How to start an e-commerce business and succeed

E-commerce businesses are more popular than ever. Customers prefer the convenience and selection provided by online shopping, and the pandemic has pushed even more people to shop online. According to data from IBM’s U.S. Retail Index, the pandemic has accelerated the shift away from physical stores to digital shopping by roughly five years.

With that in mind, you will find plenty of opportunities to delve into online sales. And low barriers to entry have made starting an e-commerce business an appealing prospect for aspiring entrepreneurs. But while it’s easy for anyone with a bit of knowledge of e-commerce and a few resources to get started, it’s a fiercely competitive market. The pandemic caused many brick-and-mortar store owners to switch to an e-commerce model, and brand loyalty is eroding. According to research by McKinsey, three-quarters of Americans said they shopped differently during COVID, and most intend to continue that behavior.

To succeed in e-commerce and pull a profit, you will need to work hard and build a strong foundation. You will need to do market research; understand your target audience;  create a business plan; and take all the necessary steps to set up your business in compliance with federal, state, and local laws.

Beyond that, here are some essential tips to help you start a successful online business.

1. Choose an e-commerce model

When most people think of e-commerce, they think of an online store that is the digital equivalent of a brick-and-mortar store. However, there are a wide variety of e-commerce business models. Some require you to build your own e-commerce site, while others let you set up shop on an existing marketplace. Some require you to handle the process of manufacturing, marketing, selling, and shipping yourself. Others allow you to make a profit without handling the product at all. Which model you choose will depend on the type of product or service you want to sell, how much money you can afford to invest in the business, your existing skills and competencies, and your time horizon for getting to profitability.

Here are some e-commerce models to consider:

Business to Consumer (B2C)

Using a B2C model, businesses sell directly to customers. This model works for both products and services and is what people commonly think of when they think of e-commerce.

There are some variations on this model. For example, a direct-to-consumer (D2C) business model means the manufacturer is also responsible for distributing the product. You won’t find a D2C business’s products at a brick-and-mortar store or a third-party e-commerce website. Such companies only sell through their own physical or online store. A vital benefit of a D2C business model is that the customers can always trust the product to be original. Examples of D2C businesses include Casper, Allbirds, Manscaped, and Dollar Shave Club.

But you don’t necessarily need to be the creator of the product or service you are selling to operate a B2C e-commerce business. You can be a curator who brings together various products from other manufacturers—an online version of a variety store or department store. You could also sell via a subscription model.

No matter which model you choose, you need to think about how you will fulfill orders. You could take delivery of inventory and ship the products yourself, but you’ll likely need a workspace for that. Or, you could sell the product, collect the money, and have the product dropshipped by the manufacturer or a third-party service. The downside of dropshipping is that you don’t have complete control over the customer experience, but you are the one who will be held accountable and receive negative reviews if customers are unhappy.

Business to Business (B2B)

Using a B2B business model, one company buys goods or services from another company. They typically do not sell directly to individuals. B2B commerce is one of the fastest-growing e-commerce segments , and opportunities abound. However, this kind of business can cost more to start and take longer to get off the ground. The business buying process is more complex, typically involving more decision-makers and purchasing order processes. This model also requires you to consider how you will fulfill orders.

Consumer to Consumer (C2C)

The C2C business model connects customers with other customers to trade goods or services using your platform. It’s the online version of a go-between, with the platform taking a cut of each transaction. eBay is an early example of this type of business. In the past few years, specialized C2C companies have sprung up, such as ThredUp and Poshmark for clothing; Chairish for furniture and home decorating; Airbnb and Vrbo for short-term rentals; GOAT for sneakerheads; and TaskRabbit and Thumbtack for errands and household chores.

C2C can offer higher profit margins and less hassle with products and fulfillment, but it can also take a long time to get off the ground. Sometimes also called two-sided marketplaces, you have to focus equally on attracting buyers and sellers. Customer satisfaction can also be a challenge since not all sellers will deliver the same quality of goods and services, but the buyer will still associate the experience with your brand. Fraud is also a challenge, as these types of businesses are heavily targeted by criminals who set up fake listings to take the money and run.

