I'm pretty much always thinking about the prospect of starting an eCommerce business. I like my job, but the siren songs of any number of passive income streams call to me daily. Tragically, however, I am not cut out for entrepreneurship. I spent a few years freelancing full time in my early 20s, and I nearly bankrupted myself—I just never did any work. So, to help you avoid my mistake, I'm going to help you learn how to start an eCommerce business the right way.
If you're thinking about diving into eCommerce entrepreneurship, you should have a clear and thorough understanding of exactly what it takes to be successful as an online seller. So before you start loading up on craft resin or earring hooks, read on to find out what you need to start an eCommerce business.
How to start an eCommerce business:
1. Choose your eCommerce niche
In eCommerce, the most successful sellers hone in on extremely small, highly specific niches. Think of eCommerce niches as segments of the market other businesses don't satisfy. The more specific your product niche is, the fewer competitors you have; the fewer competitors you have, the more likely you are to succeed.
Your business model should reflect your eCommerce niche, since not all models will work with all types of products. For example, dropshipping won't help sell hand-knitted sweaters, and few people would buy a subscription for artisan coffee tables.
You want to find a niche that is both large enough to contain a robust target audience and small enough that it doesn't include many competitors. Touchland is a great example—they transformed hand sanitizer from a first-aid item into a chic beauty staple.
The best way to identify your niche is to start with a product market and whittle it down from there. To choose a product market, start with target products that:
You're capable of creating (at high quality)
You enjoy creating (even at scale)
Have a small market/minimal competition
People want or need
Narrowing down your eCommerce niche
Once you've identified the right product market, you can add details to refine your niche. Let's say you make clothes in your free time and you're interested in figuring out how to turn that into an eCommerce business opportunity. In the broadest sense, you want to target the clothing industry, but since it's an extremely saturated market—meaning it contains many, many competitors—you're not likely to succeed as an individual eCommerce seller.
You need to find a unique product category within the larger framework of the clothing industry. Let's outline the process of narrowing down a niche and product experience to cut out the competition:
Start within a broad market (like clothing) that you can make products for.
Find a segment of that market with fewer designers and retailers. In this case, the pet fashion industry cuts out a lot of competition.
Since pet clothes is still a broad category, you can narrow it further to pet clothes for dogs.
Retailers don't produce pet clothes with the same style and methods. If you make your pet clothes yourself, consider "handmade pet clothes for dogs" your market.
To get even more specific, you could focus on dog clothes for special occasions, like weddings and engagements. Specificity can make your business hard to compete with.
That's as far as I'm taking this example, but if I were actually launching this business, I'd probably drill down even further just to really make sure I had my unique micro-market cornered. I might narrow it down by size, theme, or even specific clothing items until I hit my ultimate niche: floral-themed wedding bow ties for small and medium dogs. (Though there's truly no limit to how far you drill down your niche—until, perhaps, you reach CelebriDucks levels of specificity.)
Your niche isn't a permanent designation—if your product does well in your corner of the market, you'll have more capital to invest in better marketing, audience targeting tools, and maybe even an employee or two. The more your company grows, the more resources and power you have to capture a larger market share.
2. Determine your shipping strategy
When I think of small eCommerce businesses, I think primarily of some of my favorite niche Etsy shops selling things like taxidermied squid jewelry and D&D dice with real mushrooms inside. (I am a very fun person to know at Christmas.)
But eCommerce selling includes far more than traditional consumer retail. A lot rides on your choice of eCommerce sales channel. Depending on your needs, you may find that one of these options suits you best:
Direct-to-consumer (DTC): DTC shipping occurs when an eCommerce store produces and ships its items directly to consumers. This approach steers clear of go-betweens and third parties in your sales process.
Dropshipping: Dropshipping is an eCommerce model where you sell products without carrying any inventory. When customers order on your site, you contact the supplier and have them ship the product to the customer. Dropshipping is a popular eCommerce business model because you don't need to spend much money upfront.
Print on demand: Print on demand is similar to dropshipping, but instead of shipping products from a supplier, you have your products printed and shipped by a print-on-demand service. This type of business works for selling custom-printed products like T-shirts, mugs, and stationery.
Retail arbitrage: Retail arbitrage involves buying products from physical stores and selling them online at a higher price. This type of eCommerce can be profitable, but it requires more work than dropshipping or print on demand. You also need to find a niche where you can ensure customers won't go to the source to make their purchase at a lower price.
Wholesaling: Wholesaling is an eCommerce approach where you sell products in bulk to retailers. The benefit of wholesaling is that you can get discounts on the products you purchase, which allows you to sell them at a higher price and still make a profit. However, this requires a large initial investment since you'll need to stock inventory in bulk quantities.
Subscriptions: Subscription eCommerce businesses sell products or services on a recurring basis, most commonly in the form of a monthly box of curated products. But other types of subscription businesses exist, such as online courses and members-only clubs.
Private label: Private-label businesses pay a third party to make their product for them. If you private label, you have complete control over the good's specs and packaging. Private labeling takes a lot of research and investment to form the right business relationship.
