Do you dream of starting your online store in 2020? Start an Online Store in 7 Easy Steps .
Whether it is your first time setting up a small business or you’ve been in the game for a while, this guide will teach you how to start an online store in 10 easy steps.
Ecommerce sales are presently account for 17.2% of all retail sales, with online shopping itself growing 13.7% year-by-year. There’s really never been a better time to get online. According to Statista, the number of worldwide digital buyers is expected to reach 2.14 billion by 2021, with global e-commerce sales exceeding $4.5 trillion.
Building an online store is an amazing way to make a bit of extra money. But it is difficult to understand where to start. The good news is you don’t need loads of money, time or technical knowledge to build an online store.
Table of Contents
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Here we go!
Finding niches is one of the crucial areas of online business.
This means what you’re going to sell and who you’re selling to it. Some entrepreneurs don’t put a great deal of thought into their niche practices.
Here’s their thought process:
Selling hiking gear online sounds like it’ll be fun… Okay, let’s do that!
That’s a very bad, bad idea.
Your niche impacts on a lot of things, including…
That’s why it’s important to take some time to think of a niche which is strategic approach.
Your niche is broken into __ parts: price, audience, market opportunity.
First, let’s talk about product pricing.
At the very basic level, we all understand this concept:
If you sell low-priced items, more people are likely to purchase, but your Average Order Value (AOV) will be smaller.
If you sell expensive items, less people are likely to purchase, but your AOV will be larger.
But there’s more than meets the eye when it comes to pricing:
If you sell low-cost items and your target market is lower to middle class income groups, you’re setting yourself up for a lot of pre-sales work.
Here’s what I mean:
Because these people have less throwaway income to spend, they tend to consider every purchase carefully.
This translates into more questions you’ll have to answer.
In assessment, if you choose a niche that caters to consumers in the upper middle class, you won’t have that problem. They have more disposable income, so they’ll be less careful with it.
Sure, you might encounter the odd picky customer who will still bombard you with questions about your product… ..but the majority of your customers will be less “high-maintenance” to serve.
At this point, you might be wondering:
Okay, so where do I draw the line? Is there a minimum price to keep in mind?
While there’s no hard and fast rule, try to price your products at $100 or above.
Here’s the rationale behind it:
After accounting for warehousing, operations, and marketing costs, most eCommerce store owners end up with a 20-30% profit margin.
Let’s say you’re earning 20% on all the products you sell.
If you’re selling a $20 item, you’re only making $4 on that sale. That’s kinda pathetic. 🙁
If you’re selling a $100 item, you’re making $20. Which isn’t much, but it’s decent commission.
Think of it this way:
The energy you spend on processing and fulfilling your order is the same unrelatedly of whether you’re selling $20 items or $100 items.
You might as well get more boom for your buck (or in this case, buck for your time), right?
We’ve already resolute that less profitable niches are the ones that accommodate to lower income groups and are associated with inexpensive products.
On top of that, there’s also brand loyalty, popularity, and endurance to consider.
Let’s start with brand loyalty.
In a nutshell, you should avoid niches which are already dominated by household names.
Here’s an example:
Let’s say your earphones die on you and you need to purchase a new pair.
You’ll either pull out your phone and go to Sony’s website (or Bose, Beats, or Sennheiser’s website)
or you’ll stop by one of their stores (if you’re the sort who’s particular about test-driving products before buying).
Compare that in contradiction of this other scenario:
Let’s say you’re redecorating and you decide that a chandelier is exactly what you need to jazz up your living room.
You’ll probably pull out your phone, and google “buy chandeliers online” or “chandeliers free shipping”.
See the difference in behaviour?
In niches dominated by a few brands, consumers don’t even think about alternatives for buying.
Their brand loyalty kicks in, and they head straight for the brands which lodge their Top of Mind Awareness.
Obviously, this doesn’t portend well for a newbie to established markets.
So, avoid these like the plague and stick with niches and products that don’t evoke much brand loyalty or brands that are already top-of-mind for a certain type of product.
