Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on November 18, 2021 Updated on February 29, 2024
$2,200 - $7,500
$73,000 - $365,000 p.a.
Time to build
$23,800 - $138,800 p.a.
We all make online purchases, and these days more than ever — that’s why ecommerce is big business, generating trillions of dollars in revenue each year. If you have an intriguing idea for a new product or service, one of the best ways to offer it to the world is via the internet.
Building a successful ecommerce business may seem overwhelming at first, and there’s little doubt that achieving your vision will require patience, determination, and hard work.
The key is to gain as much knowledge as possible before you start, helping you avoid the most common missteps and move through the process as smoothly as possible. You’ve come to the right place, as this article details each of the 13 steps you will take to develop and launch your ecommerce store.
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
Starting an ecommerce business requires a great deal of time and effort, not to mention financing. Before you dive in, you need to fully understand what is involved. Launching your own business represents a great risk, so educating yourself beforehand is a must.
Pros and Cons
Every business presents positives and negatives, which you should carefully weigh before making a decision. Here are some basic pros and cons of starting and running an ecommerce business.
The internet is accessible around the world; you’ll have a global market
Flexibility, comfort – launch your business in your pajamas, working from home
Low overhead means real profit potential
With no real-world store, expanding your services or product line is easy
Competition – ease of entry has created a crowded ecommerce marketplace
Costly marketing will be required at launch, curbing initial profits
Establishing a reputation and making real money will take time
Ecommerce industry trends
Ecommerce sales in the US have been increasing since the late 1990s, when the Dot Com boom brought the value past $1 billion, according to market information researcher IBISWorld.
Setting aside the pandemic, ecommerce will continue to grow as more people around the world gain reliable internet access. Mobile commerce is growing as well, thanks to increased use of mobile devices, further expanding the ecommerce market.
Industry size and growth
Industry size and past growth – Ecommerce sales in the US have grown nearly 14% per year over the five years from 2017 to 2022, including a 30% surge at the onset of the COVID-19 pandemic in 2020. The market is estimated to be valued at $800 billion.((https://www.ibisworld.com/us/bed/e-commerce-sales/88088/))
How much does it cost to start an ecommerce business?
The start-up costs for an ecommerce business range from $2,200 to $7,500, according to Step By Step Research, with the website usually being the largest investment. You could reduce expenses significantly by starting your business on an online marketplace like Amazon and gaining some recognition before launching your own online shop.
Setting up a business name and corporation
$200 - $200
Business licenses and permits
$200 - $300
Website setup with online purchasing capabilities
$1,000 - $5,000
Initial Marketing Budget
$200 - $500
$500 - $1,000
$2,200 - $7,500
How much can you earn from an ecommerce business?
Your profit will vary depending on:
The number of customers and average purchase size
Expenses, particularly if you hire employees
Product types offered, and markup
The average gross profit margin for an online retail business is 40%, with the primary expenses being website hosting, insurance, and marketing.
When you launch, if you can sell $200 in products per day, revenue for the first year will be $73,000 and gross profit, as per the 40% average, will be $29,200. Assuming no employees, your monthly expenses may be around $450, leaving you with a net profit of $23,800.
As your brand gains recognition, you’ll generate more traffic and repeat customers, potentially leading to $1,000 in daily sales. This would result in $365,000 in annual revenue, and $146,000 in gross profit. Putting monthly expenses at $600, your net profit would be $138,800. Not a bad year at all.
For a successful site, the profit potential is limitless!
What barriers to entry are there?
Ecommerce presents few barriers to entry. Your biggest challenges will be:
Standing out from the competition
Early marketing costs to gain recognition and build brand
Finding a product with high demand
Related Business Ideas
If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
Now that you know what is involved in starting an ecommerce business, it’s time to further develop your idea in preparation to enter a competitive marketplace.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Identify an opportunity – products to sell
Here are the factors to consider when doing the research and deciding on the products that you want to sell:
You probably have a product or product line in mind, but you should also consider what related products you might offer. When Amazon first launched it just sold books. Music and videos appeared four years later, and just about everything else has followed.
Your ecommerce site may also be able to offer a collection of related products, which could significantly increase your average price per sale. Set aside some time to think about it and make a list of all the products even remotely related to your main product, then go through the list and determine which might be a good fit for your site.
Once you’ve pinpointed the products you want to sell, the next vital step is to figure out how you’ll acquire them.
If you’re sourcing products:
Identify reliable suppliers: Utilize platforms like Alibaba or ThomasNet to find reputable manufacturers. Check reviews, ask for samples, and communicate clearly to ensure product quality.
Negotiate terms smartly: Don’t shy away from negotiating prices, payment terms, and minimum order quantities. Your aim is to secure a deal that safeguards your cash flow.