White label: White-label stores buy items in bulk from a manufacturer. After receiving them, you rebrand the items with your company's name and logo. While this costs less than private labeling, you have less control over the products you buy in bulk.
After picking a channel, you need to work out the shipping logistics. If you use an eCommerce website builder, check if it offers shipping label printing or adds shipping costs to customers' orders. On your end, gauge how much it costs to ship goods, and decide if there are places you can't afford to send goods.
3. Create a business plan
After choosing your product niche and shipping strategy, you can write a business plan. Think of a business plan as the way to hone your ideas into a unified strategy. It will shape your investment priorities and plans for reaching customers. A good business plan typically involves six parts:
Business description: Info on your company's structure, industry, and background information
Mission statement: A list of your core values and goals as a business
Competitor research: Details about your competition and their tactics
Business roadmap: A timeline describing how you plan to grow your business over time
Product descriptions: Details on the product or service you want to offer and a logistical view of how you'll provide them
Financial projections: Estimations on your pricing and sales strategy, profit goals, and investor details
4. Set up your eCommerce store
You've found your market, honed your niche, picked your product, and you're ready to start generating inventory and selling it to your customers. It's time to choose a platform and set up your eCommerce store.
Choose an eCommerce platform
Talk about a crowded market—there are a ton of different platforms you can use to start a store online. You also don't necessarily need your own online storefront; you can sell on marketplaces, crowdfunding sites, or a number of other eCommerce alternatives. If you do go with an eCommerce platform, here are a few different guides and comparisons that can help you find the right site for your business:
Set up your website
The platforms above fall into one of two categories, each with different setup requirements.
A standard website builder like Wix, Weebly, Squarespace, or WordPress will let you create an entire website, only part of which needs to focus on your store's functions. If eCommerce selling is only part of your business plan—for example, if you're a professional photographer who sells prints and posters as a side hustle—you would want your site to be dedicated to your store as well as pages housing biographical information, your professional portfolio, booking information, recordings of photography classes or talks you've given, online course sign-ups, and anything else that pertains to your career.
If your primary goal is eCommerce selling, you're better off opting for a purpose-built eCommerce platform like Shopify or WooCommerce. Both platforms offer many of the same features as a general website builder, like adding About pages, image displays, and blogs. These platforms also grant access to advanced features and integrations designed for eCommerce, like shopping cart software. These tools can help supercharge your selling and help your store gain momentum.
Ready to build your store? Check out these step-by-step guides to creating your store on the platform you want:
5. Market your business
With your eCommerce shop all set up, it's time to throw everything you've got into ensuring it succeeds. You can't wait for your customers to come to you—you need to find, reach, and convert your target audience.
Establish your branding
While your product brings customers in, your brand creates a unique identity around that product. If your competitors offer a similar product or service, branding creates an impression that helps you stand out. You can infuse your brand identity into your business through:
Your business name
An eye-catching logo
Vibrant store design
Marketing collabs with influencers
With branding, it pays to stand out. Choose visuals, names, and marketing that emphasize what makes your product unique. Creating a brand that resonates can attract buyers without leaning on your product's strength alone. Once you settle on a branding strategy, keep it consistent across all areas of your business.
Target inbound sales leads
Inbound sales strategies are designed to draw people to you instead of the other way around—think search optimization (SEO), paid search, social media, email marketing campaigns, and content marketing. Across these channels, you'll show how your product solves customer problems or enhances their day-to-day lives.
Tip: Before generating inbound leads, come up with a buyer persona representing your ideal customer. By understanding the kind of person who would buy your product, you can map out their customer journey and find the best channels to attract them.
Explore potential sales strategies in more detail with these guides:
Use what you've got
As a small business owner, your plate will be full most of the time. If you want to keep up, you need to efficiently use what you already have and draw multiple marketing materials from one asset. For example:
Get into the habit of snapping and recording your day-to-day processes and behind-the-scenes moments. That way, you always have material for social media and website visuals.
If you're researching a topic related to your business, consider adding an extra step and turn your research into a marketing email or SEO post.
Whenever you design a new marketing asset—an email layout, an Instagram Story, a blog structure—aim to turn it into a template you can reuse instead of starting from scratch on your next asset.
Marketing as a small business owner is a "work smarter, not harder" game. Get as much mileage as you can out of repurposed content. Staying efficient frees up time and attention you can spend on refining your business strategy and growing your company.
How to tell if eCommerce is right for you
In the same way that some kids are terrible at homework but are great test-takers, there are some personalities that thrive under the pressure of relying on their business's success for their survival. When it comes to employment vs. entrepreneurship, there is no objectively better, more flexible, more independent choice—there's just what works better for you.
Here's a quick self-screener you can use to see if you're cut out for eCommerce selling:
Do you like what you do? This is something you're going to spend hours on, day in and day out. And you need to work hard to get your business off the ground. If you're not truly passionate about your product, you'll be miserable within a few weeks.
Are you self-disciplined? It's not easy being your own boss, especially in an industry as isolating as eCommerce. Traditional small businesses don't have this problem when you can rely on coworkers and trust managers to keep you accountable. In general, it's a lot easier to stay motivated when you're interacting with customers or a small staff.