Consumer to Business (C2B)

A C2B approach is an emerging category in which a brand’s customers create value for the brand. An example is a blogger becoming a paid influencer for certain brands; becoming an affiliate seller of the brand’s products; cocreating a product, service, or experience with the brand and marketing it to the audiences of both; or providing ad inventory for digital advertising companies.

With this type of business, you don’t have to worry about products or fulfillment. The main challenge is building a large enough audience to have the kind of influence that would attract a brand or drive enough traffic to your site to generate significant revenue from affiliate sales or ads.

2. Determine your product(s)

Once you’ve determined what business model best suits your aims, you need to find the right product. An ideal choice will be a product or service with high demand and low competition. Of course, that’s easier said than done, especially when it seems like everything under the sun can already be found and purchased online.

The key is to carve out a niche for yourself. Start by thinking about the things you are passionate about or have unique knowledge of, products that come out of your skills and intellectual property, products that are brand new to the market, bespoke versions of existing products tailored to a specific audience, or a novel solution to a big unsolved problem.

How do you find these products? To get started, you can simply search for products to sell online. Keyword research can help you determine how many people might be looking for a particular product or service, and what it might cost to advertise for it. Google trends can alert you to emerging problems and hot products.

If you’re thinking of selling on an existing platform, do some research there to see what is on offer, what the prices are, and how much competition there is. Read reviews to see if customers are generally satisfied, or there are unmet needs you can fulfill. Search for related products to see if there are ancillary products such that you could put together a value-added package or come up with a better iteration of an existing product.

3. Develop your brand

Developing a brand image and a brand voice that attracts your customers is crucial to customer acquisition for your new business in the first place. Customers will be loyal to your brand because of the high-quality products or services you offer, but they are attracted to your brand by what they think you represent.

Choose a business name

Once you have decided on your offering, you’ll want to choose a solid brand name. Aim for something catchy that also speaks to your offering rather than obscures it. It should stand out from the competition. Consider how your business name can be incorporated into the logo and other visual representations of the brand.

Be sure to research domain name availability. There are plenty of tools that can help you determine whether the domain for your potential brand name is available. Popular domain research tools include:

• Name
• GoDaddy
• Google Domains
• Instant Domain Search

Hire a designer

Since visual branding is a key element of a successful e-commerce site, you might consider hiring a professional to bring your brand to life. After all, your site is your storefront, and it needs to be as attractive. You’ll want a total package that includes logo design, website design, and a visual branding stylebook to ensure consistent branding across all social and advertising platforms.

Here are some popular services you can use to hire designers:

• Dribbble
• Upwork
• Toptal

4. Setup your website

Building your website is the online equivalent of building your store. There are two parts to that—the storefront and then the back of the shop where operations are carried out.

If you are looking to create your website from scratch, you can hire website developers to do it for you. However, if you are looking for a quicker option, you can choose from various e-commerce platforms and software available online. Think online marketplaces like eBay, Etsy, Shopify, and Amazon.

When choosing an e-commerce platform, consider how much control it provides you, how user-friendly the interface is, and whether the platform will support your brand image and other business requirements.

Set up Google Analytics and Search Console

Setting up Google Analytics helps you understand how your users interact with your website. You can use this information to make their experience better and to build well-informed campaigns. Setting up Search Console helps you take care of security and maintenance issues like malware, hacking, site load errors, and server errors, thus ensuring a seamless experience for your users.

5. Implement e-commerce software

You don’t need to be tech-savvy to run an e-commerce business successfully. Tech companies have developed several platforms that allow you to handle different business processes without much hassle. Here are some tools and software you should look for when building your e-commerce business:

Shopping cart software

Shopping cart software allows your customers to place an order online and select the payment option easily. You can choose to set up a shopping cart function yourself on your website, or you can use platforms like Shopify to have ready-to-use shopping cart software. This allows you to collect payments upfront via credit card, PayPal, or other popular payment gateways.