Quality control is key: Establish stringent quality control processes, either by visiting the manufacturer in person or hiring a third-party inspection company.
If you’re manufacturing products:
Prototype and test: Create a prototype of your product and test it extensively. This step is crucial to iron out any issues before mass production.
Find a production partner: Look for local manufacturers or workshops that can handle small batch production. This approach reduces risk and helps in maintaining quality.
Calculate costs precisely: Ensure you have a clear understanding of production costs, including materials, labor, and overheads. This clarity is crucial for pricing your products right.
Hybrid approach (sourcing + customization):
Personalize products: Source basic versions of your product and add unique touches to differentiate your brand. This could be as simple as unique packaging or as complex as custom designs.
Focus on branding: Use this opportunity to build a strong brand. Even if the product itself isn’t unique, your brand’s story and presentation should be.
Identify your target market
Your target market will depend on your product. Once you have determined who is most likely to buy and rely on your product, you can target your marketing to that group.
For example, if your product is shoes targeting a younger audience, you can create content for your site targeted to those people. You can also advertise on social media sites that are more popular with younger people, like Instagram and TikTok, and frame your messaging for youth.
How much should you charge for your products?
Prices are dependent on the type of product being sold and how it’s positioned. You might use a value-based strategy, in which your good has a lower price point than similar products. Or you might use a perceived value strategy and market your product as being worth more than similar products.
When launching an e-commerce business, the virtual nature of your store means that your physical premises take on a different role. Rather than customer-facing retail space, you’re looking at storage, office space, or even just a good setup at home.
Drawing from extensive experience in e-commerce startups, here’s how to make the best choice for your business’s unique needs.
If you require warehouse space:
Strategically located: Opt for a location with easy access to major transportation routes. This ensures efficiency in receiving stock and dispatching orders.
Scalability is crucial: Choose a space that can grow with your business. Avoid long-term leases that might limit your scalability options.
Security and safety: Ensure the premises are secure and meet all safety standards, protecting both your stock and any staff.
If you’re operating from home:
Dedicated workspace: Establish a specific area of your home as your workspace. This helps in maintaining a work-life balance and keeps you organized.
Consider Sstorage Solutions: Invest in efficient storage solutions if you’re holding stock at home, ensuring products are kept in perfect condition.
Check zoning regulations: Ensure that running a business from your home complies with local zoning laws to avoid any legal issues.
Leveraging a fulfillment center is ideal for e-commerce sellers aiming to outsource inventory storage and order fulfillment. By entering a contract with a reliable third-party logistics company, you can ensure efficient product handling and timely deliveries, freeing up resources to focus on growing your business and enhancing customer experience.
Step 3: Brainstorm an Ecommerce Business Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that is short and easy to remember — think of Zoom, Google, Amazon, Uber — since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some suggestions for brainstorming your business name:
Short, unique, and catchy names tend to stand out
Names that are easy to say and spell tend to do better
The name should be relevant to your product or service offerings
Ask around — family, friends, colleagues, social media — for name suggestions
Placing the product name or related words in the business name boosts SEO
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Step 4: Build an Ecommerce Store
Establishing your online presence through an ecommerce store is the most important aspect for your store’s success. Follow these essential steps to create a robust and user-friendly shopping platform:
1. Decide and Purchase a Domain Name
Secure a short, memorable domain name that reflects your brand. Typically, businesses opt for a ‘.com’ extension, as it’s widely recognized. Check the availability of desired domain names using our Domain Name Search tool below.
Choose a platform that suits your budget and customization needs. Popular options include Shopify, Magento, and WooCommerce. Evaluate their features and scalability to find your best fit.
Most of these ecommerce solutions offer seamless integration with WordPress through plugins, ensuring that even those with minimal technical expertise can set them up and start selling quickly.
If your e-commerce platform or website builder does not include a hosting service as part of its plan, you will need to select a reliable e-commerce web host. Your hosting provider will store your website’s files and ensure it’s accessible online. Some of the best hosting services for an ecommerce store are Shopify Hosting, Hostinger, and SiteGround.
Select a responsive theme that aligns with your brand. Most ecommerce platforms offer a variety of free and paid options. Tailor your chosen theme to match your brand’s identity, adjusting colors, fonts, and layouts as needed.
If you’re creating a custom online store (without using a website builder or an ecommerce platform), we strongly recommend consulting with experienced developers to ensure a smooth and successful setup. You can hire a developer from platforms like Upwork or Toptal to assist with complex customizations. Check their portfolios and reviews to ensure a good fit.
