How to Start an E-Commerce Business: A Step-by-Step Guide – NerdWallet

much like starting any business, learning how to start an e-commerce business is n’t constantly slowly — but setting up, launching and maintaining sites where entrepreneurs, designers, and creators of all sorts can sell their wares is more attainable nowadays than ever. Ecommerce businesses — which are businesses that air goods, services, and funds over the internet — deviate in size and setting, from retail behemoths like Amazon to Etsy craft sites. Online shopping is just one of many areas that have seen across-the-board emergence over the past five years. According to a reputation from the U.S. Census Bureau, in the third quarter of 2019 alone, U.S. e-commerce sales amounted to approximately $ 154.5 billion, accounting for 11.2 % of all retail sales in the nation. Depending on your goals, it might make sense to start an e-commerce occupation. After all, without the indigence for a brick-and-mortar localization, e-commerce businesses offer greater flexibility, affordability, and opportunity for many entrepreneurs. So how precisely do you start an on-line business ? This steer is hera to help. We’ll break down how to start an e-commerce commercial enterprise in seven dim-witted steps — so that you have all the information you need to get your on-line business up and running in no time.

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How to start an e-commerce business

Although there are celebrated differences in starting an e-commerce business compared with starting a brick-and-mortar business — there are besides a number of similarities. As we ‘ll discuss below, many of the plan and legal steps you ‘ll need to take will follow the like process ( more or less ) than any other business. however, once it ‘s time to start your mathematical process, you ‘ll see how different starting an e-commerce commercial enterprise can be.

Step 1: Research the e-commerce space and find your niche

The first gear step in learning how to start an e-commerce business is performing the necessary research. just as if you were starting a restaurant and looking into different locations, food options, and themes, you ‘ll want to investigate the e-commerce sphere you ‘re matter to in and make some decisions with respect to your specific commercial enterprise. For exercise, you ‘ll want to consider what precisely your e-commerce occupation is going to offer. Will you be selling products or services ? If you ‘re selling products, are they physical or digital ? Where will you reference your products ? Along these lines, you ‘ll besides want to think about the type of business exemplar you want to employ — will you offer individual products, packages, subscriptions, or something else ? additionally, you ‘ll want to think on a broader scale during this process arsenic well : How will you get your products or services to your customers ? What will your startup costs look like ? Are there legal or early regulations on your product or service that you need to keep in mind ? These lines of questioning, among others, will be integral to the begin of your occupation and will help you start to create and write your business plan. This action will give you a better common sense of your specific goals and how you ‘re going to reach them. particularly in the e-commerce space, an important separate of this step is finding your recess. Although the growth of the e-commerce industry is a great benefit for those looking to learn how to start an e-commerce business, it besides means more competition. You ‘ll want to perform rival inquiry and find a space where you think you can establish your brand and find success in selling products and services.

Step 2: Select your business name and choose a legal structure

once you ‘ve solidified the plan for your e-commerce business, the future step is to choose a list. Like any early business, you ‘ll want to choose a name that ‘s alone, but besides that clearly indicates what your business is or does. You ‘ll probable want to consult your local repository of state ‘s web site, angstrom well as the U.S. Patent and Trademark Office to ensure that you ‘re not choosing a occupation mention that ‘s already claimed by another company. Although you wo n’t want to invest excessively much time on a web site quite yet, it will be worthwhile to check to see if your likely business world name is available. If your knowledge domain name is presently being used, you may consider a unlike business name, or a different structure, such as “ yourbusinessname.co ” rather of “ yourbusinessname.com. ” future, choose your commercial enterprise ‘s legal structure. The business entity type you pick will have authoritative legal and fiscal implications for your e-commerce operation. broadly, you ‘ll choose to create a sole proprietorship, general partnership, LLC, or corporation. There are benefits and drawbacks to each of these entity types, so you may decide to consult an lawyer or another legal professional for advice on the best option for your business. If you choose to start a sole proprietorship or general partnership, you wo n’t actually have to register in the state where you ‘re operating. alternatively, your commercial enterprise will be associated legally under your individual name, meaning if you want to operate under the list you ‘ve chosen, you ‘ll need to need to file a DBA or “ doing business as ” application with your local politics .

