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9 min read

How to start an e-commerce business

There’s never been an easier time to start selling products online either through your own e-commerce website or via marketplace websites like Amazon and eBay. This article will look at everything from choosing and obtaining your product portfolio to getting started and running your e-commerce business. 

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What is e-commerce?

Since the dawn of the internet, online sales have been growing year on year. This process of buying and selling products online has become known as e-commerce.

Generally, when we talk about e-commerce, we’re thinking about businesses who operate mostly online – as opposed to, for example, High Street retailers who have both an online and bricks and mortar presence. So, for the purposes of this article, we’re focusing on keeping things online-only.

It is said there are over 20 million e-commerce sites. The two biggest are Amazon and eBay. These two are also referred to as marketplace sites meaning third party sellers can showcase their products on the platform.

However, there are plenty of much smaller e-commerce companies who are successful, whether selling through their own website or through marketplace sites.  

Given the general direction of travel, along with the Covid-19 pandemic, the number of e-commerce businesses is only going to increase as more customers shop online.

What products should I sell?

If you’re starting an e-commerce business, you need to first decide what you’re actually going to sell.

You might already have a good idea. If not, here are some of the most popular items that are sold online according to Shopify:

  • Peel-off face mask
  • Nail polish
  • Exercise bands
  • Water bottles
  • Blankets
  • Yoga and pilates mats
  • Kayak accessories
  • Jigsaw puzzles
  • Kitchen and dining room furniture
  • Rugs
  • Board games
  • Laptop skins

How to source products

Another consideration when picking your products should be where you’re getting them from. Are you making the product yourself or sourcing it from elsewhere?

  • Make it yourself: There are plenty of craftspeople who make a living selling their own homemade creations online. It’s a good option if you want to keep costs low and maintain quality control. However, it can be time-consuming and harder to scale.
  • Manufacture: Don’t have the resource to make the product yourself? Alternatively, you could find a manufacturer to make it for you. This option allows you to produce greater quantities of stock at a lower cost per unit – but comes with more financial investment and risk. 
  • Wholesale: The low-risk option is buy readymade products straight from manufacturers or from wholesale suppliers (usually at a discounted rate). 
  • Dropship: This is an increasingly popular option. Instead of buying and owning a product inventory, you work with dropship partners to sell their stock through your website. They also provide the fulfilment (delivery of the product to the customer). It’s a cheap and low-risk option as you’re not paying for inventory costs. However, the margins are low and the competition is high. 

Whichever way you go, do your research and assess the numbers. The cost of getting your products to market will determine your pricing strategy and profit margins – and ultimately the viability of your business. For example, if you need to sell high volumes to break even or turn a profit. 

What to research before starting

We touched on research, and it’s definitely worth spending some time collating various bits of information on the current market situation. Try and and answer the following questions:

  • Target audience:
    • Who are your products most likely to appeal to?
    • What makes them tick?
    • Where are you going to go online to find them?
  • Competitors:
    • Who are the competitors in your product space?
    • What are they doing well and not-so-well?
  • External factors: 
    • What are the current and possible future market trends?
    • What is the economic forecast looking like?

This is valuable information that will help you to determine how you position your business. For example, if we’re going into a recession and your target audience are likely to be impacted by this financially, your product focus and pricing strategy needs to reflect this.

A lot of these insights can be found simply by typing the product into Google and seeing what comes up. Look at competitor websites, Amazon reviews and social media feedback to build a compelling picture.

Writing a business plan

Your business plan is the summary of your idea, vision and objectives – and how you plan to achieve this. The information you’ve gathered in your research should be factored into your thinking and provide evidence for the viability of your business.   

Here are some of the typical things you’ll need to include:

  • What your business will do 
  • The business structure and operations  
  • Team members and their expertise 
  • Market analysis to see current and projected state of the market and industry
  • How your business will sell and market  
  • Startup costs and funding required 
  • Financial projections 
  • Legal requirements 
  • Free business banking

To make life easier, we’ve created a simple-to-use downloadable business plan template.

Download: Please login or register to get your download.

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How do I price my products?

A lot of people find writing a business plan to be a difficult task, particularly when it comes to the numbers.

One of the most important areas to concentrate on is your pricing strategy. A good tip is to set a revenue target.

“To do this, you’ll need to look at everything you’re paying out for stock, running costs, and marketing.

“The next step is to estimate how many products you expect to sell over one year. Then, you simply divide your revenue target by this number to give you the cost at which you would need to sell each product. You can then adjust your revenue target accordingly if the price seems much too high or too low.”

Victoria Greene, ecommerce and marketing specialist

If you’re using Shopify, there are a number of pricing apps available to help you:

  • Dynamic Pricing– boosts sales by automatically setting up the best product price
  • Quant Price– increases your revenue with A/B price testing to boost conversions
  • EdgePi– keeps track of your competitors’ pricing and stock status
  • Wholesale Hero– incentivises wholesale customers with volume discounts

Startup costs calculator

We've put together some of the typical things you'll need to invest in when starting a business. Fill in the costs below to find out how much money you'll need to get up and running.

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How do I create a brand?

Having a strong and distinctive brand is always important, but even more so in e-commerce. You want to make the best possible impression when people come to your site, otherwise they’ll go elsewhere. 

Here are some of the main components to think about when creating a business brand.

