Some start out looking for an alternative income. Some of us launch stores because we just have to get our amazing product out there. Many of us take steps to starting an ecommerce business just as a hobby but begin to enjoy it so much, we leave our day jobs to be full-time merchants!
Whatever the motivation, there are several benefits to owning an online store, and several points to note before starting. Sadly, ecommerce as an industry has a failure rate of 80-90%, depending on who you ask. Compared to the retail industry with a 53% failure rate, such a high number of online stores going under is concerning.
You won’t be part of that massive number, because you’re here preparing and researching what to know before starting an ecommerce business! Let us answer your first question, about online store launches:
What to know before starting an ecommerce
Ready to take note of the right steps to starting an ecommerce business, and succeeding? We asked business and ecommerce experts for their tips.
Product research for a new venture
The first thing you should be clear about is what you are going to sell. Are you going to offer a product or a service? This is one of the most difficult questions to answer but it is essential for the development of your business.
As you wonder what is the best ecommerce business to start, let us tell you: Choosing one product can be complex as there is a lot of supply, and therefore competition, in the market. You are better off choosing a niche, rather than one product.
However, there are always niches where you can find opportunities: Katharina Schumacher, a Partner at McKinsey cites home and garden as being slower to move online: only “20 percent of the industry’s SMEs […] participate in e-commerce, compared with 40 to 45 percent of large companies.
This kind of information is exactly what you’re looking for when deciding what to sell in an online store, be it service or product.
Once you’ve narrowed down a niche that interests you, ask yourself:
What problem do customers have?
Design a product or make something locally accessible that solves that problem.
Do existing products or services solve these problems?
There may already be a solution to these problems on the market, but customers may not be happy and continue to look for alternatives. You’ll uncover discontent by reading customer reviews. In this case, there is an opening to offer something cheaper, better, or more aligned with their values.
What market trends are emerging?
Keeping up to date with what is happening in the world is key to anticipating the demand for certain products or services. As quarantine loomed and countries required mask usage, the textile and medical supply companies that pivoted to meet demand flourished. To research trends, simply read the news and social networks. This is known as social listening.
Do I have market research to ensure viability?
By viability, we mean the potential of a specific market. Nobody wants to launch an online store in a market that’s saturated or dying. Research these factors:
Is the market big enough for a new entrant or will you need to bump a competitor out? The latter is difficult, and makes success less probable as a new online store.
You need to know the strengths and weaknesses of your competition to know how you can differentiate yourselves from them.
Define a target audience that will find your product or service useful and whether they have the economic capacity to acquire it or not
Analyze if there is already demand for a product. If not, you might open the market and dominate it as the OG. However, you will need to spend months educating people on a need they are not looking to solve.
Both innovating a new market and entering an existing one have their challenges. The key is to know if either way, you can generate a profit margin. You might need to cut expenses such as product design, inventory management, and lagging AOV marketing campaigns to stay in the game long enough, so consider which battle you prefer to face!
A plan must begin from the problem you want to solve, your mission. This is your “why” as Simon Sinek so famously described.
From this, you can gauge the “who” also known as your audience, and the description of the product or service to solve the problem is your “what.”
As you describe your product in a business plan, define its competitive advantages against other brands, similar products, and brands that might enter the market soon.
While many business owners shirk plans, this likely has more to do with the type of personality to start a business than effectiveness. Yes, business plans should flex as you learn more and the market changes. This is not, however, an excuse not to have one. Prepare ahead, plan, and pivot as required!
You need to define your business model early to estimate how much it’ll cost to start your ecommerce business, which partners you need to seek, and how long it will take to see real results.
Brand image and name
Your branding can be the difference between a good business and a game changer. Plan out the following and then ask for feedback from many people who you consider your target audience:
- Brand statement or tagline
It’s worth hiring a professional to design your brand as your entire image is hard to change later on, and worth doing right straight away.
Choosing a name for an online store is not to be taken lightly or left to the last minute! Carry out a preliminary investigation to ensure there are no other trademarks registered with the name you like, and choose a name that suits your niche, with which your clients can feel identified.
A store name must be: original, relatable for your audience, and easy to remember.
Here’s what you need to know before starting an ecommerce business: some boring paperwork is required. Let’s get you started to avoid headaches later on!
Register your brand to avoid legal problems down the line. Also investigate whether it is necessary to obtain operating licenses and other types of permits. Each country has specific legislation regarding the sale of products and taxes.
Darren DeMatas wrote about what’s needed in the US for Ecommerce CEO, namely:
- Business Operation License or a Seller’s License.
Online store owners should also look into:
- Doing Business As (or DBA) License
- Employer Identification Number (an EIN)
- Sales Tax License
- Home Occupation Permit
- Occupational License
Lastly, you need to register your store’s domain. When possible, your domain should be the same as your brand name so that customers can find you easily once they know your brand.
If you plan to use Shopify to host your store, you can use their domain checker to find a website that’s available, and register it to your store.
Now that you have decided on your brand name and registered it along with your domain, you can refer back to your branding to create an online store.
Your webpage is akin to a storefront in a shopping mall. It should draw customers in with enticing designs that do not overwhelm the eye. If you lack the knowledge or resources to create a website from scratch, there are many design platforms, such as Wix and Squarespace, available so you can simply build and manage your online store.
With the help of these tools, you can accept and send orders, receive payments and even manage your inventory. Even if you decide to hire a web developer or make your site alone, these sites are good places to start your research on to know before starting an ecommerce business.
Once you’ve created your store, planned your service or sourced your product, and ensured all the paperwork is filled out, you can start marketing your new business to potential customers to get your first sales.
Bring on virtual ecommerce experts
Creating an online store is rewarding. If you choose a product you love to sell, making content to promote it won’t feel like work. Moreover you can choose who you work with, because you’re in charge! So, why not choose to work with the best in the marketing business?
Designed by ecommerce experts, Aument will drive your first sales in no time. Our platform does all the heavy lifting on the marketing side, you simply decide when and how.
When you launch your store, keep us in mind! In the meantime, check out this free, simple guide on the 6 steps to starting an ecommerce business successfully.