Do you have a lot of commitments? Anyone who has ever tried to work remotely from their parents' house can tell you that some people simply do not perceive solo work on a computer as "real work." So if you want to run a successful online store, you need strong boundaries and a close relationship with the word "no."
Can you take on the financial risk? Starting a store on the side while you hold a day job is one thing. If you're making a complete leap to entrepreneurship, you'll need to go a few months or even a year without much income. If you have lots of debt or a family to feed, this might not be the career for you.
Tips for starting an eCommerce business
Provided you've given it some thought and you're ready to make the leap, here are some tips to help get the ball rolling.
Pick something you're good at
It's perhaps the most obvious of the six tips listed, but it still bears mentioning: when starting an eCommerce business, choose something that you can do or make well. If you choose something extremely unique and specific that no one else is doing, you may be fooled into believing the lack of competition will make up for poor quality. But the moment you gain popularity, if someone else can create your product better than you can, your business will be dead in the water.
Pick something you like
Choose something you enjoy making, looking at, and thinking about. More importantly, pick something you won't hate after the 10th, 50th, 100th, or 1,000th time you've sold it. Selling can be tedious work, especially if you make your products yourself. Don't build your business around a product market only to find that you can't stand working in it.
Pick a small market with limited competition
eCommerce sellers can't use the same logic and strategy that regular companies rely on to choose their target markets. You're one person with one person's resources and power. If you try to enter a market where you're competing with full-sized companies and brands, you'll be out-marketed and out-maneuvered every time.
Remember to always be specific. Instead of lawn services, target the market for environmentally sustainable lawn care in one finite geographical location. Instead of publishing eBooks on finance, publish eBooks on investing for American women ages 18-24. Keep narrowing it down until you've found your product niche.
Pick something people want or need
This is common sense: you need to sell something people will buy. Even the biggest brands still mess this up every once in a while (looking at you, Colgate-brand frozen dinners and the Bristol-Myers Squibb nightmare that was the "Touch of Yogurt" shampoo). Don't wait until after you've launched your product to match it to a potential customer market. You can get ahead by:
Researching and narrowing down your target customers' priorities and must-have features
Reviewing the problems your customers need to solve and the enjoyable things they want to enhance
Ensuring a large enough demographic of people in the market want what you provide
Pick something profitable
There's no surefire way to guarantee a business will become profitable. Still, with some research, you can strengthen your odds. Ideally, you want to choose a product market with a strong balance between a large potential customer base and a small number of competitors.
Tip: You're more likely to succeed if your product is truly unique in some way. Go beyond how it looks and decide if your product delivers a feature or element that no competitor offers.
Automate as much as possible
There are lots of opportunities to automate parts of the eCommerce process. Invest time in setting up automations at the outset, and you'll save far more time and energy avoiding unnecessary busywork once your store gets off the ground.
Most of the risks specific to eCommerce entrepreneurship come down to the fact that it's an overwhelming amount of work for one person to handle. Automating your eCommerce business can materially increase the likelihood of your business's success.
Here are a few guides on the kinds of automation that work best for eCommerce and how to set them up:
FAQ: starting an eCommerce business
Still have questions about how to do eCommerce or where to start? Here are some answers.
What is an eCommerce business?
An eCommerce business sells products and services through digital channels. While eCommerce business owners can open physical stores, they lean into an online-first approach to selling. Typically, an eCommerce business makes most of its sales online through a digital storefront.
What are the four types of eCommerce business?
eCommerce businesses fall into four categories:
Business to customer (B2C): B2C websites sell to individuals much like physical storefronts. Online customers make a selection, check out, and have their products shipped to them. Some shoppers call this approach direct-to-consumer (DTC) eCommerce.
Business to business (B2B): B2B eCommerce occurs when businesses sell to each other online. They often base their model on higher order volumes and SaaS subscriptions. B2B sellers also tend to offer white-glove customer service and more customization options.
Consumer to consumer (C2C): C2C marketplaces allow customers to sell to each other. Websites like eBay and Etsy host this kind of eCommerce.
Consumer to business (C2B): C2B platforms let individuals sell to businesses. In some cases, C2B involves companies purchasing a good or service from freelancers. Consumers can also write reviews, share affiliate links, or host ads on their websites for pay.
How profitable are eCommerce businesses?
eCommerce businesses become more profitable with each passing year, with sales reaching $272.6 billion in the first quarter of 2023.
Whether or not you'll get a piece of the pie depends on other variables like the competitive landscape and your marketing savvy.
Turning business ideas into eCommerce success
Whether you want to expand into a new niche or start an eCommerce business from the ground up, automating the repetitive parts frees you and your team up to sell more products, keep your customers happy, and make your business dreams come true.
Explore how Zapier can help you automate your eCommerce business. Whether you want to automate payments, optimize your tech stack, or schedule repetitive orders, Zapier gives you more time to make the product you're passionate about.
For more insight on managing a growing business, check out these guides:
This article was originally published in August 2018 by Matthew Guay. The most recent update was in August 2023.