E-commerce is a business model wherein goods and services are purchased and sold over the internet. Hence, payment for goods and services is made digitally via various payment methods such as Paypal, Payoneer, and others.
In the United States, retail e-commerce revenue was expected to reach $875.2 billion by the end of 2022, up from $767.7 billion in 2021. It is projected to rise to $1.3 trillion by 2025. E-commerce accounts for 14.5% of total retail sales.
From these stats, it’s clear that the e-commerce industry is a highly lucrative market with incredible opportunities. However, it’s competitive and dominated by major brands with hefty resources.
Is Starting an E-commerce Business a Profitable Idea?
Running an e-commerce business can be a very profitable venture. Below are a few advantages:
- Low startup costs: As a beginner, starting an e-commerce store is less expensive than opening a physical store. There is no need for rent or employees if you want to work independently.
- Faster and easier to set up: unlike a physical business that requires months or years, setting up an e-commerce business takes a few hours in the comfort of your home.
- Operates globally: Regardless of your physical location, having an e-commerce business allows you to sell to anyone in the world who requires your product or service. There are no restrictions on location.
How to Set Up Your Own E-Commerce Business
While millions of e-commerce businesses thrive and make huge profits, many also fail. This difference boils down to two things: adequate planning and execution.
Even if the cost is low, there is no greater joy than seeing the business you started flourish. As a result, we have carefully highlighted the prerequisites for setting up an e-commerce business.
Here are step-by-step instructions for starting an e-commerce business:
Find out more: Need funding? Check out our guide on small business grants.
Decide on a Product or Service to Sell
The most important aspect of setting up an online business is selecting the right product or service to sell. You need to understand that the digital space follows trends. Therefore, consider a competitive market when deciding which product to sell in your e-commerce store.
While you may be concerned about the competition, you should also recognize that there is a market in the niche, which is why people are flocking to it.
In contrast, a less competitive niche may show no demand for the product. As a result, if you want to see tangible results from your e-commerce business, you must invest in a thriving market. You might decide to have multiple products in your store, like Amazon, or sell a single product, like Nike.
Choose Your E-commerce Business Model
Depending on the kind of service or product you choose to sell online, your e-commerce business can function in various ways. These are some examples:
Business-to-Consumer (B2C): This is the most common e-commerce business model in which you sell your product or service directly to the end user. Transactions are typically completed quickly, and sales may be a one-time event. Mobile phones, clothing, kitchen utensils, and other items are popular B2C e-commerce products.
Business-to-Business (B2B): a model in which your e-commerce business's consumer is another business. Orders are typically high in B2B setups, and purchases are frequently recurring. However, bargaining and transaction times are often extended due to the necessary protocols for a smooth transaction.
Business-to-Government (B2G): Your customer is a government entity or a public administrator. The process of closing a deal with the government is usually ambiguous. B2G requires proposal writing, project bidding, and ticking all the boxes. Also, the transaction is high-valued because you may need to sign a government-wide acquisition contract.
Consumer-to-Consumer (C2C): This is a situation in which one user sells their (old or new) product to another user via a specific platform. Customers can use C2C e-commerce websites to buy or sell products without dealing with a company. A typical example is eBay.
Consumer-to-Business (C2B): An e-commerce business model where customers can sell to a business. Customers can sell their skills to a company via a website. Fiverr, Upwork, and other similar services are examples.
Choose Your Delivery Model
Your delivery model describes how you intend to profit from your e-commerce venture. Unless you're running a non-profit, your primary goal in starting an EBusiness is to make money (and make your customers happy). As a result, you must carefully plan how you will generate funds to sustain your e-commerce business.
Here is a list of revenue models that are currently available:
Dropshipping is a new business model in which e-commerce websites contract with suppliers to deliver products to customers on demand. Dropshipping is a low-cost and low-risk e-commerce venture. E-commerce stores do not stock products in this model.
Warehousing and Wholesaling: You buy bulk from manufacturers and store them in a warehouse. Then, depending on customer demand, sell these items. FedEx uses an e-commerce business model like this.
Private Labeling is a business model in which a company purchases an unbranded product from a manufacturer. The product is then rebranded and sold to the final consumer. This e-commerce business model allows for the division of labor, which lowers costs for the manufacturer and the reseller.
White Labeling is when you buy a product from a company and ask for it to be branded with your company's name. As a result, when a customer requests a product, the manufacturing company ships it under your brand name. For example, Walnut offers this type of service.
Subscription-Based Revenue Model: In this model, you provide a service to customers in exchange for recurring fees. The fees could be daily, weekly, monthly, or yearly. Customers can pay ad libitum while receiving a premium value with a subscription-based model. It also provides a consistent source of revenue for your e-commerce business. Subscription-based revenue models are used by companies such as Netflix.
Conduct Research on Your Competitors
Your e-commerce business's success depends on conducting thorough research on your competition. Proper competitor analysis allows you to understand the market and fine-tune your marketing strategy. You will also be able to identify market gaps and plan for the long term.
Understand Your Target Audience
Since your product is only for some, you must determine your intended audience. By defining your target audience, you can optimize your marketing budget by reaching out to the people directly involved.
It also allows you to manage your time more effectively by avoiding misdirected efforts. Finally, with your target audience identified, you can position your small e-commerce business as a worthwhile investment for investors.
Your E-commerce Business Plan
A business plan is a document that contains all of your company's information. It includes the purpose and objectives of your e-commerce business, the resources needed, and pertinent information about your niche and competitors.
