6 Basic Steps to Start And Develop An E-commerce Business
How can I start an e-commerce business? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
Step by Step Guide on Starting a Successful Ecommerce Store
Step #1 – Find a profitable niche
Sell what you like and what you know: When you are choosing a product, it’s important to pick something you know and are passionate about. Entrepreneurship already has a high learning curve, and you don’t want to make things even harder.
First, list all the things you like to buy and use in hobbies and daily activities.
For example: If you’re into winter sports and like snowboarding, you might start an eCommerce shop in this niche. You can sell everything from boards, boots, goggles, helmets, gloves, jackets and other things related to snowboarding.
Don’t forget that Tony Hawk started Birdhouse, his skateboarding company, because of his love for the sport. You can do the same based on what you like to do.
To get started, here are some categories you can look into:
- Consumer electronics: Notebooks, printers, smartphones, TVs, digital cameras, video game consoles, etc.
- Books. Both digital and printed.
- Clothing and apparel: T-shirts, jeans, suits, dresses, shoes, watches, jewelry, etc.
- Household goods: Air conditioners, furniture, washer, dryers, coffee machines, dishes, kitchen utensils, etc.
- Office supplies: Paper clips, post-it notes, stables, cash registers, photocopiers, pens, paper, etc.
- Sporting goods: Football, basketball, flying discs, surfing boards, skates, skis, cricket spikes, nets for tennis, golf clubs, protective equipment, gym equipment, etc.
- Pet supplies: Food, toys, appeal, treats, litter, beds, aquariums, cleaners, cages, grooming, etc.
- Tools: Knives, camping gear, etc.
What do your friends and peers complain about? If you know people who occasionally complain about something, maybe they need a solution that can be delivered as a product or service.
Even the slightest dissatisfaction with current products or distributors is a sign that there is a need for something better.
It is often a good idea to further investigate and ask people questions like:
- What are the things you’d like to buy online right now?
- What are your biggest challenges at the moment [in that niche]?
- Is there something you can buy that will help you out in your situation?
- What are the hardest products for you to order and why?
- Is there something your current provider is not offering you? What is lacking in their service?
The answers to these questions could give you a good idea of what people are looking to buy.
What are people complaining about on social media channels? Review posts and ask others on Facebook & LinkedIn groups, Google+ communities, Reddit, Quora, Forums, etc.
Your end goal here must be to find out the biggest problem people have in your niche, so you’ll know what to offer them.
Imagine you have a neighbor who often complains about his cat peeing on the floor inside the house. To solve his problem, he might be very interested in buying things like a litter that kills the bad smell or lessons to litter box train the cat.
Check out the top selling items on Amazon and eBay: One of the best ways to further investigate your niche is to simply review the top selling lists on Amazon or eBay. By doing so, you will learn exactly what people are already buying so you don’t need to guess if there is a demand or not for your product.
Just go to Amazon Best Sellers and select your category of desired products from the bar on the left.
Step #2 – Analyze the market opportunity
Once you find a potential product with demand, you need to figure out whether there is big enough market in the long term? You don’t want to start your eCommerce site only to realize there are simply not enough people interested in what you’re selling.
Here are a few ways to determine the size of the market and its profitability:
Use Keyword Planner Tool(such as SEMrush): High volume of searches for your product keywords on Google usually means high demand and a big market. If there are several thousand avg. monthly searches per month, you’ll know you’re on the right track.
For example: If you’re looking to sell digital cameras in UK, this is what the Keyword Planner tool will show you:
You might search for specific brands like GoPro and see there are 20 times more searches for that:
You can further investigate by checking specific products or series:
As you can see, there are a lot of searches for GoPro Hero 3, which means there are tons of people willing to buy it. If you‘re looking to build an eCommerce store for digital cameras, this is a product you‘d definitely want to include.
Industry reports: From these you can learn which products are highest in demand and get an idea of how to position yourself.
The report Global Consumer Electronics Market 2014-2018 reveals information about key market drivers, challenges, trends, opportunities, expected market size in 2018, etc.
The information in these reports is very structured, which will save you time when putting all the different pieces of the puzzle together. The downside is that sometimes you’ll have to pay for them.
Google Trends: This helpful tool will show how the average search volume for product keywords has changed over time. By looking at this data, you can analyze if your prospective market is shrinking, staying steady or growing.
If we once again search for GoPro, we’ll notice a rapid advance of search volumes from 2013 till 2018. It looks like the market is booming and will continue to grow at a rapid speed in the following years.
Step #3 – Define your target customers
Don’t try to sell to just anybody. Most people are not interested in your products, and they will never buy from you (even if they have the money).
Instead, focus on finding the people who actually need your product .
Develop buyer personas for your target customers: These are semi-fictional representations of your ideal customer. They allow you to narrow your niche and the specific people who will want to buy from you so you can focus only on them.
When creating buyer personas you should ask yourself the following:
- What are their demographics? (Age, gender, location of residence, etc.)
- What are their behavior patterns? (How do they act in the environment in different situations?)
- What are their core motivations and goals?
- What are their biggest challenges/issues in your niche?
- Why would they want to buy your products? What can they accomplish with them?
For example: If you’re selling GoPro cameras, your buyer persona might look something like this.
