A Complete Guide on How to Start an E-Commerce Business

The world is more reachable and connected than ever. People can buy products with a few clicks from anywhere worldwide. It is a perfect opportunity for setting up an online store. Here’s a guide for you if you are planning to set up an e-commerce bus

In the digital age, e-commerce has become a thriving industry, offering entrepreneurs an incredible opportunity to build successful online businesses. As more consumers turn to online shopping for convenience and variety, the potential for growth in this sector is immense. However, launching an e-commerce business requires careful planning, strategic decision-making, and a solid understanding of the online marketplace. You also need to partner with top e-commerce app development companies to help you create the best platforms for your business.

We'll walk you through the essential steps you must take for starting an e-commerce business. Discover practical insights and actionable tips to tackle the challenges and seize the opportunities that await you in the world of online retail.

What is an E-commerce Business?

Electronic commerce or e-commerce involves buying and selling products/services online. Unlike in-person brick-and-mortar stores, businesses create an online storefront to display their products. Some famous e-commerce business examples are Amazon, Alibaba, eBay, etc.

E-commerce has been a common phenomenon for a few decades now. Yet, it is one of the most profitable and rewarding industries to explore. Statistics show that e-commerce sales account for over 19% of global retail transactions.

If you are an entrepreneur wishing to join this thriving space, here is how to start a successful e-commerce business.

10 Practical Steps to Start an E-commerce Business from Scratch

Experts predict global online retail sales will hit $5.5 trillion by 2027. This means there is no better time to develop an e-commerce business.

As you already know what an e-commerce business is, here are the 10 steps to starting an e-commerce business. 

1. Narrow Down on Your Niche

The increased online sales work in your favor due to the high demand amongst internet users. That does not mean every e-commerce business can benefit from it. After all, broad categories have enough audience base, but they can be too crowded to make your mark. 

For this reason, starting small is one of the best ideas to establish your brand in the market. For example, health and personal care are promising e-commerce markets. However, competing with significant drug chains or beauty retailers can be counterproductive. 

Instead, create an e-commerce business plan that targets organic skin care for teens. Under this business model, you can offer cleansers, moisturizers, and sunscreen for acne-prone skin.

Research to identify a gap in the market and find profitable product opportunities. Here is what you can do to find a promising niche for starting an e-commerce business from scratch.

• Identify and understand a customer's pain point
• Find possibilities that cater to passionate hobbyists
• Venture into a niche that you have expertise in
• Research about the trending products
• Check competitor products and find a gap that you can help bridge
• Take help from search engine keywords to find new product opportunities

2. Perform Market Research 

While you have picked your niche, you will still find enough competition to handle. A SWOT analysis is a perfect e-commerce business strategy to gain an edge over competitors.

A SWOT analysis is about conducting research on competitor’s strengths, weaknesses, opportunities, and threats. Complete your SWOT analysis in multiple sessions to gain perspective and insights. 

This analysis will help you identify any gaps in the market your product or service can fill. Even if you narrowed down a niche that already exists, try to think of a way to be different. Creating a unique value proposition will help you attract more customers and build a loyal base for the products you offer.

3. Select Your E-commerce Business Type

The next step for building an e-commerce business is to select its type. Once you know about the product and have conducted a market analysis, it is time to find out how you will sell it. 

Four e-commerce business types are:

• Business-to-Customer (B2C): This business model aims to sell to individual users directly. It is one of the easiest and cheapest e-commerce businesses to start. 
• Business-to-Businesses (B2B): This is where a business sells to other companies. It requires more initial costs and involves lengthy sales cycles. 
• Consumer-to-Consumer (C2C): In this business type, a customer sells products to peers. Freelancers and entrepreneurs come into this e-commerce business and sell products themselves. 
• Consumer to Business (C2B): Individuals sell services or goods to businesses under this business type. It also means when consumers provide value to an organization - for instance, in the form of reviews.

4. Choose an E-commerce Business Model 

The next step is to find out how you aim to manage inventory and source goods. It involves selecting a suitable e-commerce business revenue model. Choosing a perfect business model depends on your startup needs, cost, and available resources. 

Here are some standard e-commerce business models to explore: 

• Print-on-demand: This is a hassle-free option as you don’t have to print anything before there’s an order. Besides, it has the lowest startup cost, as you do not need to purchase excessive inventory. 
• Dropshipping: This is best suited if you do not want to manufacture, store, or ship products. You manage the selling and marketing side of the business. You will need a storefront to display products and a creative marketing plan to attract customers. 
• Digital products: One of the best options for people with expertise in e-learning, eBooks, photography, etc. 
• Direct-to-consumer: The D2C business model is best for business owners who want to interact with their customers directly. It allows them to have complete control of their products and performance. 
• Wholesale: It is the best option for store owners who want to sell various products and brands. They offer bulk items at discounted prices for more sales.

