You might have thought about starting an ecommerce business recently – many people have. And this wouldn't be surprising considering that ecommerce sales within the US increased by 12% in the year of 2013 alone, meaning that the total revenue produced from these activities was approximately $294 billion. In addition to that, India's ecommerce industry has also grown by more than 30% compared to the previous year of 2013. India now has a $12.6 billion revenue share in the whole ecommerce industry.
By looking at the numbers listed above, you might think that the industry is too large for you to get involved but this simply isn't true. In fact, it's easier for you to get involved and start selling your products because the market is so large. There is competition, yes, but there is also a large number of buyers browsing marketplaces and ecommerce websites with their wallet right beside them.
This article will be a guide to building an ecommerce business from the ground-up, how to build a solid foundation so that your business can grow and develop as it should. We won't talk too much about the advanced factors such as sales and logistics as that's not a problem when you're getting started.
By looking at the numbers listed above, you might think that the industry is too large for you to get involved but this simply isn't true. In fact, it's easier for you to get involved and start selling your products because the market is so large. There is competition, yes, but there is also a large number of buyers browsing marketplaces and ecommerce websites with their wallet right beside them.
This article will be a guide to building an ecommerce business from the ground-up, how to build a solid foundation so that your business can grow and develop as it should. We won't talk too much about the advanced factors such as sales and logistics as that's not a problem when you're getting started.
Getting Started
Ecommerce is one of the easiest businesses to get started in simply because the barriers to entry are so low. You don't need a lot of capital, you don't need a $10,000+ website, you don't need to spend $4,000 per month on overheads, you don't even need to hold stock! We will talk more about stock in a moment.
The first thing that you need to do is figure out what your goals are when it comes to this ecommerce business – do you want to be a “superstore” and source anything you can get your hands on? Or would you rather be a “specialist” store, focusing on solving a certain problem in society with the help of your products?
Superstores have a much greater chance of being successful on a larger scale, most of the time they are very risky if you don't have a lot of capital to invest, don't have the resources to do proper market research, and things of that nature. It also take a lot more time to source a wide range of products from reliable suppliers.
Your best option when getting started is to choose a specialization, a niche in other words. This is a small corner of the market that you try to dominate by branding yourself as an expert. Some examples would be: horse riding equipment, scooter accessories, custom helmets, t-shirt printing, or toys for 3-6 year olds. By choosing a niche you are essentially increasing your chance of success, it will also be a lot easier to source suppliers and handle the sales and logistics aspect.
You'll want to look for some reliable suppliers so that you have good products to sell. Look for suppliers within your industry and take a look at what they are offering. If you are sourcing from a different country you should research the import laws and taxes. If you don't want to hold a lot of stock then drop-shipping is also an option, you essentially buy an item from the supplier only when a customer makes the purchase from you. So it's risk-free making it a great option to get started.
So now that you have figured out what you want to sell, the next step is to figure out where to sell. Don't worry too much about this, ecommerce has become a huge operation and there are dozens of marketplaces where you can list your products for sale, even with a tight budget or no budget at all!
The two biggest ecommerce platforms in the world (eBay and Amazon) should be of most importance to you, this is where you will want to spend the majority of your time building up a reputation and establishing yourself as an expert in your niche. There are both free options and paid options on these ecommerce platforms, the best route for you will depend on your budget – you will have greater success with the paid options, but don't let it discourage you if you can't afford it.
The first thing that you need to do is figure out what your goals are when it comes to this ecommerce business – do you want to be a “superstore” and source anything you can get your hands on? Or would you rather be a “specialist” store, focusing on solving a certain problem in society with the help of your products?
Superstores have a much greater chance of being successful on a larger scale, most of the time they are very risky if you don't have a lot of capital to invest, don't have the resources to do proper market research, and things of that nature. It also take a lot more time to source a wide range of products from reliable suppliers.
Your best option when getting started is to choose a specialization, a niche in other words. This is a small corner of the market that you try to dominate by branding yourself as an expert. Some examples would be: horse riding equipment, scooter accessories, custom helmets, t-shirt printing, or toys for 3-6 year olds. By choosing a niche you are essentially increasing your chance of success, it will also be a lot easier to source suppliers and handle the sales and logistics aspect.
