How to start an ecommerce business

Share this on

Everyone has at least one great business idea. Given the size of the ecommerce industry, now may be the best time to turn it into a reality! There are countless ecommerce software tools and services available to help you start your business.

However, starting an ecommerce business is not a set-it-and-forget-it endeavor; it's a multi-step process, some of which you might not be aware of. That's why this guide will break things down and help you understand the nine steps you need to follow to make your ecommerce business ideas a reality.

How to start an ecommerce business successfully

1. Research the ecommerce market and identify your niche.

In the same way that you need to study medicine to become a successful doctor, you have to study the ecommerce market to do well in it. Check what types of products sell a lot and how many people are selling similar kinds of products. This tells you how active that niche is.

As you explore niches in the market, think about how your experience relates to them. For instance, if you love fishing, your experiences buying and working with fishing equipment could help you carve out a niche in an online outdoor activities business.

Another way to identify your niche is to find gaps in a space. What do companies in the field not do that you think could help them grow or excel? Your market research will help you find these gaps as you learn about interesting ecommerce business models in other fields that haven't crossed over yet.

Once you have identified your niche, you can start making decisions about your business. Ask yourself:

  • Will you sell products or services?
  • Will you sell physical products or digital products?
  • Where will you source your products?
  • What business model will you use (individual products, packages, subscriptions, etc.)?

You can also think about how you will find customers, what your upfront costs will look like and what regulations your product or service will have to meet.

Thinking about all of this early on helps you figure out specific goals you can set and how you will reach them.

2. Select the type of product you'll sell and make it your own.

Once you know your niche, the gaps you found in the field should guide your product idea. If you're good at spotting trends early, that can help you find openings in the market before anyone else.

Remember not to follow fads, though. Fads are fleeting novelties, so the demand for any business focusing on a fad will subside quickly as well. These opportunities are generally better as marketing opportunities.

Some ways you can spot genuine trends include:

  • Social listening. Pay attention to what people in your industry say on their social media channels. Trending hashtags and popular influencers in the industry are other good ways to find out about emerging trends.
  • Tracking search trends. High search activity in a topic indicates higher interest and problems that many people face. With tools like Google Trends, you can track the performance of different search queries. Google also shows you emerging search queries and the queries people search most often. Many online marketplaces also have search filters that let you see what products are most popular or trending.
  • Following ecommerce and aggregator websites. Following subreddits for your niche and trend-tracking websites like Trend Hunter can help you discover new trends early.

Once you have an idea of your product and the market need that it meets, it's time to flesh out your idea to make it unique. Read reviews of similar products to understand what problems they have and brainstorm ways to incorporate the feedback yourself and make a profitable product. It will perform better if it stands out against its competitors and fills a market need.

3. Develop your ecommerce business plan.

A business plan for ecommerce is a vital tool for evaluating your business and finding room for improvement. It outlines your business and its goals, breaking down its place in the industry and identifying the capital and resources you'll need to carry out your plan. It can also include your distribution channels and marketing strategies.

The key components you should include in your business plan are:

  • Executive summary. This summarizes your business in one or two pages so stakeholders briefly understand what's inside the business plan. Your summary could include an overview of what your business will do, your business goals, the products or services you sell, your target market, where you'll sell your products and your monetization strategy.
  • Company overview. This section should inform reviewers what type of business you run, your plans and why you're special. It should cover your brand name, business structure, domain name if you have one, mission statement, goals, background information (like why you came up with the business) and any team members and key roles.
  • Market analysis. Discuss your company's market potential and consumer demographic, going in-depth about customer behaviors and industry trends. Then, you should include a competitive analysis, discussing the strengths of some of your strongest competitors in the market. You can also talk about gaps they leave that you cover to set yourself apart.
  • Products and services. Here, you discuss your offerings in more detail, highlighting the general features and benefits of any products and services you'll offer. Keep this section easy to read — with nontechnical language, short paragraphs and bullet points to list characteristics. Focus on your experience in the industry and stay positive.
  • Marketing plan. Here, you will explain how you'll attract customers. A helpful framework for this is the four Ps: product, price, place and promotion. What sets your product apart? What costs go into providing the product or service, and how much will customers pay? Where will people look for your offerings, and where will they attract attention? What channels will you use to promote the business?
  • Marketing channels. Analyze which marketing channels best fit your consumer demographic. These could be paid channels like social media ads and influencer marketing or organic channels like content marketing and blogger networks.
  • Logistics and operations plan. This covers the physical needs of your business, such as warehouses and technology. You can discuss where you'll get raw materials from, how you'll produce your product or service, how you will get your product to buyers, how much inventory you'll keep in stock and where you'll store it.

