If you’re constantly hearing about eCommerce, it’s because it is a fast-growing trend. Recent U.S. Census Bureau figures estimate that U.S. eCommerce sales totaled $215 billion for the first quarter of 2021. That’s more than a 39% increase over the same period of 2020. Other countries also show recent growth in eCommerce sales.
Do you want to join the trend? If so, learn all you can about eCommerce and the steps you need to go through to set up a business online.
Many articles make eCommerce seem easy, and it can be if you do your homework first. But, if you jump into eCommerce without putting much thought into it, you might be setting yourself up for failure.
Remember that eCommerce is a way of doing business. If you want to succeed, you need to treat it like a business. That means following some defined steps like those that I'll cover in this high-level tutorial.
Are you ready to learn more about eCommerce? Let's get started.
1. eCommerce Defined
So, what is eCommerce?
Simply defined, eCommerce refers to business transactions conducted through the Internet. Anytime you buy something from an online site, you are participating in eCommerce.
eCommerce can refer to sales of physical products like clothing, books, cosmetics and many other things. It can also refer to digital products such as software, eBooks, and apps. Finally, eCommerce sales also include services such as consulting.
A common misperception is that businesses that market their products through eCommerce don't have a physical presence. The truth is that many popular retailers have both a brick and mortar store and an eCommerce site. That being said, one of the big advantages to starting an eCommerce business is that you don't need an offline store to succeed. You just need a product that you can sell online.
2. Decide What Product to Sell
It may seem easy to decide which product to sell, but give it some serious thought. You want to sell a product that sets your eCommerce business up for success.
Here are the four main questions to ask when deciding what to sell:
- Can I get the product or the materials to make the product? (If you’re selling a service, ask whether you can perform the service yourself or need to hire others.)
- Is the product (or service) expensive to get or produce?
- Does somebody want the product or service? (That somebody is your target market.)
- Are there companies already providing the product or service?
Depending on your business, you may need to ask other questions as well. In this section, we'll look at questions one, two, and four. In the next section, I'll discuss question three.
The first question is crucial. Just because you want to sell something doesn't mean you can get enough of it to sell. If a product is unavailable or the materials to make the product are hard to get, that product may not be a good choice for eCommerce.
Your cost to produce or acquire a product (question two) is an important consideration. If the price you pay for the product (or for materials to make the product) is too high, there may be too little room for profit. Don't forget to include labor costs into your decision-making.
Even if you can get a product at a reasonable price, that product still might not be a good choice. Check the online marketplaces to see how many other sellers offer the same thing (question four). If there are too many sellers in the market, the product may not be a good choice, though some competition is often a good indication of a profitable niche.
Here are some questions to ask when looking at potential competitors:
- Is the product selling well for the competitor or do they seem to have trouble moving it? If they often discount the price it could mean that there isn't much demand.
- Are your competitor's prices reasonable for you? If the competition sells the product for a lower price, why should your customers buy from you?
- How can you distinguish your product and your business from the others? Can you improve upon what your competitor is doing. What’s different about your business?
Now, let's take a closer look at question three. It's time to identify your target market.
3. Find Out Who Needs Your Product
For you to sell your product, someone must want it. If there's no demand for a product, your eCommerce business will have trouble succeeding. Of course, you can try to generate a demand for the product, but that can be difficult to do.
To discover your target market, do some research. Here are some steps to take:
- Describe who you think your ideal customer is. Start with a complete description. Include age, gender, race, socioeconomic status, and educational level. (This profile is known as a demographic.) The more you know about your potential customers the better you can meet their needs.
- Use the search engines. Strategic searches will help you learn about your potential customers. You can find studies and statistics online about many aspects of your ideal customer base, including spending patterns and disposable income.
- Use a questionnaire. Gather a focus group that represents your ideal client base. Have them complete a poll or questionnaire about the need for your product or service. Word your questions carefully. Have a goal of what you are trying to learn from the questions.
- Release the product on a trial basis. A pre-launch trial release of the product can be a good way to judge whether there is an interest. If you already have a website, make the product available to your current audience before offering it to the public.
Learn how to create a market research survey to begin your research, as well as how to build a minimum viable, agile product:
- How to Write an Online Market Research SurveyDavid Masters09 Jan 2014
- The Lean, Agile Way to Build Your First ProductAndrew Blackman23 Apr 2021
After you've determined that there's a need for your product or service, it's time to develop a business strategy.
4. Organize Your Business
You've done your research. You've found out that there is some demand for your product or service. You’ve discovered that your product or service is cost-effective to produce. You're going to go ahead and start an eCommerce business. Now's the time to organize your business.
Give some thought to questions like:
- What should I call my business?
- Will my business be a sole proprietorship, partnership, or small corporation?
- How will I finance my business?
- What are my business goals?
- What are my price points?
It's best to deal with these questions early in the process. It’s better to get it right now than to try and fix it later. Depending on the complexity of your business structure, you may need to hire an attorney to set up your business properly. A CPA can help you with tax questions.
