Congratulations! If you’re reading this, then you’re totally serious about starting an ecommerce business and you’ve taken the first and most important step in giving yourself the best possible chance of becoming one of the 10% who actually make an e-commerce business profitable and successful.
This guide aims to provide you with the basic steps you’ll need to take to make an e-commerce business successful and profitable. Integrity Commerce is owned and managed by Integrity Search – an award winning e-commerce digital marketing agency established in 2010.
Over the years, we have seen so many e-commerce businesses fail. We’re not ashamed to admit it, we’ve made mistakes ourselves too. To help people like you increase your chance of success; we’ve put together what we believe are the 10 important steps or critical success factors for profitable e-commerce, so we hope you find our advice useful.
# 1 – Business Planning
If you do a bit of research around the internet you’ll see various reports that claim up to 90% of e-commerce ‘startups’ fail. In our experience, one of the biggest reasons so many fail is because of poor business planning. Without a well thought out and carefully executed business plan, your chances of success are limited. Most people starting out in e-commerce think it’s as simple as launching an on online store and the sales will come flooding in. This simply isn’t the case.
Launching an e-commerce store is like launching any other business on the high-street. You wouldn’t take a wheelbarrow full of low quality products down Oxford Street in London and try sell them at double the price the other high street shops are selling them at would you?! So many people do this kind of thing online and then they wonder why they fail! You need to think very carefully about:
– What is your product offering?
– Who is your target market?
– Who are the competition?
– How are you going to market your products and brand?
– How much will it cost you to market your products?
– Can you afford to compete on price?
– What is your break-even point?
– How will you deliver your product?
– How will you manage customer service?
– Who will look after the financials?
– How much will it cost to set up?
– How will you grow your business?
# 2 – Choosing The Right Product To Sell
More often than not, prospective internet entrepreneurs are completely undecided on what to sell. You basically have two route to market options available; sell products by buying stock in and selling it for a profit or you can ‘dropship’ which is selling other people’s products – you advertise someone else’s products on your e-commerce platform. Customers place an order through your site and then you place that order with a supplier or wholesaler and they’ll take responsibility for fulfilment and delivery of order. You can basically set up an e-commerce store without ever holding any stock which is extremely cost effective when starting up. The problem you then have is what to sell via either of these channels.
Choosing the right product to sell is critical to your success. Selling popular products means there is a proven demand for the products you are selling but on the flipside – there will be much more competition which means it will be much more expensive to advertise and harder to generate sales without larger budgets.
Your chances of success will increase significantly if you find a niche product or a collection of niche products. Look out for emerging markets where the competition is lower and you’ll find that sales will be easier to come by if you have a range of products that little or few others do.
Finding the right niche could take a little time so do your research carefully. Our advice is choose things that interest you and things that you have knowledge in – don’t sell something that you have no experience in. The most successful sites we’ve seen over the years, is where the owners are experts in their field.
# 3 – Don’t Spend Thousands On An E-commerce Website
Most e-commerce startups think you need to spend thousands and thousands on website to get going. Don’t! You’ll need all the money you have to market your products through the appropriate digital channels when the time is right. Web designers are great at draining start-up budgets but there really is no need at the beginning. Before you invest in top end e-commerce platforms costing thousands – you need to know that there is a market for your products and that your business model works. There are two low cost startuup e-commerce platforms that are ideal:
- Shopify – Click here to start a free 14 day trial
- WordPress – View the best WordPress e-commerce themes here
Shopify is by far the easiest and the quickest to set up which takes literally minutes and WordPress is for the far more technical minded entrepreneurs out there. Shopify will even process your transactions so you don’t need to go through the lengthy and rigorous ‘online merchant application’ with your bank. You’re also far more likely to get accepted for an internet merchant account if you’re an existing online trader so our advice is use Shopify to start with. They’re very modern, slick and professional too.
# 4 – Market Research
Know you’re the size of your potential marketplace – research the market as much as you can to understand if you’re entering into a market that is expanding or declining. The trick is to enter a market that is expanding and has less competition than others. If you can be first out there in an emerging market then even better. Look for consumer trends predictions and forecasts and use industry data to help you make your decision.
When it comes to researching suppliers – you’ll find it’s far easier to source suppliers if you already have a site up and running, even if you only have dummy products on your site. Suppliers will take you far more seriously and will provide you with much more information if you have one ready so get your site up and running first before your start performing your market research – trust us, you’ll get much further quicker with a basic site up and running.