You'll want to look for some reliable suppliers so that you have good products to sell. Look for suppliers within your industry and take a look at what they are offering. If you are sourcing from a different country you should research the import laws and taxes. If you don't want to hold a lot of stock then drop-shipping is also an option, you essentially buy an item from the supplier only when a customer makes the purchase from you. So it's risk-free making it a great option to get started.
So now that you have figured out what you want to sell, the next step is to figure out where to sell. Don't worry too much about this, ecommerce has become a huge operation and there are dozens of marketplaces where you can list your products for sale, even with a tight budget or no budget at all!
The two biggest ecommerce platforms in the world (eBay and Amazon) should be of most importance to you, this is where you will want to spend the majority of your time building up a reputation and establishing yourself as an expert in your niche. There are both free options and paid options on these ecommerce platforms, the best route for you will depend on your budget – you will have greater success with the paid options, but don't let it discourage you if you can't afford it.
Developing a More Professional Brand
Once you have built your brand using the popular ecommerce platforms mentioned above, you should now have a loyal customer base as well as a decent amount of capital. You should use this capital to reinvest back into your ecommerce business, generate more sales, and improve your whole ecommerce operation.
The first thing that you'll want to do is establish your self online properly, this means having a dedicated ecommerce website where you can sell your products – allowing you to move away from the platforms such as eBay and Amazon and thus save on the fees that they take. Don't completely negate these platforms though. Amazon receives an estimated 81-million US visitors per month – eBay receives even more at 105-million visitors per month.
Building an ecommerce website is a complicated process so the best option is to hire a web designer, don't try to build the website yourself. You should ask your designer to use a platform such as Magento or WooCommerce. These platforms will allow you to make minor adjustments yourself, without the help of your web designer – so you'll save money in the long-term.
Your logo and branding is another very important factor to consider. It's what your customers remember you by so you shouldn't compromise on this. Hire a professional graphic designer and have him/her craft a beautiful logo that demonstrates the personality of your ecommerce business perfectly.
The first thing that you'll want to do is establish your self online properly, this means having a dedicated ecommerce website where you can sell your products – allowing you to move away from the platforms such as eBay and Amazon and thus save on the fees that they take. Don't completely negate these platforms though. Amazon receives an estimated 81-million US visitors per month – eBay receives even more at 105-million visitors per month.
Building an ecommerce website is a complicated process so the best option is to hire a web designer, don't try to build the website yourself. You should ask your designer to use a platform such as Magento or WooCommerce. These platforms will allow you to make minor adjustments yourself, without the help of your web designer – so you'll save money in the long-term.
Your logo and branding is another very important factor to consider. It's what your customers remember you by so you shouldn't compromise on this. Hire a professional graphic designer and have him/her craft a beautiful logo that demonstrates the personality of your ecommerce business perfectly.
Defining Your Unique Selling Proposition (USP)
As you become more established you will want to focus on your unique selling proposition (USP). It's not very difficult to sell a handful of products every now and then, but scaling up your operations, bringing in more sales and more revenue is a lot more difficult and requires more planning, preparation, and more dedication to execution.
Your USP should be a factor of your ecommerce business that separates you from your competitors – a reason why your customers should buy from you instead of them. When creating your USP you will want to think about the gaps in the industry, where could it be improved? This might be something along the lines of extended warranty, faster delivery times, better customer support, or in-depth buying guides so the customer gets exactly what they need.
Many ecommerce businesses try to use price as their USP and in most cases this has a negative effect, the customers who shop around for the lowest price probably aren't the customers that you are looking for. Chances are that you aren't making enough capital just yet to obtain items at a very cheap price as this requires that you order them in huge bulk quantities. Furthermore, unless you are specifically a discount store then your customers will go elsewhere as soon as someone else is cheaper.