3. Add Your Products
Start populating your store with your products, ensuring each listing is comprehensive and well-organized. Break down your inventory into logical categories or collections, making it easy for customers to find what they are looking for. High-quality images are crucial; they should accurately represent the product and be uniform across your store.
In your product descriptions, be clear and concise but also include all necessary information a customer might need to make a purchase decision. Remember to optimize your product pages for search engines by using relevant keywords, which can help in increasing your store’s visibility on search engine results pages.
4. Set Up Payment Options
Integrate secure payment gateways, and consider offering a variety of payment methods to accommodate customer preferences. Some popular payment gateways include Amazon pay, Skrill, Stripe, PayPal, and 2Checkout.
5. Sort Out Shipping Settings
Define your shipping strategy and integrate with major carriers for automated rate calculations. Offer multiple shipping options and communicate shipping policies clearly.
6. Ecommerce Automation
Ecommerce automation refers to the use of software tools and systems to streamline and optimize various business processes and workflows within an online store, ultimately reducing manual effort and increasing efficiency. This can encompass areas such as inventory management, order processing, customer service, and marketing.
To achieve ecommerce automation, you can integrate tools and platforms specifically designed for this purpose, such as:
CartHook: CartHook is an ecommerce automation tool that boosts average order volumes through smart offers and discounts post-purchase, allowing store owners to create targeted offers based on current cart contents.
Shopify Flow: Exclusively for Shopify users, Shopify Flow offers a simple interface for creating custom workflows to automate tasks within the store and across various apps, available to merchants on Shopify’s higher-tier plans.
Zapier: Zapier connects and automates tasks across thousands of web applications, such as Shopify, WooCommerce, and PayPal, enabling businesses to streamline operations and increase productivity with customizable ‘zaps’.
ReChargePayments: Tailored for subscription management, ReCharge automates recurring orders, payment plans, and delivery date adjustments, integrating seamlessly with platforms like Shopify and Stripe.
CartStack: CartStack aims to recover sales lost to cart abandonment through personalized emails, text messages, and web notifications, while also offering automated email marketing features for targeted customer communication.
Mailchimp: Mailchimp serves as a comprehensive ecommerce automation tool, offering a range of digital marketing solutions including email campaigns, customer segmentation, and insightful analytics, all through an easy-to-use interface.
Keap: Combining CRM, sales, and marketing automation, Keap helps ecommerce businesses convert leads, streamline workflows, and save on marketing costs, with integration capabilities for various ecommerce platforms.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — a prerequisite to paying taxes, raising capital, opening a business bank account, and other guideposts on the road to getting a business up and running.
Registration is also exciting because it makes the entire process feel official! Once it’s done, you officially have your own business.
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to ecommerce.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Choose your business structure
Businesses come in several varieties, each with its pros and cons. The legal structure you choose for your ecommerce business shapes your taxes, personal liability, and business registration requirements, so it’s important to choose wisely.
Here are the four main options:
Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
Limited Liability Company (LLC)– Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just needs to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate on a calendar year (January–December), or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine what taxes you’ll pay.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Step 7: Fund your Business
Securing funds to support your business through its launch process and beyond is the next key step, and it can be done in a variety of ways.
Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
Personal: Self-fund your business via your savings, the sale of a property or other asset, and support from family and friends.
Bank and SBA loans are probably the best options, other than friends and family, for funding an ecommerce business. You might also try crowdfunding if you have an innovative concept.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
Keeping your business finances separate from your personal bank account makes it easier to track your company’s performance and file taxes and a profit, so it’s worth doing even if you’re running your business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer business account options, just inquire at your preferred bank to learn about rates and features.
It’s a good idea to look at a few options, as banks vary quite a bit in what they offer, and you want the rates that are best for you and your business. Once you choose your bank, you just need to bring your EIN (or Social Security Number if you decide on a sole proprietorship) and your articles of incorporation or other legal documentation that proves your business is registered.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked but is vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating effect on your life and business.
Here are some of the different types of insurance to consider:
General liability: This is the most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is the one. It even protects against bodily injury and property damage.
Business Property: Provides coverage for your equipment and supplies.
Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken down due to mechanical issues.
Worker’s compensation: Provides compensation to employees injured on the job.
Property: Covers your physical space, whether it is a cart, food truck, or storefront.
Commercial auto: Protection for your company-owned vehicle.
Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.
As opening day nears, prepare for launch by reviewing and perfecting some key elements of your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, a number of excellent software programs and digital tools can help you with many business tasks.
A significant portion of online shopping occurs on mobile devices. Ensure that your website is mobile-responsive, offering a seamless experience to users on all devices.
Social proof is powerful in influencing buying decisions. Incorporate a product review section on your site, allowing customers to leave feedback and share their experiences.