4. Calculate your startup costs and determine payment solutions.

Now that you have your business plan, you can figure out the cost of starting the business. You might think that since you don't have a physical location, you have almost no costs, but you always need to pay for at least:

  • A domain name
  • Website hosting
  • Inventory
  • Payment processing

Some other optional costs to consider are:

  • A G Suite account
  • A website designer
  • Incorporation (creating an LLC or S Corp for tax purposes)
  • Logo design
  • Marketing
  • A warehouse
  • Product photos
  • Email marketing software
  • Useful apps or plugins

Then, you can think about your payment solutions. A solution that makes your customers feel unsafe about trusting you with their payment information or that worsens the customer experience can increase cart abandonment, so it's important to pick the right one.

Your payment solution should encompass these two components:

  • Merchant account. This is an account you hold directly with a bank to accept customer payments.
  • Payment gateway. This is the service that authorizes and securely processes credit card payments.

Most payment solution companies will set up a payment gateway and a merchant account as part of the same process. You could also use a payment service provider (PSP) like PayPal to receive online payments in a merchant account under the provider's terms of service. This takes much less setup.

When you pick a payment solution, consider:

  • Fees. Each option has different transactional, monthly and volume fees to compare. PSPs usually have higher fees than gateways and merchant accounts.
  • Transaction processing. It can take longer to process transactions with some solutions than others.
  • Ecommerce site support. If you've already picked an ecommerce platform, it should give you a list of the compatible solutions.
  • Integration. Some solutions are integrated, meaning that the payment takes place directly on the website. Others are hosted, which means a site redirects the customer to its own page to process the payment. Consider whether you prefer lower maintenance or more control.
  • Customer experience. A good customer experience improves your conversion rate, so try using the solution options to make sure it runs smoothly and isn't jarring. Generally, the fewer steps necessary, the better.

5. Acquire business licenses and apply for an employer identification number (EIN).

Business licenses legally permit you to operate your business and sell goods. It's generally simple to apply for them. Just follow these steps:

  1. Register your business with your state. In many states, you have to file your business with the Secretary of State's office. If you're a sole proprietor, you may need to register as an assumed name so the state recognizes your business name. If your business has more staff, you should file a certificate of formation or incorporation.
  2. Apply for an EIN. An EIN is an identifying number the IRS issues for your business. You can apply for one on the IRS website. Having an EIN can help you as you open business accounts and apply for ecommerce business licenses.
  3. Research relevant licensing requirements. Most states don't have specific requirements for ecommerce businesses, so you'll likely have to identify the type of license that best fits your business. Common types include a general business license, a home occupation permit, a federal license and sales tax permits.
  4. Apply for licenses. Depending on the permit, you may be able to apply for free, or you may have nominal filing fees. You can usually apply online, though you may have to drop off your form at city hall or your local tax office. You'll need your registration paperwork and EIN to fill out applications.

