided "as-is"; no representations are made that the content is error free.