A well-structured, intuitive navigation system can enhance user experience. Categorize products logically, implement a search function, and regularly review and adjust based on user behavior and feedback.
Take advantage of your website, social media presence, and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
Google Ads: Utilize Pay-Per-Click (PPC) advertising to appear at the top of search engine results for specific keywords. Google Ads can drive immediate traffic and sales, especially for highly targeted and conversion-focused campaigns.
Email Marketing: Build a mailing list and engage with your customers through newsletters, promotional offers, and personalized recommendations.
Affiliate Marketing: Partner with bloggers, influencers, and other websites to promote your products in exchange for a commission on sales generated through their referral.
Pinterest: A visual search engine that is ideal for ecommerce stores, especially those in fashion, home decor, and DIY. Create pin-worthy content and use Pinterest Ads to reach a wider audience.
Influencer Marketing: Collaborate with social media influencers to promote your products to their followers. This can help build trust and credibility, especially if the influencer’s audience aligns with your target market.
Content Marketing: Create and share valuable content related to your products or industry. This can include guides, how-tos, and articles that help establish your brand as an authority in your field.
YouTube: Create video content showcasing your products, how-to guides, or behind-the-scenes looks at your business. YouTube’s vast audience and search capabilities make it a powerful channel for reaching potential customers.
Retargeting Ads: Use retargeting ads to reach users who have previously visited your site but didn’t make a purchase. Platforms like AdRoll or Facebook can help set up retargeting campaigns.
TikTok: With its massive and engaged user base, especially among younger demographics, TikTok offers unique opportunities for creative, viral content and influencer collaborations.
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your ecommerce business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Do all you can to ensure your USPs stand out on your website and in all your marketing and promotional materials, stimulating buyer desire.
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running an ecommerce business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in ecommerce for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in ecommerce. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
Step 12: Build Your Team
If you’re starting small from a home office, you may not need to hire any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for an ecommerce business include:
Customer service representative – responds to customer complaints
Ecommerce specialists – social media marketing, SEO, content creation
Your business may in the future need to hire all of these positions, or just one or two of them, depending upon its size and needs. You might also hire multiple workers for a single role, or a single worker for multiple roles, again depending on your needs.
Free-of-charge methods to recruit employees include publishing a job post on social media platforms such as LinkedIn and Facebook groups, or using free classified sites like Jobs and AngelList. You might also use a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Finally, you could hire a recruitment agency to help you find talent.
Step 13: Run an Ecommerce Store – Start Making Money!
Ecommerce is a massive market that is predicted to grow much faster. You can still get in on the action by starting your ecommerce business now. But first, you might want to consider creating a niche market by specializing in a certain type of product, like 100-year-old books or top-shelf tracksuits. An intriguing niche market can often jumpstart an efficient marketing and sales campaign.
It’s important to keep yourself updated with the latest trends, such as curated shopping and social commerce. Now that you know how to start an ecommerce business, you should be on your way to success!3z
Ecommerce Business FAQs
How do I start an ecommerce business from home?
All you need is a computer, shipping supplies, and a product to sell. You can conduct all your operations from home until you outgrow your space, or retire to your private island.
Is e-commerce profitable?
Ecommerce can be very profitable. In just the first few years, an ecommerce business can make $100,000 or more in profits.
Can I get into ecommerce even if I don’t have much money?
Start-up costs are relatively low, averaging around $5,000. You can save up money to launch your business by first selling via an online marketplace, like Amazon or Etsy.
Which ecommerce type is the most successful?
The success of an ecommerce business depends on various factors, and there isn’t a single type that can be considered the most successful. Different ecommerce models, such as business-to-consumer (B2C), business-to-business (B2B), dropshipping, subscription-based, or marketplace platforms, each have their own advantages and potential for success.
Which products are most profitable in ecommerce?
Generally, niche products or unique items that cater to a specific target market tend to have higher profit margins. Additionally, products with high demand, limited competition, or those that solve a specific problem for customers often have good profit potential.
Is it hard to start your own ecommerce business?
Starting an ecommerce business can be challenging, but it’s also an opportunity for growth and success. The difficulty can depend on factors such as your level of experience, market competition, sourcing reliable suppliers, establishing a strong online presence, and managing logistics and customer service effectively.
How to Start an Ecommerce Business
Decide if the Business Is Right for You
Hone Your Idea
Brainstorm an Ecommerce Business Name
Build an Ecommerce Store
Register Your Business
Register for Taxes
Fund your Business
Apply for Ecommerce Business Licenses and Permits
Open a Business Bank Account
Get Business Insurance
Prepare to Launch
Build Your Team
Run an Ecommerce Store - Start Making Money!
Ecommerce Business FAQs
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