Next, let’s move on to popularity.
Now, I’m not saying that you should restrict yourself from selling “trending” products.
(In fact, that’s possibly a bad idea, because you might find your sales flatlining once the hype dies down).
Instead, you should try to identify a niche or product that’s slowly but steadily gaining in popularity.
To help you along, here’s a handy tool: Google Trends.
Just plug your keyword in and you’ll be able to see how many people are searching for the term (either worldwide, or within a specific country).
Last but not least, consider the endurance of your customers.
This bit requires you to think a few steps ahead, but it’s important to have that anticipation when you’re starting a business.
After you make your first sale and you’ve got your operations running smoothly, the natural next step is to work on generating more revenue.
How do you do that? A lot of entrepreneurs try to increase their Customer Lifetime Value (CLV) – and they come up with strategies to re target their existing customers and keep selling new items to them.
Here’s the tricky part:
Certain niches are absolutely terrible for customer longevity.
It pays to be aware of these upfront, so you don’t find yourself in a bind when you’re 6 months into your business and trying to figure out how to increase your CLV.
People inevitably assume the wedding niche is highly profitable because, well, people are willing to bout on their big day.
That’s true, but what they don’t realize is that the “lifecycle” of each customer is crazy short.
You might have 100 customers today, but these 100 customers will have shaken within 3 months – and they’re never coming back.
While other eCommerce stores will be able to work on customer retention and sell to their existing customers, it’s a diverse story for you.
In order to scale your eCommerce business, you’ll have to spend aggressively on ads and other forms of marketing.
You’d be stuck in an infinite loop of customer acquisition – and once you stop, your sales drop too.
Pretty scary thought, eh?
Alright, before we move on to the next section, here’s a quick summary:
Unprofitable niches (typically!) cater to lower income groups, are associated with cheaper-priced products, evoke a ton of brand loyalty, aren’t growing in popularity, or don’t have customer endurance.
On the other hand, profitable niches, cater to the upper middle class, are associated with more expensive products, don’t evoke brand loyalty, are growing in popularity, and have customer longevity.
One final thing:
I recommend not instinctively going into a niche you know undeniably nothing about.
If you find a niche that fits the above criteria but is new to you, take your time to do some market research.
At the end of the day, the more you understand your competitors and how the niche or industry functions, the higher your chances of building a successful eCommerce business.
The next step in starting an online business?
Deciding on whether you want to use dropship model for the store or hold your own products inventory!
Dropshipping has become more popular, but with anything else, it comes with its own set of challenges.
In this section, I’ll run you through the pros and cons of dropshipping versus holding your inventory for the products. So, you can make an informed decision on the best choice for you!
Let’s start off with dropshipping model.
In a way, dropshipping can feel like the ultimate eCommerce store hack.
Basically, dropshipping levels the playing field.
With dropshipping, virtually anyone can start into eCommerce.
Even a guy who’s too broke to move out of his parents’ basement.
Even a high-schooler who still gets his allowance from mom and dad.
But here are the not-so-good things about dropshipping…
First, you have zero control over fulfilment.
Yeah, the idea of putting your feet up while a third-party company takes care of your fulfilment is pretty enticing… but here’s the problem:
When they screw up (and they will, at some point or another), your customer will be pointing fingers at you.
For eCommerce stores who handle fulfilment in-house, it’s easy enough to apologize, fix the problem, and move on.
But dropshippers who have to communicate with manufacturers who are in a different city, or even continent… Obviously, not as easy.
On top of that, product returns are also problematic.
Most sellers on AliExpress (which is the most popular dropshipping platform out there) don’t accept returns and even if they do, it’ll take an eternity for you to send your customer’s defective product to the manufacturer, get the replacement from them, and ship back to your customer.
So you have two options:
If you’re starting out an ecommerce with a limited budget, you might be tempted to nix returns altogether
But don’t do that. Bad!
You’re a new brand that no one has ever heard of and you need to build trust with your customers.
So, if you have a strict not acceptable return policy, it’ll probably put off your potential customers from purchasing from your store.