There are a few different ways you can source potential suppliers. You can source them yourself, you may have your own contacts or there are various sources out there on the internet that can save the groundwork by providing you with a list of credible manufacturers and suppliers that will ‘dropship’ or sell you goods direct for a small fee. Salehoo is a great source for finding dropshippers and suppliers.
# 5 – Competitor Analysis
If you think you’ve found the perfect range of products that can be supplied or dropshipped then you MUST perform some detailed competitor research. You should analyse the main competition, those who are selling the same types of products as your business, this could be between 10-20 competitors. You need to understand them inside out – most importantly how much are they selling their products for and then work out if you can you compete with them on price?
If all of the competition are selling similar products as you for less than what you can buy them for (remember larger brands will have buying/ordering discounts), then it’s a ‘no brainer’ from the start. Our advice is aim to sell a range of products that have an average sale price of between £300-£1000 and where you can compete in the marketplace with a cost + 40% pricing model.
# 6 – Digital Marketing
It is one thing having a website with fantastic range of products at a competitive price; but it’s another thing driving targeted traffic to your site that will convert. Launching a website is easy these days – the hard part is driving sales. We’ve spoken to so many businesses over the years that come to us with a brand new fancy website, populated with great products but they have no budget left for digital marketing. Crazy! Every business plan should contain a financial section that identifies the cost of marketing your products to your potential target market. The beauty about digital marketing is that there a lots of things that you can do yourself to increase your rankings, traffic and sales – it’s just knowing what to do and how to do it. You must always budget for some kind of digital marketing service to promote your products. Organic Search, Paid Search (Google AdWords) & social media (in our experience) the three primary and most profitable channels for conversions. The are other ways to promote your business for free but some will be more beneficial than others.
# 7 – Customer Service
We can’t emphasise enough how important it is to deliver first class customer service – via telephone or email. Customers don’t always go for the cheapest price, they often go for the best, the quickest and most efficient service. Answer your phone calls as quickly as you can – try to never let it go to answerphone – potential customers will think you can’t be bothered or you’re a small one man band with which they will be less likely to part with their money. Speak professionally – treat your potential customers the way you would like to be treat if you were buying something. Expert product knowledge goes a long way. A fast, efficient delivery service is essential. Have a clear and concise delivery and returns policy. Offer a great ‘after sales care’ service. All of these things will help build your brand reputation and will help you win repeat business.
# 8 – Financial Planning
Do the math! Work out how much your start-up costs are going to be. Work out how much you can afford to spend on marketing your products online. Can you source the right products at the right price that will allow you to compete? How much do you need to break even? How much do you need to earn a living? Many e-commerce entrepreneurs continue with their existing jobs until their online turnovers are sufficient to pay their wages. It’s a great way to start-up with little or no risk at all. All you need to do is put the effort in to building the sales once your business planning and research is complete.
# 9 – Planning Your Time
Time management is critical to success. You need to spend the majority of your time doing the things that will help your business succeed. If you’ve done your business planning well, you’ll have the right products at the right price along with first class customer service. All you need now is sales. Sales won’t come to you automatically. Launching a site is not a key to success. Driving sales is like with any business is. Yes you’ll have to deal with enquiries, yes you’ll have to deal with order fulfilment, yes you’ll have keep your paperwork up to date but you need to spend as much time and effort as you can on digital marketing to ensure your brand and your products are in front of the right people at the right time which is when they are looking to buy. You’ll save yourself thousands if you can do your own digital marketing to start with and you’ll have a far better chance of making your business profitable.
# 10 – Hard Work
No one gets anything in this world for free. Hard work is an essential ingredient for building a profitable business. Instant success doesn’t certainly happen over-night. Digital marketing doesn’t generate instant sales (unless you’re doing paid search from the beginning). It’s about consistently doing the right things. Search engine optimisation and social media marketing isn’t easy and it takes time to build up your brand, but if you allocate time doing the right things and put in the effort where it’s needed, then you can build up a profitable e-commerce business. Unless you have unlimited budgets for your startup then you need to be patient and put in the hard work. It’s a medium to long term commitment starting your own e-commerce business but if you put the right effort in, you can certainly reap the rewards and the skyis the limit for how much money you can make. We’ve previously worked with UK leading fashion brand that started off 5 years ago with a budget of just £90. They now turn over than £15M+ per year!! Amazing story!