6. Choose the platform and sales channels for your online store.

Now, you can find the platform you will run your business through. There are many options available, so narrow them down with these criteria:

  • Hosting and platform ownership. You could host the platform yourself, in which case you'll have better access to data, though you will need to weigh this against the time and money you'll spend on it. Other common options to consider are cloud-hosted, open-source, software-as-a-service and headless platforms.
  • Cost of ownership. Most platforms have a monthly fee and processing costs to consider.
  • Integrations. Plugins and integrations help you evaluate a platform. Look for plugins that help with accounting, email marketing, customer loyalty programs, payment, shipping and third-party integrations.
  • Themes and user experience. Simple, elegant themes make your website more appealing, which makes it more memorable to customers.
  • Platform speed and scalability. If your page takes even five seconds to load, most people will leave it. Similarly, if the page can't handle heavy traffic, you risk losing interested customers to competitors.
  • Functionality and ease of use. If the platform isn't easy for you to use, you should find a different one.
  • Platform security. Ecommerce businesses face many security threats and issues. Make sure the platform you choose uses HTTPS servers, antivirus software, firewalls and other cybersecurity measures to keep you safe.

Next, you can explore sales channels, like:

  • Ecommerce marketplaces. These are websites like Amazon and Etsy, which facilitate your online sales for a fee. Using a marketplace lets you access a pre-existing customer base.
  • Dropshipping. In this channel, a third party manufactures the goods, carries inventory and ships products to customers for you.
  • Rental marketplaces. Some marketplaces let you rent goods to consumers. If renting is part of your business model, this might be a good option for you.

7. Build your website with search engine optimization (SEO) in mind.

SEO helps search engines index your website so that they can recommend it to people who make relevant search queries. When you build your website, keep in mind these SEO best practices:

  • Scannable content. Keep paragraphs and sentences short so that people can read your article with ease. You can use an online content grader to evaluate your content, aiming for an 8th-grade reading level.
  • Keyword optimization. Keywords are the queries people can search to find your article. Ideally, one keyword drives each article, though it's good to also include some related keywords that people also search. Make sure you use them naturally — if algorithms think you're "keyword stuffing," your rank won't improve.
  • Formatting elements. Search engines prefer sites that use HTML formatting tags, like header levels and different lists. These make your content more scannable and easier for algorithms to index.
  • Visual elements. Visual elements such as images, graphics and videos help make your content more interesting and engaging. You can also add keywords to the alt text on your images (i.e., the text that shows up if you hold the cursor over an image).
  • Backlinks. These are links to your site from other sites. Having a lot of high-quality backlinks helps you rank higher because algorithms assume this means that many sites trust your information.

8. Identify your target audience and develop a marketing strategy.

Your marketing efforts will be more effective if you direct them at a specific target audience that is more likely to want to buy your products. Figure out who would want to use your product the most and think about the demographics they fit into. You may have to divide this audience into segments, such as people over 50 and people under 25, so that you can target each segment specifically.

Then, you can develop your marketing strategy. The SEO you did helps with inbound marketing, using internal tools to catch potential customers' attention.

Some other marketing channels to consider include:

  • Social media marketing. Social media ads offer powerful targeting options that help you direct different ads to different segments of your target audience. Make sure to pick the platforms that your target audience uses most.
  • Email marketing. Email marketing helps you retain and nurture potential customers until they're ready to make a purchase. Make sure you send useful information and be sure you don't send emails too frequently, or you may end up on people's spam lists.

Make sure you understand the costs of your marketing efforts and budget before you start. Otherwise, you might end up spending more than you realize.

9. Sell your quality products and enjoy being a business owner!

Finally, your ecommerce business is ready. Track and analyze the performance of the different strategies you've used to find ways to improve on them. When customers make purchases, remember to follow up with them and ask for feedback. It may take time for you to grow, but you're well on your way now.

Create a successful ecommerce business with an end-to-end solution.

Starting an ecommerce business is a huge achievement, but it's only the first hurdle to overcome. As you continue to do business and grow, you'll keep facing new challenges.

You don't have to do it alone, though. Reach out to us at Cart.com to learn more about our end-to-end solutions that help you connect more deeply with customers and scale your business seamlessly.

Thank you! 🙌 A representative will be in touch shortly.
Oops! Something went wrong while submitting the form.

Expand your brand faster than ever