Here’s what I recommend:
Accept returns, but only for defective items, and state that the item needs to be sent back to you within a shorter time period (maybe 7 days?) to qualify.
At the same time, keep track of the returns that you do get.
If one manufacturer is constantly sending out defective products, stop working with them and look for a new supplier instead.
Okay, on to the last disadvantage of dropshipping – a lack of branding.
So, here’s the thing:
You can request your supplier to not include any promotional materials inside the packages they ship to your customers, which makes it less noticeable that you’re dropshipping.
But you most likely won’t be able to get them to use any kind of custom packaging with your company name or logo on it.
Which means your customers won’t have the best unboxing experience.
Basically, they’ll receive ordinary box with a few Chinese shipping labels slapped onto it.
There won’t be anything on the box, or inside the box, to indicate that it’s from your store.
If you’re just trying to make a quick money from eCommerce, that’s fine.
But if you want to build a brand, this is a major roadblock.
You may be able to get your suppliers to put your materials in the box, but that’s rare and will likely cost you a pretty penny.
Now then – we’ve covered all there is to know about dropshipping, so let’s move on to holding your own products.
The disadvantages are obvious:
Basically, holding your own inventory is more expensive and an all-around pain in the tulkus.
With dropshipping, you can outsource certain aspects of eCommerce.
But when you hold your own products, you’re responsible for everything, and there are a lot more pieces of the puzzle that need to come together.
On the bright side, the benefits of holding your own products are awesome:
First, you get to make sure your customer’s experience is perfect.
Here’s why this is important:
If you’re doing just enough to get by?
You’re hurting your own customer retention rates (and revenue!) without realizing it.
To ensure you don’t accidentally flattening that revenue down the drain, you need to step up when it comes to customer service.
We’re talking about.
Of course fixing customer problems as soon as possible.
Statistics show that the majority of unhappy customers won’t actually tell you they’re unhappy – they’ll just churn into stupor and never visit your store again.
When you will be screw up, your customers tend to talk about it more.
Who hasn’t posted an angry Facebook status or complained to a friend about a business that had poor customer service?
You don’t want to be talked about for the bad reasons – so make sure you nail your customer experience.
The second benefit of holding your own products is better profit margins.
Whenever you purchase products from the manufacturer, you typically adhere to a Minimum Order Quantity (MOQ).
Because you’re buying items in bulk, you’ll get a discounted rate.
You can either hold on to your higher margin or pass down the discount to your consumers, which will drive more sales.
Either way, this means more revenue for your store!
Last but not least, by holding your own inventory allows you to nail your branding.
We talked about how it’s important to have your brand on your packaging and/or products if you’re in this for the long tow.
But it’s not just about the consumers recognizing your brand…
Products delivered in well-designed, branded packaging are perceived to be more desirable and attractive.
If you got a maltreated, unmarked cardboard box (save for a shipping label in a language you don’t understand), how would you feel?
Probably like you just bought something from the black market. Or maybe some guy in his basement trying to con you.
But, if you will get the same product in a beautifully designed package, you’ll be a little more excited. There’s a reason people film unboxing experiences!
One final point on branding:
An awesome branding and packaging also encourage consumers to share your product on social media.
So, before I move on to the next step, a quick recap:
Once you have chosen a business model to work with, it’s time for the fun part – coming up with your business name and registering a domain!
Your business name isn’t as make it or break it as the niche you choose, but it’s really important.
But, if you’re not careful, it can put a stop to starting your online store!
People consume over picking a name – I know I have.
My advice is to give yourself a deadline of 1-2 weeks to choose the name if you’re really stuck. Otherwise, you’ll ended up spend months trying to figure it out and never pull the trigger on starting.
Now, onto some do’s and don’ts to help you pick a name:
✅ DO choose a name that’s easy to pronounce.
Spelling is hard, people! So, make the name SOUND like it’s spelled, and make it easy to pronounce. Otherwise people might go to the wrong URL.
✅DO choose a name with some significance.
