The Internet has completely revolutionized the way we communicate, the way we consume information, and of course, the way we do business.
Thanks to the Internet, more and more people are leaping and starting their online store or, in other words, their own e-commerce business.
And really, it’s easy to understand why.
With low start-up barriers, global transactions exceeding $1.2 trillion in the last year, and double-digit growth forecasts, the potential of e-commerce is truly staggering.
In the past, if you wanted to open an online store, your customer base was limited to those within a certain radius of your store. However, these days you can open your doors and reach nationally, or even internationally.
The purpose of this eCommerce Entrepreneur Guide is to educate you on all the key elements of setting up and running an eCommerce web business.
What is an e-commerce store?
Let’s start with the basics.
An e-commerce store (short for electronic commerce), is simply a platform for people to purchase products or services over the Internet or through a website. Or, in simpler words, an eCommerce store is simply an online store.
Many large online retailers, including Amazon, ASOS, and Overstock fall under the eCommerce heading, and many companies with an offline presence today also have an eCommerce arm, such as Walmart, Ikea, and American Apparel.
If you’ve ever bought anything online, you’ll know how e-commerce works from a consumer perspective. However, the focus of today’s guide is to introduce you to it from a business perspective.
Who can open an e-commerce store?
In one sentence: anyone.
The multiple barriers to entry to operating a commercial storefront model simply don’t exist when you do it online.
- You will not need to spend months looking for safe and well-located premises.
- You won’t need to secure a potentially risky long-term lease on the building, then spend a small fortune putting it up.
- You won’t need to hire a small army of workers to help you run the store.
- You won’t even have to buy all of their stock upfront—many online stores only buy inventory after they’ve made a sale, completely minimizing their risk (known as a dropshipping business model ).
With an online store, things are much easier. All you need is a website, and this will be relatively quick and easy to set up and will cost a fraction of the price that many things would in the traditional way.
Of course, some issues will need attention in an online store just as much as an offline store would. For example, you’ll still need certain levels of security and a way to process payments, but these features are often faster and cheaper to install.
With this in mind, any entrepreneur can start an eCommerce store. Finally, few people have the financial means or the risk appetite required to set up a physical store.
This has led us to a highly competitive online market, where anyone can try their luck; from small sellers of products based on a single person, to large multinationals known to all.
And of course, many of the big retailers have a presence in more than one shopping channel, known as omnichannel retail. For example, they may have an online e-commerce store, a physical store, and a catalog, and sell by direct mail, all under the same brand.
Who could deny that your e-commerce start-up may soon expand into these other areas as well?
Getting started in e-commerce
At its most basic, an e-commerce company is like any commerce business.
The business principles needed to run an offline store always apply to running an online store, although the issues faced are different.
With this in mind, the basic outline of an e-commerce business model is very similar:
- you need products to sell
- you need a place to sell them and
- you must have a marketing strategy to attract customers
For online stores, you’ll also need a strategy (logistics) to deliver the products you sell, since a customer can’t just pick them up off the shelf.
Let’s take a look at each of these concepts in turn and compare how your approach will be different from that of a brick-and-mortar store.
A product to sell
First, your eCommerce store is going to need one or several lines of products for you to sell. These can be produced internally or purchased externally.
As an online retail entrepreneur, don’t limit yourself to online vendors when it comes to sourcing your products, any offline vendor is perfectly viable. However, due to the nature of business online, most eCommerce owners often do business with other businesses online.
In many ways, the approach to finding products for an eCommerce store will be identical to that of an offline store: find the best product at the best price, simple right?
However, there is a big difference.
Digital Products Vs. Physical Products
Now, in general, the products you sell in an online store will be identical to those in an offline store: if you sell guitars, a Gibson is a Gibson, whether you buy it online or offline, right?
However, running an online store also allows you to sell digital products.
A digital good is an intangible version of a physical good in the real world: think eBooks instead of books and downloadable music and videos instead of CDs and DVDs.
These have several advantages over physical products, both from a buyer’s and a seller’s point of view.
From a buyer’s perspective, a digital product is great because it can be downloaded instantly. Without waiting several days for delivery.
For sellers, there are no shipping costs, you’ll never have to worry about running out of inventory (a download doesn’t affect stock levels), or conversely, you’ll never have too much product in inventory.
A place to sell: your website
The main difference between an eCommerce store and a brick store is where you do business.
Of course, for an eCommerce store that place is the Internet. And to do that, you’re going to need a website.
Now, your website will possibly be the most important part of your eCommerce business.
After all, your website will be the place where your customers interact and make purchases. The design of your website will greatly influence how they feel about your store and how likely they are to make that purchase.