A business plan lays out a clear path for your business, allowing you to avoid common pitfalls. It also helps in making strategic decisions faster and crossing out ineffective solutions.
While there is no one-size-fits-all solution for writing an e-commerce business plan, here is a well-structured template you can use.
How to Fund Your E-commerce Business
Funding is the most challenging issue that a start-up entrepreneur faces. Everyone has an idea, but who gets it implemented is determined by money. Raising enough funds for your business may appear daunting, but numerous organizations can help you finance your e-commerce venture.
Here are a few resources that can kick-start your search for e-commerce grants.
A government-supported program called the Small Business Administration offers loans to entrepreneurs starting or expanding their businesses.
However, for grant purposes, you can explore the following:
We also have dedicated resources on funding the start and growth of any business. Here's a detailed guide on small business grants in the USA for better insight. Also, you can go through our guide on small business loans in the USA.
How to Build Your E-commerce Website
The abundance of e-commerce platforms that allow businesses to host an e-commerce store on their websites has made it easier to build this business. However, to avoid a bad customer experience, your website selection should align with your e-commerce website's goal.
Here is a step-by-step guide to owning an e-commerce website:
Select a legal status and register your company
After successfully planning your business, you must give it a name. Make sure your name is distinct but not ambiguous. Then you ensure that the name you select is available for commercial use (You can consult your local secretary of state websites, the US Patent and Trademark Office).
After that, choose your business structure (sole proprietorship, partnership, corporation, or limited liability company). These business structures directly affect your e-commerce business and have advantages and disadvantages.
While it is not required to trademark your e-commerce business name, doing so grants you exclusivity. Also, it safeguards your company against any form of infringement.
Branding is another essential process (logo, e-flyers, tagline, and more). A well-branded company increases its value and legitimacy.
Create an E-commerce store
An e-commerce store allows you to display available stock to potential customers. It is simple because numerous platforms allow you to run an e-commerce store on their websites.
These websites have specific characteristics regarding the best products that sell; therefore, you must know the appropriate platform to select for your product.
Choose an appropriate CMS
To run an e-commerce business, you must have a well-planned content marketing strategy. It will enable you to interact with your customers continuously, resulting in solid business-customer bonds and the generation of more and better leads.
Payment methods
Because you are not running a charity shop, you must provide a way for customers to pay for your product. There are many certified online payment methods; ensure that you offer several options to meet increased customer demand—PayPal, Payoneer, Amazon Pay, Google Pay, and other popular e-commerce payment methods.
Consider 3PL (third-party logistics)
Order fulfillment providers are an excellent option for entrepreneurs to accomplish certain tasks, like stock management. Expeditors and UPS Supply Chain Solution are excellent 3PL providers in the United States. Therefore, you are free to concentrate on other business areas.
How to Advertise Your E-commerce Website
Like any other type of business, e-commerce operates in a crowded and competitive marketplace. Hence, finding a way to drive the necessary traffic to your website daily is critical.
It is also advisable that you develop an e-commerce market plan. It will allow you to maintain a consistent customer base, increase sales, and keep your business running.
5 ways to promote your e-commerce website
Social Media: is the simplest, low-cost and no-cost advertising method. The goal is to determine which platform your customers prefer (Google Analytics will help). Once detected, you must provide customers with market trends and product-related news. Always include a direct link to your e-commerce store.
Influencer Marketing: Over the years, influencer marketing has proven to be one of the most effective methods of driving traffic. Loyal fans enjoy imitating their influencers, and if you can get them to talk about your ebusiness, you will be well on your way to a successful online business experience. Choose an influencer knowledgeable about your niche and willing to work with a small budget.
Pay-Per-Click (PPC): About half of the leads generated by a pay-per-click advertisement will likely convert, making PPC one of the most effective advertising methods. However, you must ensure you select the appropriate PPC model for your business.
SEO (Search Engine Optimization): According to a study, 53% of online shoppers conduct research before purchasing online. And to reach this pool of potential buyers, your e-commerce website must rank high in Google search engine results (SERP).
SEO optimization is simply creating high-quality SEO-oriented content that appears when a user searches for a specific topic. Many factors influence how high your content ranks. Hence, you may need to hire an e-commerce SEO expert to accomplish your desired goal.
Find out more: Need more advice on this sector? Read our sector-specific articles.
Starting an E-commerce Business Is Not Your Only Option
Starting a business is thrilling, but other business ownership options also exist. Starting a business can be challenging; over 70% of startups fail within the first three months.
By purchasing an established business, you can avoid the lengthy process of starting an e-commerce business from scratch. Because it's an established business, you'll have fewer issues to deal with, and if properly managed, you'll be able to make your profit in no time.
Here is a list of top e-commerce businesses for sale in the USA. Choose one that fits your product or services and enjoy the benefits of being an e-commerce owner without dealing with the terrifying beginner's hurdle.
Also, go through this guide for a detailed explanation of how to buy a business in the USA.
We've gone through an in-depth analysis of how to start an e-commerce business in the United States. To summarize, here's what you'll need to set up an e-commerce business:
- Select a lucrative and competitive niche
- Choose an e-commerce business model
- Select your revenue model
- Research your competitors
- Understand your target audience
Starting an e-commerce business could be your best decision. Aside from becoming an e-commerce owner, you can enter the expanding e-commerce niche at a low cost. Also, you can contact us for help, and we will be happy to assist.