If it’s related to the niche, you’re in, it makes it easier for people to “get” your business.
If there’s a deeper, more personal meaning to it, it’ll make a great backstory for media pitching.
✅ DO be as original as possible.
An entrepreneur based in Kentucky, Victor Moseley, opened a lingerie shop called “Victor’s Secret”. Victoria’s Secret promptly filed a lawsuit against them.
✅ DO choose a name with an available .com domain.
While .store and other domain endings are becoming more popular, people will still instinctively type in .com. You want to make it as easy as possible for your customers to find you!
❌ DON’T choose a name that’s too long.
Your business name should be within 1-3 words, MAX! I would strongly advise sticking to one or two words. Again, the easier a name is to pronounce and type, the more people will remember it.
❌ DON’T choose a business name that’s a combination of words and numbers.
This is a no brainer, but I had to add it. That is, unless you’re trying to look dodgy and unethical.
❌ DON’T choose a name that references a specific product or product line.
You might be tempted to do this. If you’re planning on focus your efforts on selling just one (awesome!) and highly innovative product. But what happens when you decide to branch out in the future? You’ll be stuck to that one product.
If you need some more help coming up with a name, check out Shopify’s Business Name Generator!
You’ve chosen a niche. You have a business name and URL. Now…
How do you figure out what the heck to sell products?
Easy – by looking at social proof.
Head over to Amazon’s best-seller list, and check out the most well-received items under your niche.
Do the same with eBay’s best-seller list.
And AliExpress’s best-seller list.
Keep a document or spreadsheet of all your ideas. Some things to keep in mind…
Need product ideas? Check out this post about trending products.
Once you choose the specific items you want to sell, it’s time to find out suppliers.
There are plenty of suppliers on both AliExpress and Alibaba, but here’s the difference:
You can buy products without adhering to MOQs on AliExpress
But if you’re on Alibaba, most of their items come with an MOQ.
If Chinese suppliers aren’t your thing, SaleHoo has a Supplier Directory that lists high-quality suppliers (and it’s fairly cheap for a membership).
Their Market Research Lab is very useful for finding hot selling products:
This tool allows you to compare different products and evaluate them based on sales trends, competition ratings (i.e. whether there are a ton of other stores selling the same product), and more.
When looking for a supplier, here are a few tips to keep in mind:
To learn more about finding the right supplier, check out this guide.
When it comes to creating an online eCommerce store, the most painless, fuss-free solution is Shopify. Hire our Shopify Experts to get your store online today!
(We’re only a smidge biased. But take a look at it and try it out – I think you’ll agree with us!)
Now let’s walk you through how to create an online store using Shopify. Start Your 14 Trial Today!
Once you’ve got your store done for your suppliers, and your products, it’s time to think about setting up a business entity.
The main benefit to this is that your business will operate as a separate entity from you, the owner.
Essentially, this means you’re not personally liable for what happens to your business, and your personal assets are protected from any liabilities which your business might have.
You don’t necessarily need to incorporate right out of the gate.
While incorporating a business protects your personal assets, You can start as a sole proprietorship without any official paperwork. However, you will be taking a risk doing this.
My advice is to wait until you’re making a certain amount (say, $1,000 per month) before you incorporate. That way, the business can pay for its own incorporation and you know you’ll be doing it for the long run.
Again, we’re not lawyers – if you have questions about what to do, please consult with a business lawyer! Take our advice with a grain of salt.
Now let’s talk about online business sales tax.
Here’s what you need to know:
Once you have created your online store, you’ll have sales tax nexus in any state which you have physical presence (including property, employees, and inventory) in.
Let’s say you’re from Florida, and your office (or garage), employees, and inventory are all contained within Florida.
This means you only have nexus in one state. You only have to pay sales tax on orders placed by customers in Florida.
Fast-forward a few of years later, and let’s say your HQ is still in Florida, But now have warehouses in San Diego as well.
This means you have nexuses in two states.
While you can collect sales tax in all states you have nexus in, you need to get a sales tax permit before you do that.