Key considerations are that it is secure, simple to use, and in line with the payment methods you want to offer your customers.

Shipment tracking software

If you want to keep your customers happy, keep them informed. Shipment tracking software allows you to do just that. By using shipment tracking software, you can keep the information of all your shipments in one place and allow your customers to check their order’s status at any given moment.

If a dropshipper is handling fulfillment for you, make sure that their services include shipment tracking. A good provider will push back the shipment information to your system so that your customers can easily track their packages.

Analytics software

Analytics tracking software allows you to keep track of the activity on your website as well as other online platforms that you are using. Such software can be a source of great insights about your customers, product popularity, search trends, and market demand.

Some of these software programs require qualified data scientists, while others use artificial intelligence to simplify the analytics to a level that they become easily understandable by people without much technical knowledge. Using analytics tracking software, you can use the power of big data to guide your customer service, product development, and marketing decisions.

Marketing automation software

Every business needs a digital marketing presence, and email marketing can help businesses build a brand. Using marketing automation software can be a great idea if you are new to e-commerce and do not have enough expertise to come up with the right marketing strategies or enough budget to experiment with different marketing techniques.

Using marketing automation software eliminates the need for hiring a whole team of employees. The software helps you grow and get new customers through lead generation, campaign analysis, and the use of that analysis to create new, better, more targeted, and more fruitful campaigns.

Loyalty management software

Loyalty management software is an excellent tool for customer retention. The software identifies your repeat customers and helps you reward them for their loyalty, which is an excellent tactic for customer retention. It also identifies potential repeat customers and can be used to send incentives like gift cards and coupons to keep them coming back.

6. Build marketing and lead generation campaigns

No matter what e-commerce business model you choose, there’s no growth without marketing. Here are some of the ways in which you can generate online sales through marketing:

Paid ads

Paid advertising is the fastest way to reach your customers. It can also be very expensive. If you’re interested in paid marketing, Google and Facebook are the best places to start because they have the largest reach, offer easy-to-use platforms, and return a ton of data that you can use to make your ad programs more and more effective.

Organic growth and search engine optimization (SEO)

SEO refers to creating content so that when internet users search the internet for the things relevant to the content you have posted, your content shows up in the search results for free. But it would be a mistake to think of SEO as free advertising because it takes time and effort, and can take a long time to pay off. However, it is something you should invest in from the start, and build on as you grow. If this is outside your skill set, hire a professional.

Influencer marketing allows you to leverage the popularity of successful individuals on social media to your benefit. You can reach out to bloggers and influential personalities to review your products in exchange for free products or other benefits. You can also pay them to create sponsored content promoting your brand to their followers.

Word of mouth and referrals

Word-of-mouth and referral marketing is the kind of marketing that has the most profound effect. Word-of-mouth marketing is when your consumers have a good experience with your product or service and they, of their own accord, decide to tell others about it. These days, word of mouth and referrals are largely accomplished through ratings and online reviews.

Although this kind of marketing doesn’t require any out-of-pocket investment, you may need to come up with an operationalized way to solicit such reviews from happy customers. The key ingredient—and the main investment—is in creating the kind of customer experience that customers want to tell people about. Positive word of mouth is the culmination of everything that goes before—choosing the right business model and product, creating a beautiful brand, and ensuring a seamless purchase and delivery experience.

Get started with your e-commerce business today

Technology has made it relatively easy and inexpensive to start an e-commerce business, especially when compared to the capital investment required to open a physical storefront. And economic predictions for the growth of e-commerce are rosy. But make no mistake, there is no such thing as easy money in e-commerce. It’s highly competitive, and many markets are already saturated. However, with careful research and planning and the smart use of resources, you can succeed.