5. Craft Your Business Plan 

A business plan helps you stay on track and have a clear general e-commerce strategy. It helps identify business opportunities, potential risks, and growth plans. 

A business plan is also essential to raise additional financial support. It allows you to convince your investors so they can evaluate your online business. Your business plan document also serves as a reference point and a roadmap for your business for future conflicts.

Here are some common elements of a good e-commerce business plan.

• Executive summary
• Company overview
• Products and services offered
• Market analysis
• Marketing plan
• Financial plan
• Operational and logistics plan
• Organizational structure

6. Pick Your Business Name and Legal Structure

Pick a name for your business that is memorable. It should reflect the customers you serve, your services, and your brand's mission. It allows your potential customers to relate your brand name to the product.

A good brand name sticks to people’s minds and helps create your brand’s identity. Similarly, start with something simple yet impactful when it comes to the logo. A good logo design should align with your business name. This is one of the most important tips for starting an e-commerce business.

Before you finalize your business name, the following points must be considered:

• Ensure the name is easy to pronounce, read, spell, and remember.
• Make sure it is search engine-friendly.
• It should have an available website domain. 
• It should not be an existing business name.

We recommend not overstressing the name; your services and products are essential, along with the e-commerce business strategy. Please keep it simple and consistent and make sure it doesn’t violate legal compliance. 

Once you decide on the brand identity, select your legal e-commerce structure. Consult with legal professionals to figure out which structure will suit your requirements. 

You can either set up your online store under:

• Sole proprietorship
• Partnership
• LLC
• Corporation

The legal structure you decide on will help set your obligations, like liabilities and taxes. So, select the proper structure to register your company. 

7. Get EIN, Permits, and Licenses

All businesses do not need an employee identification number (EIN). However, it helps to keep personal and business finances separate. So, you can consider getting one, as applying through the IRS is free. 

The next thing to consider is getting permits or licenses for your business to start an e-commerce business in your state. You will not need brick-and-mortar setup permits to run your business online. However, you would want to stay on top of all the legalities when starting an e-commerce business.  

Visit your local government’s website to find what permits or licenses you must have.

Here are some e-commerce business examples of licenses and permits one might need:

• Industry-specific professional and trade licenses
• Sales tax permits
• Federal license
• Health, safety, and environmental permits (if any)
• Signage permits

8. Set Up Your Online Store

Once you complete the groundwork, it is time to launch your online store. Developing an e-commerce business platform is an exciting step that can become stressful sometimes. 

After all, there are many moving parts and aspects to consider. However, the result is fulfilling if you know what you are doing and have a plan. Here are the steps to set up your online store. 

Choose Your E-commerce Builder 

There are a lot of alternatives available for creating an e-commerce business store. You can choose from leading store builders like Shopify, BigCommerce, WooCommerce, etc. 

You can evaluate these planforms considering the following factors: 

• Web developer skills and ease of use
• Themes and templates available
• Compatibility with multiple payment gateways
• SEO-friendly features to help rank on search engines
• Options to choose a customizable domain
• Scalability options
• Pricing plans
• Ongoing technical support

Website Design for E-commerce

You need to be very mindful while building an e-commerce business website. A great website design offers the best user experience with simple CTAs and easy navigation. So, consider different page types to suit your business. 

Ensure to create a landing page, about us page, contact us page, and site map. Remember to check all these pages and website functionalities on mobile and make them responsive. 

Data shows that 91% of people order products using their smartphone. This also highlights the importance of e-commerce mobile apps in attracting customers to your store.

Other Add-on Services and Software

Considering your logistics is essential when learning how to start an e-commerce business and launch a website. You will need other software services for the online store when you deal in hundreds of products and SKUs. 

Besides, these services and tools must integrate with your website builder. For example, you will need inventory management and a warehouse management system to track products stored at different locations.

9. Select the Right Payment Gateway

Today, customers prefer digital payments to ordering from home and paying quickly. It requires you to set up different payment options that customers can use at their convenience. 

Whether you are creating an e-commerce app or website, PCI-compliant online payment gateways are necessary to ensure a quick and secure checkout. You can select payment gateways that process payments through tools like PayPal and Stripe.

PayPal or Apple Pay are great options to let shoppers skip entering credit card information. This helps reduce friction, resulting in less cart abandonment.

10. Market Your Online Business

The last step is to market your online business to gain more traffic to your website and drive conversions. So, it is important for you to select the best marketing channels. This involves paid ads, influencer collaborations, affiliates, SEO, email, and content marketing.