How do you register for a sales tax permit?
Simple – go to your state’s Department of Revenue website and register there.
Some states’ sales tax permits are free, and others will cost you a nominal sum.
Once you’ve registered for your sales tax permit, the state will give you instructions of when and how frequently your payments are due (either monthly, quarterly or annually.)
It’s a bit of a hassle to go through the paperwork, but don’t put this off! It’s illegal to collect sales tax without a permit in most states, and you don’t want to get into trouble with the law.
Hang in there – you’ve reached to the last section of this guide on how to start an online store in 7 Steps.
You now know how to set up a company, how to set up your online store, and how to meet your online business sales tax requirements.
All that’s left is to create a marketing plan for your online store, which we’ll talk about in this section.
You probably know that, but the Search Engine Optimization (SEO) is amazing.
You can have two online stores selling the exact same things, but you’ll see extremely different results if only one store is search optimized, and the other isn’t.
At the end of the day, selling stuff online is really a numbers’ game.
I recommend setting goals for your various social media channels, if you’re clear on what is it you want to achieve, you can reverse engineer the steps to get there.
One golden rule of marketing: you want to have a presence where your consumers are hanging out.
I recommend coming up with a content calendar.
You can create and schedule your posts ahead of time and make sure you’ve always got something planned for the major holidays.
If this sounds like a lot, don’t sweat it.
Just choose ONE channel that you want to focus on first, and start small.
Most growing entrepreneurs I know are hesitant to try PPC (because they’re worried they’ll end up busting their budgets).
According to Google’s Economic Impact Report, businesses make an average of $2 in revenue for every $1 they spend on AdWords.
So even if you’re not a wizard at PPC and your ads are mediocre, you can still make a decent profit off them.
Also, don’t forget that PPC isn’t just limited to Adwords – you have Facebook ads as well. Here’s a guide that will help you set up Facebook retargeting ads.
Whenever I tell online store owners the statistic that I’m about to share, their jaws always drop.
You know how I just mentioned that businesses, on average, make $2 for every $1 they spend on Adwords?
Well, with every $1 businesses spend on email marketing, they make an average of $44.
Yup, you read that right. $44 for $1. Money machine!
Don’t let anyone tell you email marketing is old-school, or outdated, or boring.
it’s actually insanely powerful and effective, and one of the most profitable types of marketing that exists.
Influencer marketing can pay huge dividends…
…if you do it right.
There are loads of fake influencers out there who bought their followers. Avoid those at all costs!
In fact, to navigate the muddy waters and find the golden nuggets, check out this guide.
So, we’ve just covered a lot of crushed in terms of marketing strategies, and it’s comprehensible, if you feel a little overwhelmed at this point.
Take a deep breath, and stay with me.
All you need is a high-level plan which will allow you to have a bird eye view of everything that’s going on.
Start off by determining your financial goals for the year.
How much revenue do you want to hit?
Then break it down and figure out your monthly revenue goal.
Based on estimates, work out how many products you need to sell each month.
Once you know how much you need to sell, start working on your action plan.
Congrats, young Padawan.
You’ve made it all the way to the end of this amazing guide…
…and you’re now a fully-fledged expert on how to start an online store.
Before I leave you, here’s one final piece of advice:
Don’t wait for that “perfect” moment.
Just go ahead and start an online business today!
As George Patton famously said, a good plan violently executed now is better than a perfect plan executed next week.
And, let’s face it…
You might tell yourself that you’ll start your own business online next week, when things are less busy at work.
But when next week rolls around, you might be down with the flu.
So, you postpone it.
And the week after?
It’s your partner’s birthday, so, you postpone it again.
And the week after?
Your dog is due for his check-up, so you postpone it again.
You get my point.
There’s never going to be that one moment where the stars are all aligned. So, stop waiting for that moment to happen, and just make it happen instead!
If you found this ecommerce guide useful (and I hope you did, because I poured my heart and soul into it!), please share it with your friends who are also an aspiring entrepreneur.