Bottom line: if you want to run an online business, your website is something you have to do well.
Unfortunately, it’s not as simple as picking a website and running it, there are several things you need to keep in mind.
If you’ve never built a website before, the whole process can seem intimidating. However, the goal of this guide is to break down everything you need to know as an entrepreneur in simple terms, to make the process less scary and more manageable.
Content Management System
If you are new to web development, building a website from scratch seems like a daunting task.
The good news is that you don’t need programming knowledge to create your website: you can make use of what is called a Content Management System (CMS).
This essentially provides the framework for your website, allowing you to add and edit pages on your website at the click of a button – perfect if you’re looking to add and organize a full range of products.
There are several CMS available, but choosing one can be overwhelming for beginners. For simplicity, I’ll just compare two of the most widely used CMS, WordPress and Shopify.
WordPress vs. Shopify
WordPress is the most popular CMS today, providing more than 20% of solutions on the internet. It’s a self-hosted CMS, which means you’ll need your web server, but otherwise, it’s completely free.
There are two versions of WordPress, WordPress.org and WordPress.com. WordPress.com is fine for testing the waters, as it’s completely free to try (you won’t require your own host), but many limitations make it unsuitable for running an online store.
In the future, when I refer to WordPress, I am referring exclusively to WordPress.org. This is the version that can be used to create an online store.
With WordPress, you start by installing a theme for your website. A theme (or template) is the visual design used for your site. There are thousands of themes available. Some of these are completely free, while others are classified as premium themes and must be purchased.
The theme you choose will control the design of your website, although many themes have options to customize things like the color scheme. They can also be modified by hiring a developer.
With some great themes available for less than $50, you can have the foundation of a good-looking website at a relatively low price.
One of the best ways to find premium templates is to search ThemeForest, where you can see demos of all the different themes in action. The quality of themes on ThemeForest varies; so when choosing a theme, I recommend considering the number of sales, buyer star ratings, and feedback on the theme.
WordPress also allows you to install what are known as plugins, which offer very specific functionality for your website. For example, if you want to allow social media sharing on your website, you can install a plugin to add social icons to each page.
Just like with themes, there are thousands of plugins, both free and premium. If you decide to use WordPress, you will need to install an e-commerce plugin to add shopping cart functionality to your website. I’ll explain how to do this later.
If you want more help and direction in choosing a theme or plugins, there are plenty of great WordPress resources available, including theme and plugin roundups, reviews, and how-to guides. Some of the best are WP Tavern, WP Lift, and WP Explorer. If you are new to WordPress, you may find this set of introductory WordPress tutorials quite useful.
Shopify
The other CMS we talked about is Shopify.
Shopify was built specifically to power eCommerce stores and now has over 100,000 online stores.
Shopify is a hosted CMS, also known as software as a service (SaaS). It is an all-in-one solution that takes care of everything you need to run an eCommerce website.
It’s great to have the option to keep everything under one roof, but at the same time, Shopify’s service has limitations compared to WordPress, and it’s quite a bit more expensive.
Just like with WordPress, you can choose a theme, which provides the overall design of your website. There are far fewer themes available, but these were designed from an e-commerce perspective. Many of the themes can be customized within the theme framework, or you can also hire a developer to modify the theme exactly to your liking.
There are free themes available, but the premium themes are a bit more expensive, between $80 and 180 dollars, which is still considered very cheap compared to a custom version, and much cheaper than setting up a brick-and-mortar shop.
Just like WordPress, you can also add plugins to your theme, although the vast majority of these are paid plugins. With the platform dedicated solely to online stores, your website will come with a built-in shopping feature out of the box, giving you one less feature to set up.
Accommodation
Every website needs hosting. A web host stores your website on one of its servers, which means that other Internet users can access it.
Put another way: no host, no website!
Now, if you’ve decided to use Shopify, all hosting is included in your monthly plan. If you want to store more than 25 products, plans start as low as $29 per month and go as high as $179.
As for hosting, that’s pretty expensive. However, this also includes all security considerations and a shopping cart solution.
If you want to use WordPress, you will have many more hosting options. Some popular web hosts include Hostgator, Bluehost, and Siteground, with plans available from an amazingly low price starting at $3.95 per month.
There are several dedicated WordPress hosting services available; these are called “Managed WordPress Hosts”. Not only are they very fast services, but they also help you manage your website by optimizing WordPress for speed, security, and updates.
You can do all of this yourself, but it’s helpful to have specialists help you with these tasks. One of the most popular managed WordPress hosting services is WP Engine, with plans available starting at $29 per month.
Domain
Your domain name is your web address, and it’s what your customers will need to access your website, think for example www.amazon.com.