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Step 3: Apply for an EIN

future, you ‘ll want to apply for an EIN, or employer identification count, for your e-commerce occupation. Although not all business entity types are required to have an EIN, this nine-digit count can be useful to help you separate your personal and business finances. Plus, you can apply for an EIN from the IRS, for free — either on-line, by mail, facsimile, or phone. Since you ‘re learning how to start an e-commerce business, you ‘ll very likely lack to apply for this clientele tax ID on-line, and once you do, you ‘ll receive your number immediately .how to start an ecommerce business EIN You can use this online application to apply for an EIN for your e-commerce business. Source: IRS.gov

Step 4: Obtain business permits and licenses

After you ‘ve applied for your EIN, you ‘ll now want to obtain any business licenses or permits needed to operate legally within your city and submit. As we mentioned above, if you ‘ve established your e-commerce business as a sole proprietorship or general partnership, you do n’t actually need to register your business with the state — unless you ‘re filing a DBA to legally operate under a specific occupation diagnose. For the other business entity types, however, you will need to register your business with your express and receive a general operate license. Depending on where your business is located, you may besides need to acquire a local operate on license ampere well. by and large, because most e-commerce businesses are home-based, they do not require as many occupation licenses and permits as brick-and-mortar stores. however, you ‘ll want to determine what the specific requirements are in your area — you can normally find this data on-line via your state or local government web site. For exemplar, most locations require that home-based occupation owners receive a home occupation let to legally operate. This character of permit just shows that by operating your occupation out of your home, you are n’t adding traffic, noise, or baffling conditions to your localization. Some other types of business licenses and permits that you may need admit :

  • Professional and barter licenses for certain industries .
  • Sales tax permits .
  • Health, safety, and environmental permits .
  • signage permits .
  • building and construction permits .

Step 5: Choose an e-commerce platform and create your website

At this point, you ‘ve completed the paperwork required to register and legally start your e-commerce business. In this way, the majority of our steps therefore far have mirrored the process of starting a brick-and-mortar commercial enterprise. now, however, alternatively of searching for a location and organize to set up up your forcible memory, you ‘ll start creating your web site and on-line store. Like a physical shopfront, this web site will be the side of your commercial enterprise — it ‘s what your customers will see first and what they ‘ll use to browse and purchases your products or services. With this in mind, creating your web site will be one of the most significant parts of starting your e-commerce business. You ‘ll want to consider a few different points as you develop your on-line shopfront : first, you ‘ll want to think about your domain name, as we mentioned above. You ‘ll want your sphere name to ( at least closely ) match your business name. Along these lines, and possibly your most significant decision will be choosing an e-commerce platform. Whether an all-in-one software, like Shopify, or an open-source platform, like Magento, your e-commerce platform will be the foundation you use to build and develop your on-line storehouse. Most e-commerce platforms not alone allow you to create and launch your on-line store, but besides customize your invention, add your domain ( or purchase one ), wield armory, take and ship orders, receive payment, and more. Although there are hundreds of these platforms available on the market, you might consider any of the pursuit popular solutions for starting your e-commerce business : Shopify possibly the most well-known and popular e-commerce software out there, Shopify offers an across-the-board, user-friendly solution with a variety of add-ons. You can purchase a Shopify subscription in one of four plans, starting with Shopify Lite at $ 9 per calendar month ( this plan does n’t include a fully on-line memory ). WooCommerce If you already have started a WordPress site, or are familiar with the platform, you can download WooCommerce to start selling on your WordPress locate. This circuit board is open-source, free to download and includes the full range of e-commerce features. Compared with Shopify, however, WooCommerce is best-suited for business owners who have some technical cognition to take advantage of its open-source nature. Squarespace Most much thought of as web site builder, Squarespace besides offers e-commerce capabilities and is known for its advanced templates. You can choose from two eCommerce-specific plans from Squarespace — Basic at $ 26 per calendar month or Advanced at $ 40 per month. Like Shopify, Squarespace is user-friendly and can accommodate clientele owners of all technical skill levels. however, as a web site builder first, Squarespace may not offer as many features, tools, or add-ons as some other alternatives. Magento ultimately, if you want to be able to customize every aspect of your on-line storehouse, you might choose to use the open-source adaptation of Magento. With this e-commerce platform, you can manipulate every component and customize your web site — but you besides must have the technical skill ( or pay for it ) to do indeed. Although it ‘s safe to say this chopine is n’t typically suited for e-commerce beginners, if do have the technical skill needed, or the budget to pay to work with a developer, you ‘ll find that Magento probably offers the most of any open-source solution on the market — plus, it ‘s detached to download. As you can see, there is a lot involved with this step and a kind of crucial considerations to take when choosing the correct chopine for your e-commerce business. You ‘ll want to think about price, features, serviceability, and more — ultimately, as the anchor of your e-commerce business you ‘ll need a functional system that allows you to get up and running and manage your operations on a daily basis. once you ‘ve decided which solution is right for you, the adjacent thing you ‘ll need to do is actually exploit on customizing and launching your web site. You ‘ll want to think about how you want your on-line store organized, what you want the blueprint to look like, what colors you want to use, etc. Depending on your platform and budget, you may decide to create and launch your web site yourself, or you might invest in a professional architect or developer for aid.

