Today, let's talk about what are the things you'll need to know when building your e-commerce business.
What to consider when starting to build my e-commerce empire?
Alright, I think most of the newbie will ask this question. Why? Because we need to know up front what we're dealing with.
Based on my experience (not so long after all), you need to know why you're doing this.
It's all comes back to mindset and reason driven attitude that will make you take massive action.
If you can find your "why", you will be able to take continuous actions to make this new business successful. At least that works for me.
So you need to ask yourself, why you're starting this business? For what reason you want to get involve in this? What kind of lifestyle that you want? What do you want from this new established business? Will you willing to spend more time on this new business? Why you want to get into this business but not others? etc...
Another good way to find your true why is to use the method called: 7-level deep why (this is one of the method taught in Dean Graziozi's book "Millionaire Success Habits". How you can do that? Get a trusted partner and let them ask you why for 7 level deep. Each answer will led to another deeper why question, until you reached the 7th answer. That's your main "why". In this exercise, you may become emotional, and you must be honest to your answer and deep down you'll be able to find your true answer.
So enough for the mindset part of it. Let's go to the real consideration of e-commerce business.
Start up capital
I think this is the most important question that you may eagerly want to know. It's the first thing most people will ask and consider when heading to a new business.
To be frank, it's not that expensive. But it won't be cheap as well for normal 9-5 job employees, which have other commitments.
First thing need to have is the domain name. Not a must, but for long term business and branding, it's worth the investment. You can get a domain name easily within ~$10 from Namecheap or GoDaddy.
Second thing would be the e-commerce platform. Well, this is pretty subjective on your selection. It can be pretty expensive in long run, but for start up, you can go for any platforms. Among them are Shopify, Magento, WordPress with WooCommerce, Ecommstore, etc. For me I would just start with Shopify because it's just simpler to configure and payment gateway is taken care of. Once you set it up, you can just kick start your store and you will be ready to receive orders. For long term, Shopify may become expensive. Alternatively, if you're good at customizing your own website, Magento or WordPress pair with WooCommerce may be a better choice since there isn't any recurring fee. But you'll have to subscribe to your own hosting in this case. Minimum startup cost using Shopify would be ~$29.
Third thing to consider is whether you're willing to spend your time on building this e-commerce empire. Yes, time is also part of the consideration. When you're in e-commerce business, anytime there'll be an order coming in and you'll have to fulfill the order. So you need to be prepared to allocate your time to your customers. Also, you will need to spend your time doing the research to find suitable products to suitable customer.
Forth thing would be your advertising cost. We're talking about paid advertising here since we want to get the faster result possible. Or else you'll be in trouble paying ecommerce platform but no sales. You can do the conventional way of SEO or free traffic, but it will take time. For paid ads, you can engage to Google Adwords or Facebook Ads. You'll have to be prepared to spend some money here because it's all about testing and see which works. There's no one method wins all kinda thing. So be prepared to lose some money while testing out until you get the winning ads. Nevertheless, it should based on your budget. Roughly prepare around ~$200 will do.
Niche
This is important in building reputation and brand. It's easier to established a niche site than a general store. That way you can save your time of research and eventually you will be the expert on that specific niche.
So focus on particular niche and do all the research that you need. Find the correct audience to target and feed them with great products. You'll get the payback later on.
Also, if possible, build your brand from the start. Get high quality products and sell to passionate customers. They'll love it for what you did.
Payment Gateway
This is the most important thing in order to get sales. Without this, you'll not be able to get any money from your customers.
There're lots of payment gateway that you can use. Among the popular one would be Paypal or Payoneer. If you're not US citizen, using only Paypal will do as well.
Make sure you understand the payment charges for each of the transactions and factor in so that you won't be losing money for every sales. If possible, use the one with lower charges to maximize profit.
Products to sell
This can be easy to tell. All you have to do (since you've selected a niche) is to source a quality product. A product can be sourced from a wholesaler, or you can make your own craft and put in for sale. It's important to note that understanding your audience needs is crucial in selecting which products to sell.
My rule of thumb is to get quality products. I'm getting from wholesaler. So I would check their years of doing business, how many orders they've fulfilled, how many feedback they've received, how others think about the product, what's the feedback from related products, how soon they can help to ship, how's the packaging, etc. These questions are all relevant in order to make sure the product is good and it will help in building good reputation to your store.
Pricing
For initial start up, my strategy is to earn lesser, roughly only 10% of selling price. I would like to get more visitors to recognize my store first. Then later on I'll promote a higher price item to gain higher profit margin.
Pricing is really a very tricky thing. So you must have a sense of judgement as in if I put that price, will people buy it. So it's depends on experience and how you think the product worth. You can survey around shopping mart and check out the normal price of the item. Then set a baseline for your product.
Of course, doing business means you need to earn something. Thus, don't depends on survey only, Do the math yourself and check how much you can actually put for pricing. You'll need to consider the cost involved.
In my case, I'll consider the below:
- Shopify monthly fee = ~$1 per day
- Shopify transaction fee = 2% each transaction
- Paypal trasaction fee = 4.4% of money received + $0.30
- Product cost = depends on product
So your profit margin will be:
Profit = Selling price - [ 2% x selling price ] - [ 4.4% x selling price ] - $0.30 - [ product cost ]
Profit = Selling price x 0.936 - $0.30 - product cost
So if you want 40% profit margin, then your selling price will be:
Selling price = [ product cost + $0.30 ] / 0.536
That's how I set my product's selling price.
After sale service
As an e-commerce business owner, after sale service is very important. Especially if you need to handle goods return and also money back guarantee. For US based purchase, normally we should give a 30 days money back guarantee. It's the norm there to have such to make sure they received what they paid for.
So you may consider to use some software or application to help you in automate the process. Or just hire someone to look after after sale service once your business grows to hundred orders per day.
Work with your supplier on the return policy or replacement. Normally they're willing to help on this matter. If your item is low cost, you can just ship the customer another one FOC just to please them.
For long term business, we usually focus on making sure our customer receive the goods on time and in good condition. We want them to become our return customer so that your business will grow. If you're good in email marketing, get them sign up your email list. Promptly send promotional emails to them and convert them to become your return customers.
Also, by building email list, you're having the opportunity to promote your brand and get even more exposure to outside world. You'll also get to grab back potential customer from abandoned cart.
Scaling Up
When you have lots of orders like hundreds per day, you'll need to start thinking to grow your team. It's just impossible to handle everything your own. You'll need assistant. You'll need someone handle your order and fulfill them. You'll need someone to take care of customer service to answer questions. You'll need someone to handle your ads. All that needs time.
So in order to grow even bigger, you'll have no choice but to outsource. You'll have to decide to shred a little money from your profit margin to hire someone to take care some little things for you. Doing this initially will not be comfortable I know. But have a team to help you will be your greatest choice when growing your business.
Just pay some money and get rid of headache. And earn some time for other tasks.
Final words
I hope the information above is enough for you to have a glimpse of what you're getting into when doing ecommerce business. Certainly in any business as well, you'll have lots of concerns and consideration before making the decision. I'm already started up my e-commerce business. So maybe now is your turn. If you want some extra income and
Please leave me some after-read comments and let me know what you think.
Or leave me some feedback on what're the topics you want me to write.
Again, thanks for your time. Wish you luck in starting your online business!