When you start using Shopify, you can use a free address, for example, www.bettysboutique.shopify.com.
While this address will do the job, it is recommended that you purchase a custom domain as soon as possible. Don’t you think www.bettysboutique.com would be much more professional?
If you want to run a proper eCommerce business, your custom domain name is a must.
You can buy a custom domain through Shopify or your chosen host for simplicity, but often the most cost-effective way is to use a different service, e.g.NameCheap (one of my favorites).
With your own domains available for less than $10 a year, you have no excuse not to invest in yours.
Shopping cart
Your eCommerce website will also need shopping cart software. This will allow users to place certain products in their “basket” before calculating the total, including shipping costs, and take the customer to the checkout, where they can pay.
If you want to use Shopify, your shopping cart solution is simple: all Shopify e-commerce stores have a built-in shopping cart feature. You can simply add your products, attach a price tag, and Shopify will allow users to add them to their cart.
With WordPress, this is a slightly more difficult task.
WordPress does not include e-commerce functionality, so you will need to install a plugin to do so.
There are several free plugins available; With over 4 million downloads, WooCommerce is the most popular and comes highly recommended.
WooCommerce also comes with several plugin extensions, some free and some paid, that allow you to add additional functionality to your store, including the ability to seamlessly integrate your chosen payment processor or set up repeat billing.
Once you’ve installed WooCommerce, you’ll be able to create product pages from your WordPress dashboard, where you can add product details, images, prices, shipping costs, and even stock levels.
As you add your products, this will also create a storefront, where users will be able to view your product catalog in a matrix, and will also allow users to add a product to their basket. WooCommerce can be tricky to find your way around, but luckily there is some very detailed documentation to help you out.
It’s worth noting that not all WordPress plugins are compatible with all themes, so make sure your theme is compatible with WooCommerce before purchasing.
Payment gateway
To run a website online, you’ll need a payment gateway to authorize and process your customers’ transactions: money isn’t transferred directly to your bank account.
After each transaction is successfully processed, the money goes to a holding account, called a merchant account, where you can then withdraw it to your own account.
If you take the self-hosted WordPress approach, you will have several options available to you.
The two most popular payment processors for WordPress users are PayPal and Stripe. PayPal has been around for a long time, and you may be familiar with this system. Stripe is newer but has the advantage of offering an on-site checkout process.
PayPal works by steering customers away from your website to a dedicated checkout page, where they can pay via their PayPal account or by entering their bank details. Stripe allows a customer to pay by card directly from your website.
From this point of view, Stripe offers a better user experience, it is a simpler process, but PayPal is easier to integrate. Nothing is stopping you from using both and in most cases, this would be the solution I recommend.
If you take the hosted approach with Shopify, your website can make use of its internal payment gateway, but you also have the option of an external solution, such as PayPal or Stripe.
It’s worth noting that the Shopify portal is only available in the US and Canada; Stripe is available in the US, Canada, UK, Australia, and much of Europe; and PayPal is available virtually anywhere in the world.
All three services are free to set up and integrate: you’ll only be charged for each successful transaction processed, with a small fee deducted from the money you receive.
Now, several factors influence the fees you pay: your location, the number of transactions you process, and your level of memberships. However, all three services start with the same fee structure for US customers, at the lowest membership type, at 2.9% + 30¢.
That means, for a $100 transaction, you’ll pay $3.20.
Please note that if a Shopify user seeks to use an external payment gateway, they will be charged an additional 0.5-2% transaction fee, depending on their monthly plan.
Website security
In addition to a payment gateway, you’ll also need site security before you can start receiving card payments from customers on your website.
You must comply with a standardized set of rules, called PCI compliance.
Several aspects of your website must be PCI-compliant: your server, your payment gateway, and your shopping cart.
The good news is that these are things you won’t have to deal with since all major hosts, payment processors, and shopping carts (the ones I’ve included in this article) are PCI-compliant.
However, in some cases, you will also need an SSL certificate for your website. An SSL certificate provides additional security for your clients by encrypting the connection between your client and your website. This is essential when dealing with sensitive information like credit card details.
Now, whether or not you will need to personally set up an SSL certificate will depend on the payment processor you use.
If you use PayPal, this is something you won’t have to worry about. Sensitive payment information is not entered on your website but is entered on PayPal’s own website, which means that PayPal must provide SSL.
Because Shopify offers a comprehensive service hosting, shopping cart, and payment gateway, they also include SSL.
Stripe users will need to take responsibility and set up their own SSL certificate. However, this is less difficult than it sounds. The simplest approach is to contact your hosting provider and purchase one from them.