Step 6: Source or develop (and list) products

After you ‘ve chosen your e-commerce platform and started your web site, you ‘ve about reached the end of the work. At this point, you ‘ll need to actually source the products you ‘re going to sell. You should have already thought about how you ‘re going to go about this process when you performed your research in step one. You may make your own products, informant them from distributors, or — if you ‘re selling your own services, like as a adviser, for model, you may merely have to describe and list these services on your occupation web site. If you ‘re selling products, as you might imagine, this step will be more complex, as you ‘ll need to consider the stock you want to start out, arsenic well as what these startup costs will look like. You ‘ll besides want to make sure that you take the clock to list your inventory on your on-line store — thinking about the customer experience, SEO, and the way the process will work from when a customer purchases a product to when they actually receive that merchandise.

Step 7: Market your e-commerce business

There you have it — you ‘ve learned how to start an e-commerce clientele. now that you have your products or services prepared and listed on your on-line store, your web site is up and running, you ‘re ready to start serving customers. In ordering to do this, of course, you ‘ll need to properly grocery store your e-commerce clientele. There are a variety show of marketing strategies you might decide to utilize — Google ads, social media ads, word of mouth, and more. At the most basic charge, you ‘ll want to optimize your business web site for SEO and take advantage of any on-line market tools that are included within your e-commerce platform. As your e-commerce commercial enterprise is up and running and you start to receive orders, you ‘ll want to keep track of which marketing tactics are working and which are n’t — specially if you ‘re investing money in them. As time progresses, you ‘ll be able to adjust and change your commercialize strategy to find what works best for your occupation .how to start an ecommerce business shopify marketing An example of a Facebook marketing campaign on Shopify. Source: Shopify.com

How much does it cost to start an e-commerce business?

then, now that we ‘ve gone through each of our steps involved in how to start an e-commerce commercial enterprise, you may still be curious about one crucial factor : cost. As you might imagine, by starting an on-line business, you ‘ll be saving on a variety show of costs that are associated with brick-and-mortar stores — rent, property indemnity, furniture, and more. however, although it ‘s possibly easier to fund an e-commerce commercial enterprise on a besotted budget, there are even a number of different costs that will be required to get started. As is the subject with any business, it ‘s unmanageable to determine precisely how much it will cost to start your e-commerce business. Your inauguration costs will largely depend on the type of e-commerce business you ‘re starting, the software or chopine you choose, how you ‘re sourcing your products, among early factors. With this in mind, you ‘ll likely want to think about your budget carefully as you start out and keep track of all of your expenses along the way. specifically, you ‘ll want to consider the succeed costs :

  • business licenses and permits : Depending on your entity type, location, and what you ‘re selling, you can face a range of costs for license and permits — some states charge low fees, anywhere from $ 10 to $ 50, where others can charge a few hundred dollars for incorporate .
  • Ecommerce software : Although it may be unblock to download an open-source platform, there will be other costs associated with this type of solution ( developer fees, hosting, add-ons, etc ). For an across-the-board platform, on the early hand, you ‘ll be able to find some of the most basic options at low prices ( $ 12 per calendar month for Square Online Store, for exemplar ). More advance and expansive solutions will require greater costs, with Shopify Advanced capping at $ 300 per month .
  • Domain name and host : Some e-commerce solutions will include a world name or host within the cost of the platform and some will allow you to purchase your domain identify through them. If you need to purchase your own world diagnose and host, however, you can expect to pay anywhere from $ 1 per year for the world to around $ 15 per year and an median of $ 30 per calendar month for hosting .
  • requital serve : To accept payments online, you ‘ll need to work with a payment processor like Square or Stripe. once again, some e-commerce software solutions will include their own payment serve with the platform, whereas others will allow you to integrate with your prefer system. generally, you ‘ll pay about 2.9 % plus $ 0.30 per transaction that is made at your store .
  • armory and ship : Depending on what you ‘re selling, your inventory and embark costs can range drastically. however, of all the costs we ‘ve discussed therefore far, your initial investing for inventory will likely be your greatest. You ‘ll want to purchase inventory cautiously, specially when you ‘re inaugural starting out — you do n’t want to spend excessively a lot money on products you wo n’t be able to sell. Your ship costs, of course, will depend on your sales, the shipping services you use, the size of the products you ‘re sending, and the transport speed options you offer to customers .
  • commercialize and ad : As a general govern of thumb, it ‘s safe to budget about 6 % or 7 % of your arrant gross for selling and advertising. As you ‘re starting out, this can be unmanageable to estimate, so you ‘ll surely want to take advantage of any free commercialize and advertise options you have available. then, once you have a better idea of what works well for your e-commerce occupation, you can start exploring paid options for promoting your store .