Use the best marketing practices to ensure your website ranks well and gets the desired visibility. Use Google and social media analytics to learn about your audience behavior and traffic sources. 

Take cues from the insights and optimize your online store to generate more traffic. For instance, consider checking the bounce rate of different pages - if it is high, you can try improving page layout and speed. There are many e-commerce business examples where you’ll find that a lot of entrepreneurs are taking guidance from such insights.

Checklist to Start an E-commerce Business

If you are planning to start an e-commerce business, here’s a checklist for your quick reference:

• Choose an Online Store Builder Platform
• Select a Domain Name 
• Select a Reliable Web Hosting Provider
• Ensure Your Site is Secure
• Include the Content Management System (CMS)
• Set Up Payment Processing
• Create a Terms of Use Document
• Add a Return Policy
• Ensure PCI Compliance  
• Obtain a business license  
• Invest in an Inventory Management Software
• Work on the Website Design
• Create a Website with Essential Pages
• Optimize for Search Engines
• Integrate Analytics Tools
• Set Up Email Notifications

Tips on Sustaining Your E-Commerce Business Growth

Setting up an e-commerce business and launching an online store is a great start. However, you need to make consistent efforts and build a robust marketing strategy to help your business stand in this space.

1. Refine Your Online Store for Conversion

What is the point of attracting hundreds of website visitors if they do not become paying customers? While increasing traffic is a start worth paying attention to, fine-tuning your website can turn the business around. 

It helps convert more visitors into paying customers, increasing sales and revenue. Below are some steps to ensure store optimization:

• Ensure your website is mobile-friendly
• Improve the page load speed
• Improve site navigation with clickable elements, menus, and CTAs
• Include multiple payment options

2. Start with a Niche Market

Competing with full-sized companies and brands will negatively harm your chances of sustaining your position in the market. So, start with something specific and a relatively minor niche. 

For example, you can set up an e-commerce website to sell products designed for older adults. Your e-commerce website can list ergonomic tools, therapeutic devices, or senior-friendly exercise equipment. 

Start with smaller sections and source products. Launch your website and market them with targeted Google or Facebook ads. Once you sell enough and have a customer base, you can expand your product range.

3. Collaborations and Multichannel Marketing

Working with social media influencers and affiliate marketing are some valuable ways to raise brand awareness. Use public relations (featured in select publications) to get noticed in the public domain and grab attention. 

Feature your products on channels such as significant online marketplaces like Google Shopping, Amazon, eBay, and Etsy.

4. Use A/B Testing for Marketing

Market and customer sentiments change every few years or even months. You may not know what can deliver better results until your experiment. Conduct A/B testing to improve your marketing effort. 

With this, you can achieve better click-through rates, more conversions, and loyalty. Here are a few elements to apply A/B testing:   

• Social media posts
• Google ad campaigns
• Social proof, such as testimonials and UGC (user-generated content)
• CTA button and copy

5. Invest in Technology for Automation

Invest time and money in technology to automate e-commerce processes. It will save you more time and energy, avoiding unnecessary manual tasks. E-commerce businesses can become overwhelming for limited staff in the initial phase, resulting in an increased risk of human error. 

Here are some processes you can automate in your e-commerce business:

• Inventory management, order, and fulfillment
• Chatbots for customer support
• Rules-driven pricing and discount
• Schedule marketing campaigns
• Product releases and live sales (especially for events like Black Friday or Cyber Monday) 

6. Gamification to Attract Customers

Gamification helps transform the experience on your website. It makes your web store more interactive, keeping the customer engaged. Activities like “Spin to Win,” scavenger hunts for discounts, fun quizzes, etc., boost your personalized offers. This can be one of the best ideas for those wondering how to grow an e-commerce business.

7. Loyalty Programs to Build Customer Base

Loyal customers have a higher lifetime value than new customers. Besides, 65% of a company’s revenue comes from repeat sales of existing customers. So, retaining customers and earning their loyalty means more revenue. This idea can work well for you if you are wondering how to increase sales in e-commerce business.

A strong brand presence on social media is a step toward building a following. This is where personalization can turn the game around. It allows you to speak directly to the customers and market your products. Create targeted email marketing campaigns, send discount codes, and let them know about the latest updates in the company.

Final Thoughts 

Setting up an e-commerce business successfully is not free from challenges but this venture is quite rewarding. It takes some initial investment but it is far less expensive than other profitable businesses. Besides, shopping technology is relatively cheap and requires less technical staff. Follow the above steps to starting an e-commerce business and turn it profitable. Focus on improving your online store's overall look, speed, and quality for enhanced user experience.