  • Business signs
    Name

    You’ll need a business name that conveys what you’re about. Something unique and memorable. Check Companies House Webcheck to ensure it’s not taken already and search online to see what comes up, making sure there’s no unwanted connotations. You’ll also want to see if the domain name is available. The likes of GoDaddy.com or Names.co.uk can also tell you how much the domain will be to buy.

  • Starbucks logo on a wall
    Logo

    Your business logo and your name go in hand in hand. Depending on the name, your logo design might lend itself to something literal or more abstract. You’ll also want to think about other design components. For example, do you want associated icons and shapes to feed into other parts of your visual identity.

  • Google HQ
    Colours

    Every famous brand has a colour scheme we can instantly identify. Not only can it be one of the most recognisable and striking aspects of a brand, your colour scheme will convey different meanings to people. Green, for example, is associated with money and growth. Who knew?

  • Photo shoot
    Photography

    Whatever product you’re selling, the power of quality photography can’t be underestimated. Avoid using generic stock photos on your website. Invest in professional product photography to show your catalogue in the best possible light. Get some photos of you on their too – people like to know who they’re buying from.  

  • Website on iMac screen
    Tone of voice

    How you write and convey information is massively important. Quirky and fun is the way a lot of brands are going these days, but it might not work so well for your particular business. Whatever way you go, your words will go a long way to persuading people to buy from you.  

Building a website Vs Marketplace websites

We’ve got all this way and we haven’t even talked about what online form your e-commerce business will take.

What do we mean?

Well, you can go two ways. Creating your own e-commerce site either using a website builder like Wix or with a specialist design agency. Or, alternatively, selling through a marketplace website.

We’re going to look at the pros and cons when assessing which is best:

 ProsCons
Building a website
  • You own it
  • You keep 100% of the sales income
  • More flexibility
  • Scalable
  • Better analytics and insights
  • More expensive – operating and maintenance costs
  • Longer initial set-up
  • More resource to manage
  • Harder to build an audience
Marketplace website
  • Readymade audience to sell to
  • Quick to set up
  • Low maintenance
  • Minimal costs to set up
  • You don’t own the platform
  • Sales fees
  • T&Cs to sign up and adhere to
  • Branding less visible

Whilst a lot of people will be keen to have their own website, one way to test out your business is to start small and sell your products via eBay, Amazon or Etsy, for example.

This can be a good way to learn and develop your proposition as you build an understanding of the market appetite for your products. Do this at minimal investment at first and then take things to the next level by creating your own custom e-commerce solution – once you’ve proven its viability.

Of course, many businesses will sell both via their own website and marketplace websites.

How to start a business on eBay and Amazon

Looking to start selling quickly and cheaply? The two most popular marketplace websites account for a huge portion of total online sales. 

Read more
Amazon screengrab

How do I market an e-commerce business?

If you have created your own ecommerce website, you need a way for people to find your business. That’s hard if no one knows who you are and you’re not in a position to spend lots of money on marketing.

There are a number of cost-effective ways to help you funnel people towards your website, purchase from you, and then, hopefully, become loyal and repeat customers.

What are the main marketing channels?

Pay Per Click (PPC)

PPC is an auction system where advertisers compete to appear in the ad listings at the top of search engine results.

Find out more

For example, if you sell ‘waterproof coats’ you can create ads and bid to be shown every time that keyword is searched for. What you pay-per-click will be determined by a range of factors. It’s a good way to immediately get traffic to your site but you need to ensure your ads and website are relevant to the search query.

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Search Engine Optimisation (SEO)

The majority of the results you see when you use a search engine are organic listings (i.e not paid ads). The higher your pages are ranked in the listings, the more traffic you’ll get.

Find out more

SEO is the process for improving how many people find your site this way. Unlike PPC it’s usually not a quick process, but the long-term benefit is you can generate free traffic to your site. There are various components to how this is done – from the technical set up of your site and the relevance of the content to external factors such as how trusted your site is by Google.

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Social media

It’s likely your audience will be on either Facebook or Instagram. Unless they’re following you already, though, you’ll probably need to pay to appear in their feeds.  

Find out more

This can still be a cost-effective use of your marketing budget as the targeting allows you to really narrow down and specify who you want your ads to be seen by. Non-paid activity is also recommended to complement your advertising.

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Email marketing

In order to send emails to people, you first of all need to capture their email address. Having sign up forms and some kind of incentive on your site to encourage this is a good first step.

Find out more

If they’ve already bought from you, then email is a great way to keep customers informed of the latest news, offers, product launches and useful information. The key here is to add value in some way. Good email marketing can really enhance your brand and drive repeat purchases.

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Video: Should I register as a limited company or a sole trader?

by Informi

This video explains the benefits of trading as a limited company, explaining the differences between sole traders and limited companies and the various ways that a limited company can protect small business owners and inspire confidence in their businesses.

Do I need insurance?

To begin with you may not need insurance as the risks of losing out financially are likely to be minimal.

However, as your revenues grow, you’ll want to ensure safeguards are in place if something does happen.

  • Liability insurance: If you’re selling products and something happens to your customers whilst using it – an allergic reaction or an injury, for example – liability insurance can help. The policy would kick in if you needed to pay damages or legal fees.
  • Property insurance: If there was a fire or flooding to the place where your products are kept, property insurance can help you to claim the replacement costs. If they’re kept in your home, business items are usually not covered by your existing homeowner policy.
  • Transit insurance: If you’re relying on large shipments of stock and there was to be an issue in the delivery process, transit insurance can help. You’ll need to check first what is covered by the supplier/warehouse/distributor’s insurance and what is not.  
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