Your USP should be a factor of your ecommerce business that separates you from your competitors – a reason why your customers should buy from you instead of them. When creating your USP you will want to think about the gaps in the industry, where could it be improved? This might be something along the lines of extended warranty, faster delivery times, better customer support, or in-depth buying guides so the customer gets exactly what they need.
Many ecommerce businesses try to use price as their USP and in most cases this has a negative effect, the customers who shop around for the lowest price probably aren't the customers that you are looking for. Chances are that you aren't making enough capital just yet to obtain items at a very cheap price as this requires that you order them in huge bulk quantities. Furthermore, unless you are specifically a discount store then your customers will go elsewhere as soon as someone else is cheaper.
Tracking Important Data and Key Metrics
It's very important to keep track of certain data and key metrics as this will help you improve your business operations and break past any plateaus that you will experience. Looking at data means that you are looking at your business objectively, you simply can't dispute data if it is right in-front of you.
The simplest and most obvious key metric to keep a close eye on would be your conversion rate. This is the amount of visitors who will purchase from you compared to how many visitors you get to your store. For example, if 1000 people visit your store but only 20 of those visitors make a purchase, your conversion rate would be 2%. It's good to keep track of this because it determines just how valuable your website traffic really is and it can be helpful when thinking about other metrics.
Cost of Acquiring Customer (CAC) is another metric to think about, it is essentially the amount of money that you spend to get customers to purchase something from your store. For example, if you spend $2000 to get 50 visitors to purchase from your store, your CAC would be $40. The lower you can get this number, the better.
Shopping cart abandonment is also an important factor to consider as it tells you how many customers had an intent to purchase something from your store, these are considered potential customers. Make sure to keep this as low as possible, having a high rate might indicate that your website needs some adjustments.
Average Order Value (AOV) is the average amount of money that a customer will spend in your store. You always want to try to increase your AOV, perhaps by offering discounts for bulk purchases or utilizing “related products” options or something similar. Amazon does this perfectly with their “people who purchased this item also purchased:” section.
Lifetime Value (LTV) is considered to be the most important metric that exists in an ecommerce business. It's a calculation of the amount of money that one customer will spend in total, minus the cost of acquiring the customer. So for example, if a customer returns to your store four times and has spent a total of $600, their LTV would be $560 if you spent $40 acquiring that customer.
By keeping track of the data and key metrics that have been listed above you'll be able to know exactly how well your ecommerce business is doing at any stage. It can be very beneficial when thinking about scaling your business, increasing your product range, increasing revenue, bringing more traffic to your website and everything else that you can imagine.
The simplest and most obvious key metric to keep a close eye on would be your conversion rate. This is the amount of visitors who will purchase from you compared to how many visitors you get to your store. For example, if 1000 people visit your store but only 20 of those visitors make a purchase, your conversion rate would be 2%. It's good to keep track of this because it determines just how valuable your website traffic really is and it can be helpful when thinking about other metrics.
Cost of Acquiring Customer (CAC) is another metric to think about, it is essentially the amount of money that you spend to get customers to purchase something from your store. For example, if you spend $2000 to get 50 visitors to purchase from your store, your CAC would be $40. The lower you can get this number, the better.
Shopping cart abandonment is also an important factor to consider as it tells you how many customers had an intent to purchase something from your store, these are considered potential customers. Make sure to keep this as low as possible, having a high rate might indicate that your website needs some adjustments.
Average Order Value (AOV) is the average amount of money that a customer will spend in your store. You always want to try to increase your AOV, perhaps by offering discounts for bulk purchases or utilizing “related products” options or something similar. Amazon does this perfectly with their “people who purchased this item also purchased:” section.
Lifetime Value (LTV) is considered to be the most important metric that exists in an ecommerce business. It's a calculation of the amount of money that one customer will spend in total, minus the cost of acquiring the customer. So for example, if a customer returns to your store four times and has spent a total of $600, their LTV would be $560 if you spent $40 acquiring that customer.
By keeping track of the data and key metrics that have been listed above you'll be able to know exactly how well your ecommerce business is doing at any stage. It can be very beneficial when thinking about scaling your business, increasing your product range, increasing revenue, bringing more traffic to your website and everything else that you can imagine.