If you use one of the big hosting companies, they will even take care of the installation, which means one less thing to worry about.
Marketing strategy
For a business to survive, it needs a constant flow of customers. For offline businesses, that means customers visiting your store, and for an eCommerce store, that means people visiting your website.
When you have created your website, you must develop a strategy to attract visitors.
Now, many of the marketing strategies to attract customers in the offline world will also be relevant online; Word of mouth advertising will always be powerful, and traditional print and TV ads can create interest (if you have the budget).
ECommerce stores can also make use of social networks to expand their online presence. Social media not only gives you a way to engage with your customers, but every time your company is mentioned positively, it’s essentially a golden stamp of approval: the online version of word of mouth.
People respect the opinions of their friends, so if someone references your business on Facebook, other people are likely to review it.
However, by far the main source of traffic for most eCommerce stores will come from the Google, Bing, and Yahoo search engines.
How do you get your website to appear on the search engine results page (SERP)?
There are two solutions: paid and free.
The paid solution is the fastest way to get your website featured prominently on the SERPs. All search engines have a set of paid results for each search query, with the most popular being Google AdWords.
You analyze the types of phrases your potential customers might be searching for on Google, then you bid on that phrase. For example, a hardware store might bid on search terms like ” buy power tools .”
The more you bid, the higher the visibility of your website will be. And you only pay each time a user clicks on your link, rather than over a set period.
Organic or natural positioning is a much longer process, but much more lucrative, not to mention cost-effective. In the online world, it is known as SEO or search engine optimization.
Each search engine has its own algorithm that determines how websites rank for each search query. You can optimize your website to rank better for the keywords you want to rank for.
SEO is a long topic, beyond the scope of this article, but one of the best ways to help your website rank higher is to get other websites to link to it, i.e. link to it from their posts.
Each link tells Google that your website must be of high quality by having numerous referring links, and this makes Google search and displays your website more favorably.
If you can rank well for several key keywords, you’ll have the regular influx of traffic your eCommerce store needs to survive.
If you want to learn more about SEO, Moz is a fantastic resource.
Shipping logistics
The other big difference between traditional commerce and e-commerce is how customers receive their products.
With an offline store, it’s easy: customers simply pick up products from the shelf (or order them at the counter), take them to the register to pay, and then walk out of the store with them.
With an online store, you will have to find a solution to deliver your products to your customers. If you’re not careful, this can take a lot of time and effort; making several trips to the post office each day is the least recommended!
The good news is that there are a wide variety of sophisticated solutions available to you.
By now, everyone loves dedicated courier services for shipping and delivery. This works by centralizing all aspects of shipping: simply have your suppliers ship their products directly to a fulfillment center, where your inventory is stored, ready to be packed, and shipped to your customers upon successful ordering.
This takes you completely out of the shipping equation, giving you more time to focus on the more productive tasks (selling to be exact!).
Dedicated delivery services have been prominent recently, with Amazon announcing its service dubbed Amazon FBA, and Shopify also announcing its service for users.
WordPress users shouldn’t feel left out, as several shipping startups are popping up for entrepreneurs to take advantage of. These include Cloud Fulfillment as well as the Amazon service (as long as you also run an Amazon store).
eCommerce stores can also use what is known as a dropshipping business model, which we have already briefly mentioned.
With this approach, your suppliers ship the products directly to your customer. From their point of view, this is highly beneficial: you don’t have to worry about buying 1,000 units in advance; the supplier simply ships after each order.
This minimizes the risk of holding unwanted stock, reduces shipping costs and time needed, and also eliminates storage costs.
Concluding this e-commerce guide for entrepreneurs
With this information, you should have everything you need to get your own eCommerce business off the ground.
If you think it’s too late for the party, you couldn’t be more wrong. The future of eCommerce is rosy, and there are several exciting challenges ahead.
For example, today Internet users on mobile devices and tablets outnumber users on old-fashioned desktop computers, and mobile device users spend more time on mobile apps than on the desktop web.
How will the world of e-commerce adapt to changing consumer preferences for how they want to shop online?
If the rise of 3D printing will mean an explosion in demand for personalized products, how will online retailers handle this?
Many forecasters believe this will be the end of fixed SKUs in favor of the infinitely customizable product range.
Could this also open the door for independent product designers to sell their products, in the same way that Kindle created a marketplace for self-published authors?
And what about cryptocurrencies? With the rise in popularity of Bitcoin, several large online retailers, most notably Dell, have invested heavily in cryptocurrency infrastructure.
How will other online stores react to the increasing pressure from consumers to integrate cryptocurrency as a valid payment method?
From both a consumer perspective and a business perspective, there are certainly exciting times ahead for e-commerce.
