25 years ago, ecommerce was in its infancy, with few Americans buying products or services via the web. Now, US online sales are projected to be worth more than $1.5 trillion in 2024 and over 15% of all consumer sales will be conducted online this year.
If you’re thinking of starting a new business, an online venture may be a great way to go. But how do you get an online business up and running, what does it cost, and what kind of digital organization should you start? Read on to discover all you need to know about launching an ecommerce business.
In ecommerce, the less you have to do or deliver, the more profitable your business will be. Confused? Consider this: Imagine you decide to start an online store selling candles. You’ll need your site to take orders, a supplier for the candles, a storage unit to hold your inventory, packaging to ship orders, a shipping agent to make deliveries, and a way for customers to make returns. This is a complex system to operate, and it won’t come cheap.
Now imagine your site sells business software. You’ll need your site and a source for the software. That’s it. You take your customer’s cash and deliver with the click of a mouse. There’s no physical inventory, storage, packaging, shipping or returns. After you’ve bought the rights to the software – or created the program if that’s what you do – your costs are very low. Apart from updating the software as new versions are released and maintaining your site, it’s all profit moving forwards.
So: If you want a profitable online business, keep it digital. Sell downloads or offer advice, tutorials or other digital products that you can sell over and over again and without the need for complex physical infrastructure.
The great thing about an online store is you can sell almost anything, and you don’t need an expensive retail outlet or fancy office to do so. It doesn’t matter if you’re selling products or services, with easy shipping or fast downloads available you can get what you sell to your customer regardless of where they are. The only businesses that cannot be operated online are those where a physical service is supplied – such as a barber shop, manicurist, dentist or pool service. However, even then, you could still take bookings online and if you sell accessories, such as nail polishes, pool supplies or dental products, there’s nothing stopping you from running that side of your business as an ecommerce site.
What does it take to get an online business up and running? Here’s what you need to do:
Before plowing effort and money into developing your new online venture, take the time to assess the viability of your idea. What are you selling and is there a market for it? Many businesses fail because they offered an answer to a problem that does not exist. Make sure your venture meets a need, fills a hole in the market, or can offer a product or service that may not be original in concept but is better than the competition.
You can vet the feasibility of your idea by checking other websites, conducting polls on social media, studying the business news or trying a basic beta version of your concept with a limited audience. If you get positive feedback or you can see a problem you can answer or a niche you can fill, your online business may have a fighting chance. If none of these attributes apply, move on to your next idea.
If you’re seeking external investment or a commercial business loan to launch your online business, you’ll need a detailed business plan to support your pitch or application. Investors and lenders will want to know why you need their funds and what the money will do for your new venture. Business plans should do more than paint a rosy picture – explain the risks involved, what the downsides could be – and how you intend to overcome them.
Even if you don’t need investment or a loan, a business plan can still be a very useful vital tool. Use it as your business manual, referring to the contents to guide your strategy and manage your financials.
Find out more about creating your business plan here.
You’ll need to choose a business name that’s memorable and gives customers an idea of the products and services you sell. (If you’re buying an existing online business, you may wish to keep the old name to preserve brand name recognition). Online organizations often seek short, catchy names that are easy for customers to recall. Many ecommerce vendors use familiar words and slightly change the spelling to form a name they can trademark. When choosing your business name, make sure it’s available in your state. You must also ensure it’s available as a domain name for your website – you can do this at any of the major hosting platforms such as GoDaddy.com.
You have options when it comes to business structure. You could register your venture as a sole trader, which means you own the business in your name and have personal liability for its performance, or you could register as a limited or general partnership or a limited liability company (LLC). These options will give you more personal protection, but they require more paperwork and will cost more to establish.
Once you’ve settled on a name and type of business structure, you must register your venture with your state’s business filing office. You’ll also want to get an Employer Identification Number (EIN) from the IRS. You can do this online in just a few minutes. Note that your EIN acts as a business tax ID and it is usually needed when dealing with the government or applying for commercial finance.
Establishing an online business requires filing the necessary business-formation documents and tax paperwork to ensure a solid legal foundation.
These requirements will vary depending on your state and the nature of your business, so thorough research is crucial to ensure compliance. Consulting with an attorney experienced in business startups in your industry can be particularly helpful to make sure you’re on the right track. You should also investigate the various business insurances to make sure you’re covered from all liabilities.
Your website – and your app if you create one – are everything in ecommerce. Your site is your only window on the world. It must act as a showcase, promoter, point of sale, community and brand builder and much, much more. You’ll want a site that is attractive, clear to read and easy to navigate with good photos of your products or clear explanations of your services and the benefits that you offer. To take credit card payments online you’ll need to team up a payment service such as Stripe, Square or Paypal.
If you’re planning to build the site yourself you could use one of the many web builder platforms – such as Wix.com. However, if you’re not confident with your technical skills you may be better off hiring a web designer to build your site for you.
It’s never too soon to start building an audience for your business. Make use of social media to engage potential customers as early as possible. This will generate excitement and momentum for your business launch. Start spreading the word as you work through the steps outlined above.
If you’ve prepared your audience properly, you’ll be able to make a big splash when you finally open for business. No, you’re not cutting a ribbon in the same way that you might for a bricks and mortar store, but you can still create a buzz with opening promotions, celebrity endorsements, loyalty program offers and more.
There is no bottom or upper limit on the cost of launching an online business. What you do or sell, where you operate, the scale of your operation and a host of other factors can impact your start-up costs. It may be possible to get a simple ecommerce site up and running for as little as $1,000, or you could spend hundreds of thousands or even millions of dollars to launch an all-singing, all dancing marketplace that offers a range of products as big as you would find at your local mega-mall.
If you don’t have enough cash on hand to launch your new online business on your own, you’ll need funds from investors or lenders. Many new businesses get started using financial support from friends and family, but if that’s not an option, there are networks of venture capitalists and angel investors readily available online. Bringing in external investment can give you the cash you need to get your venture off the ground but be aware that investors will usually want a piece of the action in exchange for their money. This means you will need to give up a share of your ownership and you may lose overall control of the business.
With a business loan you don’t have to surrender a share of your organization to get the funds. Although it’s never easy for new businesses to borrow money, some lenders have special products and programs for startups and entrepreneurs. These types of financing include:
To get these types of loan you can approach banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will immediately introduce you to a choice of startup loans from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out a startup loan before.
Running an online business can be lucrative and a lot of fun, but you may need a lot of cash to get you on your way. Funding is where Swoop can really help. No matter if you’re launching a brand-new online venture, or you’re buying an established business, chances are you’ll need finance to make the operation grow. Many types of business loan are suitable for online organizations, but working with finance experts can make all the difference when applying for funding. Contact us to discuss your borrowing needs, get help with loan applications and to compare high-quality business loans from a choice of lenders. Make your online business really click and collect. Register with Swoop today.
Swoop was amazing! I was looking for refinancing and they were straight onto finding me the best possible option. I would highly recommend them.
Owner, F45 Cambridge
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.
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