Adventurous, 15-25 old man who likes to film himself snowboarding. His core motivations are to promote himself on YouTube in order to find more sponsors and advance his sports career. He wants to buy GoPro to shoot from extreme angles, which is something he can’t afford to do with other types of cameras.
You might have several more buyer personas: like a stuntman or a diver, all with different goals and motivations for buying your products.
Estimate the lifetime value of a customer: The second thing you should do is to understand how much money you can earn from a single customer over a period of time. This will allow you to predict in advance how profitable your company will be long-term.
For example: Imagine you have an eCommerce store for pets and someone decides to buy a Labrador from you. Here is a list of the things he’ll need to pay for:
- Initial cost of the Labrador: $700 (or $0 if you adopt, which we support.)
- Collar, leash and ID tag: $35
- Food per year: $3,000
- Toys and treats: $200
- Kennel or dog bed: $100
In the first year, this customer will bring you $4,035 and at least $3,335 after that. If he stays with you for 5 years, his lifetime value is $17,375.
Wow! that’s a lot of money people are spending on their dogs.
Step #4 – Validate your idea
Set up a test store:The easiest way to do this is to sign up for a 14-day free trial at
Shopify . Choose a basic free template, list some products, and drive PPC traffic. If you make sales before your trial expires, then there is a market opportunity for your business idea.
In general you can validate your idea for a few days up to a week or two, depending on your market and response time. Be sure to do this properly before moving to the next step. If you don’t make any sales in advance, consider finding another business idea.
Step #5 – Position your brand and product
The internet is full of products to choose from and most of them look the same. If you don’t find a way to differentiate yourself from the rest of the market, you’re destined to fail.
Don’t compete with others: People remember no more than 7 companies from the same niche category and usually the market leader is first in their mind.
It’s smart to create a new niche category where you can be first in rather than competing with numerous existing companies in a brand category. You do this by positioning.
How to position yourself in a new category: Start by asking yourself what aspect of your customer’s need is critically important to them. Is it:
- Specific results
Whatever it is, base your eCommerce category on this key need that is currently unmet.
How to niche your category? eBay was not the first eCommerce site. It launched after Amazon but is the first to allow independent people or companies to sell products on auction. Zappos was also not the first eCommerce site. There was already Amazon and eBay, but it was the first to introduce online shopping for shoes.
You can transform each niche into a new one by adding a new perspective, such as shoes for the urban man or busy woman. It’s important to define the product category and position yourself as the number one choice.
The concept of positioning was first introduced in the book Positioning – The Battle for Your Mind by Jack Trout, and we highly suggest reading it if you’re serious about building a successful eCommerce business.
Products: The next obvious step is to consider some physical aspects of your products that will inevitably affect your eCommerce business.
Weight and size: Bigger and heavier products are usually harder and more expensive to deliver. If you’re offering gym equipment, spend some serious time considering how you’re going to deal with the shipping.
Fragility: If it’s easy for your products to break during delivery, you’ll have lots of turnovers and this will result in a bad reputation for your company. The last thing you want is your customers to receive broken porcelain dishes.
Seasonality: Some products are only sold around Christmas or in the summer. It might be difficult to build a profitable, long-term business around them. If you’re thinking of starting an eCommerce store for swimming suits, consider what you’re going to sell during the winter.
Availability: Consider what would happen if your distributor decided to stop supplying you with products. Can you order from an alternative? It’s always a good idea to have 2 or more options.
Restrictions & regulations: There might be some laws or regulations you need to be aware of in any market. Some products might be prohibited or allowed only in certain situations. Consult with a lawyer to be sure.
Shipping costs: Most people expect free shipping nowadays. You should calculate the price of your products with this in mind so you don’t have to charge an additional shipping fee.
Step #6 – How to price your product
One of the hardest things to learn in business is how to price your products properly. If your prices too low and you’ll make no profits, if prices are too high and you’ll lose revenue.
To figure out the right price, follow these simple steps:
1. Calculate your costs: Don’t sell your products for less than what it costs you to deliver them. Summarize what it costs you to:
- Purchase the products
- Acquire customers
- Deliver the product
- Pay for salaries, office materials, website maintenance, etc.
For example: Let’s imagine you’re selling jeans and you have the following costs: to buy the product $5, to acquire the customer $4, to deliver it $3 and you also spend $2 on other expenses. This means you should not sell these jeans for less than $14 and preferably for more if you want some profit.
2. Check out the prices of your competition: One of the easiest ways to determine how much to charge for certain products is to find out what other websites are charging.
For example: If you’re going to sell shoes on your eCommerce store, go to Zappos and check out the prices.
Keep in mind you can always sell the products for more or less depending on how you position yourself.
3. Use suggested retail price: Most often manufacturers will suggest how to price products for end consumers so you don’t need to think about it. Use this as a starting point and experiment further to see how much your customers are willing to pay.
4. Use keystone pricing: Double what it costs you to purchase the product. That’s the easiest pricing model for eCommerce businesses.
For example: if you bought a pair of glasses for $5, you‘re going to sell it for $10.
5. A/B test your pricing: If you can justify a higher price than your competitors and think you can get away with it, then test the higher pricing with the original pricing. See if you’ll lose lots of sales.
How much are your customers really willing to pay?
Sometimes the retailer price has nothing to do with how much it costs you to buy the products. In certain situations, customers might be willing to pay more for what you’re offering because they simply want it that much.
Contributed by Mathew A.Kyle, Own an online store.