Starting An eCommerce Business

With the online industry growing by the second, starting an eCommerce store can be a great way to earn extra income from home or expand on an existing retail business. Before jumping into the online world there are a few things to consider. Anyone can build a website but getting a website in a profitable position requires a great deal of market research and strategy. Just because it is a business that can be operated virtually does not mean that traditional business techniques do not apply. It takes a good idea, hard work, a positive attitude, the right tools, and in most cases some professional assistance.

Many aspiring online entrepreneurs tend to forget some of the basics such as: product, pricing, storefront, marketing, and customer service. An ecommerce business’s product has the potential to generate revenue fairly quickly or stop the dreams of an online entrepreneur before they even start.

Finding a Product:

This may be the most important thing to consider when opening an online store. What you need to think about is the marketplace. Think about competition and how you will market. There are millions of eCommerce stores out there so your’s needs to stand out in order to make sales. If you are planning on using traditional forms of marketing such as television, radio, magazine ads, word of mouth, or you already have an established storefront you do not have to worry about product choice quite as much. In most cases you will already have a sound marketing strategy. For those brand new home based business owners on a budget, you do not have this luxury. Most at home eCommerce store owners will rely primarily on search engine result pages and comparative shopping networks.

Focus On A Niche Market

Google, Yahoo, Bing, and several others are going to be your bread and butter. If you fall into this category you want a customer to find your website ranked at the very top of the first pages when they search for a specific product. Search engines will rank a website on page one for several different reasons, and one of the main reasons is how relevant a site is to that customer’s search. For example: if you go to Google and search the phrase “baseball bats”, you will find that the majority of the websites at the top of search results are selling nothing but baseball products. You’re not going to find a site selling baseball bats, toasters, dresses, and cell phones. That’s because these websites are not as relevant as a site specializing in that specific product. A Jack of all trades and master of none will have a tough time ranking on search engines.

The point is that you want to choose a product in a specific niche market. The more niche the better. Think of a particular category of products you may want to sell and narrow you choices into a more specific niche. Take time to do some significant research to learn about how much competition there is within your niche. Also research the demand for your niche products. Choosing a market with relatively low competition and high demand has the potential to shorten your return on investment’s (ROI) time frame. Google’s AdWords keyword tool is a good starting point when researching possible markets.

Know Your Profit Margins

Choose a product that can help you to make money. Thats why you probably decided to begin a new business venture in the first place right? Why sell a product that only allows you to make a few dollars or less. It will take millions of visitors and thousands of sales in order to make a significant profit. Consider your initial goals. Do you want to make a few hundred dollars a month from the site or a few thousand? Offering a product with a decent price tag allows you to make good money with a few monthly sales versus a few thousand monthly sales. Research your new marketplace to see how the competition is pricing their products and make sure you can compete.

Research Competitive Pricing

Using comparative shopping networks such as Google Shopping can be a helpful tool when conducting market research. This shopping network will allow you to filter product search results based on price allowing you to know what your individual product’s competitive pricing is. This is a far better procedure when calculating profit margins than only relying on the MSRP pricing. Simply visit Google.com and enter the exact name of the product and select the “Shopping Option” from the menu to the left of the result page, or from the vertical search options listed horizontally in the top left corner of the page. Once you are able to view individual product search results you can filter your results with the “sort by” option in the top right corner of the result list.

Choosing a Supplier

Once you have a solid product idea, it’s time to find a supplier. Here you have a few common supplier relationship factors to consider. The most common product distribution methods for a home based eCommerce business to utilize are drop shipping or buying wholesale. Both of these strategies have their own pros and cons.

Drop Shippers

Drop shipping is a great way to sell products online without having to store and manage your own inventory. A drop shipper is basically a middle man who will house the product for you and ship it when an order has been placed. This is a good way to get things started if you are on a tight budget, however, in most cases you can make more money per sale (higher profit margins) if you buy the product wholesale and ship it yourself. This may be something to work towards as you become more established.

Factors To Consider When Using Drop Shippers:

Buying Direct “Going To the Source”

Buying Direct tends to be the most effective way to operate an ecommerce business. In my experience, people who have taken the time to secure a relationship directly with a manufacturer or a supplier who is higher up on the food chain tend to do better than others. This distribution method allows for more control over customer service than drop shipping, because you will have a clearer idea about your products availability and the amount of time it will take for the order to actually leave its destination. Aside from that the most recognized benefit is the simple fact that you are able to make more money per sale. However, this strategy requires a bit more work on your end. You will be responsible for shipping the product and managing an inventory. If you are selling a larger product, additional storage space may be required. Make sure that you always have enough products on hand to sell to your customers. Obviously this will increase as time goes on if everything is growing as planned. Be sure to take this into consideration.

When buying direct from the manufacturer, you do not want to assume that sales will occur immediately. The last thing you want is to be stuck with thousands of dollars worth of merchandise and no customers. Especially if the product will be quickly obsolete. I recommend investing in the minimum amount of product require for you to get things up and running. Your initial investment will depend on the products you are selling. Popular name brand products means more money up front because these manufacturers will only want to work with very serious business owners to protect their brand. However, these products are usually very popular and should be easier to sell. Some manufactures may even warehouse and ship the products for you. You simply have to “stock your store” by paying an initial determined amount. This is not to be confused with a “fee”, instead think of it more as an investment. These branded products are more than likely, already being searched for so liquidating is always an option to recoup investment expenses.

Factors To Consider When Buying Direct:

Good Stuff to Remember

In closing, having a good product is one of the most crucial pieces to an eCommerce business, if not the most critical. Find something that is not already overly saturated. A good niche is the best way to be noticed early if you are a new company. Make sure you have a solid product supply and a distributor relationship that allows for a respectable profit margin. If an investment is required, remember that this will not be the only startup expense that will occur. Its a good idea to budget for this among other areas such as marketing, site development and business formation expenses. Having a good product is one thing, having a product that consistently sells online can be something entirely different. Remember McDonalds never actually created a great burger, but they did have a killer plan.