You might besides incur extra costs for things like equipment, business insurance, employees, consultants, and more. ultimately, as Roxanne King, owner of The Holistic Mama e-commerce site, tells us, although it may be tempting to choose cheaper options for e-commerce builders and other tools, some extra fees are ineluctable and some are worth investing in. As an model, King uses extra apps with her Shopify storehouse, like an auto-ship feature and up-sell pop-ups that monetary value an extra $ 50 per month, which she feels are worth the investment.

Tips for starting an e-commerce business

As with launching any newly business, starting an e-commerce business can, at times, feel consuming and nerve-racking. As function of the on-line sell community, you ‘ll have entree to a kind of entrepreneurs and clientele owners who will very likely be bequeath to offer their tips and best practices to help you as you start out. When we talked to Roxanne King, owner of The Holistic Mama, we had her share three of her tips for achiever :

1.  Start simple

back in 2011, King — already a prolific goodly living blogger — began creating and refining her own natural skin care products at home in the wake up of a pregnancy and years of issues with preservative-laden commercial products. It wasn ’ triiodothyronine until a couple of years by and by that she made the transition from giving out her homemade cleansers as gifts to selling them in farmer ’ mho markets and on-line — this was her beginning to starting an e-commerce business. “ I would barely call it a market in the beginning. It was a page on my web log that I named ‘ Store ’ and I sold only one product for a few months, ” King said. “ There was a release for people to pay with PayPal lone, which I got using PayPal ’ s site and copy-pasted onto my WordPress web log. ” Although she credits her minor start as character of the reason for her future success — she was able to refine the process of selling and shipping before moving on to larger-scale sell — and finally, she needed a more functional and impregnable platform — she now uses Shopify .how to start an ecommerce business the holistic mama Here’s an example of what King’s e-commerce store looks like today. Source: The Holistic Mama

2. Share your business across multiple channels

King credits “ incidentally ” having a blog two years before opening her store with helping jumpstart her business, and recommends others do the same. “ I had so many followers already that when I offered a product for the first clock time, customers already trusted me, ” she said. In this way, sharing your commercial enterprise, or post, across social media channels like Facebook, Instagram, Twitter, and Snapchat can be peculiarly utilitarian when you ‘re just starting your e-commerce operation. These kinds of early market are free and can be used to drop hints and build exhilaration about approaching launches or product reveals.

3. Invest in multichannel selling

King ’ second Holistic Mama products are now carried at Whole Foods a well as on her expanded shop web site. She besides carries some of her products on Amazon as a third-party seller. Small-business owners who have their own web site but besides sell on Amazon — much seen as a rival — are just covering every corner of the market. “ Amazon is a very little share of my sales, but it ‘s important to be there because some people only shop on Amazon, ” King said. Plus, there are other benefits to selling through a larger release like Amazon, including the ability to test whether your product will be adenine democratic as you predict, lower shipping rates if you frequently use fulfillment by Amazon, and a built-in believe factor that frequently facilitates purchasing by customers on the Amazon marketplace. Some consumers are still wary of on-line shopping, but trust that an Amazon-vetted seller will fulfill their order in a timely manner .

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Although maintaining your own storehouse and sight is overriding to starting an e-commerce business, you besides should n’t rule out using larger platforms to help elevate your sales and brand name.

The bottom line

There are enough of advantages to starting an e-commerce business rather of a brick-and-mortar one — the initial investment is much lower, you can begin big or small, and your on-line store can operate 24 hours a day, seven days a week, for customers all over the state ( or the world, if you ’ ra willing to ship that far ). It ’ second besides much easier and less costly to expand operations if need be — all making starting an e-commerce business all the more worthwhile for aspiring entrepreneurs. There are, however, significant steps to take and investments to make if you want your business to emerge as an internet success story. You should treat your e-commerce web site like any other business — persist compliant with tax laws, obtain the necessary permits, induct in customer retentiveness and communication, and don ’ metric ton forget about building a mobile-friendly chopine : King says 60 % of her sales come through mobile devices.

ultimately, King gives future e-commerce business owners this final examination word of advice : “ With e-commerce, you actually need to build up faith, because people are n’t seeing you in person … so they could be doubting. The estimable thing is, with blogs and sociable media, it ‘s easier than always to build that believe. Give them an inside look at your life and your business, and they ‘ll want to support you. ” This article originally appeared on JustBusiness, a subordinate of NerdWallet .

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