Naming a business is an important task. Your business name should be catchy and easy to remember. Preferably it is related to your product. Make sure that your business name is not already being used. Also, check to make sure that a domain name for your business is available. Read through our series that provides more guidance on how to choose the right name for your business, you can get started with the following article:
I'm a big believer in business plans. The process of creating a business plan causes new business owners to think about the tough questions. It also gives them goals to measure the progress against. Some startups resist creating a business plan, but I think most new businesses are better off with one. And that includes eCommerce businesses.
Your business plan doesn't have to be formal nor are you "locked in" to your initial plan. In fact, if you don't need to show it to a partner, investors, or financiers, then you can still draft one for your own use. It's still a good idea to have one. This tutorial provides some helpful guidance on how create to a fluid business plan that can change as your business changes:
After you select a product and organize your business you are ready to develop a marketing strategy. Before you craft your eCommerce website, you need a plan in place.
5. Develop a Marketing Strategy
Now that you have decided what you are going to sell and defined your business structure, it's time to decide how you are going to market your business. Since we are talking about eCommerce, that marketing strategy involves the internet. You have several options:
- Sell the product on your own site using tools like Shopify or Volusion. Or you can use scripts like Magento or Zen Cart.
- Sell the product on existing online market such as Etsy, eBay, or Amazon.
- Set up a store on social media.
Each approach has pros and cons.
Pros and Cons of Using Your Own Site
If you sell your product from your own site, you have more control over the process. You may also have better access to your customers. For example, you can create a forum, blog, or other customer interface on your site.
However, you need to drive traffic to your site. And you are responsible for site maintenance and any problems your customers have when checking out.
Pros and Cons of Using an Existing Online Market
If you sell your product from an existing online marketplace, you are bound by that site's rules. It may be difficult to differentiate your product from similar products. Plus, the market site receives a percentage of each sale.
However, most established markets already have a great deal of customers who are searching for products. Plus, the marketplace site is responsible for maintenance and upkeep. They also handle problems your customers have with the site.
Pros and Cons of Setting Up a Social Media Store
Facebook has recently allowed vendors to launch a Facebook Shop on a dedicated page. Other social media platforms may follow the trend.
The advantages of establishing a store on Facebook is that there are thousands of users already on the platform. If you do set up shop on Facebook, remember that you do not own the platform. Selling on social media shares many of the same advantages and disadvantages as selling your product from an existing online marketplace.
This article offers additional eCommerce platform choices to consider, and is part of our Fundamentals of eCommerce learning guide:
An area that should not be ignored is mobile marketing. According to statistics from the Pew Research Center, 97% of U.S. adults owned a mobile phone as of February 2021. And 53% owned a tablet. Obviously, the potential for mobile sales is huge.
Regardless of the way your eCommerce site is set up, make sure that it is mobile-friendly. To learn more about what makes a mobile eCommerce site succeed, review this tutorial:
In the end, the decision of where and how to market your product or is up to you. Many eCommerce sellers start by marketing a product on a marketplace site and later establish their own site.
6. Set Up Your Web Presence
If you've decided to use an existing marketplace to sell your products, set up your vendor account and list your products. Read all user agreements carefully before you establish your account.
If you've decided to market your product from your own website, the process is a little more complex. Here are the basic steps:
- Get web hosting.
- Buy a domain name.
- Build and design your site.
- Purchase eCommerce software or add a script.
- Add web content including product descriptions.
As you can see, setting up your own eCommerce website involves a lot of work.
Learn more about how to setup your first Shopify store, as well as whether Shopify is the right solution for you or not:
- How to Set Up Your First Shopify StoreDavid Masters20 Aug 2013
- Shopify or Not? A Cost-Benefit Analysis of ShopifyBrad Zomick19 Nov 2013
7. Promote Your Product
Once you've got an eCommerce website up and running, you're ready to start selling your product. You're not done, however. You need to promote your product to draw customers to your site. Here are several ways to do that:
- Leverage an existing customer base. If you have a website or blog, you may already have a mailing list. You can offer your product or services to your mailing list. You can also buy lists, based on demographics, of potential customers.
- Advertise. It can be expensive, but if you have the budget for it advertising can be very effective. Consider advertising in both traditional media such as print media, television, and radio as well as online.
- Give away trial size samples. Everyone loves free. Samples can help build word-of-mouth about your product. Trial size samples can be an especially effective means of marketing consumable products such as food and beauty items.
- Promote your business through social media. If your business is not already active on social media, establish social media accounts now. Social media shares can play a significant role in the success (or failure) of your eCommerce business.
To reach your goals, use more than one means of promoting your eCommerce business.
It’s also helpful to measure which promotion is most effective. Consider adding a simple question at the end of the checkout process like “how did you hear about us?” And set up your site analytics to track where sales were driven from.
Get started with developing your eCommerce mailing list by reading through our Email Marketing Jumpstart learning guide, this article is a great starting point:
You've now learned the basics about how to start an eCommerce business. If your eCommerce business is up and running, you may be wondering what to do next.
If your eCommerce business is successful, here are several options:
- Add additional products.
- Go public and attract investors.
- Sell your business and move on.
Now's the time to take action, research what products you'd like to sell, test the market, and get your eCommerce business up, running, and making money.
Editorial Note: This content was originally published in 2016. We're sharing it again because our editors have determined that this information is still accurate and relevant.