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How to Start an eCommerce Business

September 8, 2021
Table of Contents

If you're looking to start or grow an eCommerce business, it can feel overwhelming knowing where to start.

To help, we've put together a comprehensive guide outlining the steps and tools you'll need to build a successful business.

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First, let's go over what an eCommerce business is and what starting one looks like.

Starting an eCommerce Business

If you're looking to start an eCommerce business, you need three things: determination, patience, and money. With these three in-hand you can start building a successful eCommerce business.

What is an eCommerce Business?

An eCommerce business is a company that sells its products or services over the internet. There are many types of eCommerce businesses and they can be a B2B business (see what is a B2B company), direct to consumer, C2C, or C2B. All that matters is that the majority of the transactions take place online.

How to Start an eCommerce Business

Starting a successful eCommerce business is best achieved by taking a methodical approach. This means doing a lot of legwork researching and planning before you actually start the business.

First, you must carefully select the product or service you intend to sell. Research what's missing in the market and any competitors you expect to have. Next, write a comprehensive business plan outlining all aspects of your proposed business and seek investment if needed. Finally, build a website or join an eCommerce marketplace and begin selling.

How to Grow an eCommerce Business

Once your eCommerce business has been established, you can focus on growing your sales. The most successful businesses all adhere to a few rules.

First, focus on the customer. Add personalization into your sales and marketing efforts. The more personal the relationship feels, the stronger a brand advocate the customer is, and the higher their lifetime value.

Second, make the most out of social media. Instagram, Facebook, and Pinterest have integrated shopping abilities. This allows you to market your goods and have them added to a cart in one fell swoop. Plus, you can collect customers' images to use in your marketing efforts. 

Finally, leverage the power of the internet. Google is the key to growing an eCommerce business. If you focus on the search engine value of your site you can get your brand in front of more prospects every day. BlueCart Digital Storefront is optimized for search engines out of the box.

Starting and growing a successful eCommerce business is possible with enough effort and planning. But, before you can get there, it all starts with an idea.

eCommerce Business Ideas

With so many types of eCommerce businesses, it can be hard to decide what to choose. The best business ideas are sustainable and expect to see growth over the next few years.

One of the fastest-growing sectors with a low startup cost is the clothing industry. All you need to start are some design ideas. The actual production and fulfillment process can be outsourced. Your store can even be automatically linked so orders are immediately passed along when they're placed and you just handle the transaction.

Another area where there is major growth opportunity is affiliate marketing. Here, you recommend another business' products or services in return for a commission each time a sale is made. This business model has seen continued growth every year and many major businesses are participating in it. Essentially, you can run a blog that generates passive income. Many online eCommerce platforms and marketplaces have their own affiliate programs.

Most Profitable eCommerce Businesses

Not all eCommerce businesses are as profitable as others. In 2021 there are a few niche and startup businesses that are showing strong profits.

One of the fastest-growing sectors is in digital services, for two major reasons. First, due to the convenience of the internet and it’s high level of efficiency, brands and customers are turning online. Second, the COVID-19 pandemic forced more people than ever to stay home for long periods of time, causing retail or in-person businesses to transition to ecommerce to get in front of these customers. 

These include online fitness coaching, distance learning, and even online grocery ordering. Another profitable field that more eCommerce entrepreneurs are focusing on is jewelry. Single-category eCommerce stores have remained strong this year and jewelry is no exception.

You can create your own or resell from a wholesale supplier with a good markup. This category is unlikely to go away any time soon. Even more niche than other jewelry, enamel lapel pins have become a big business in the past few years. Creating custom pins, sports pins, and niche markets like television shows or films are a great way to build profits. 

There are many viable options for a profitable eCommerce business. Whether you choose a B2B or a direct to consumer business model, it's easier than ever to create and grow a business. If you pick the one that matches your skills and put in the effort you can carve out your own corner of the internet and grow an audience. 

Once you've chosen your business idea, you need to decide what type of business it will be.

Types of eCommerce Businesses

There are four types of eCommerce businesses. Some sell products and some sell services, and they all operate online. 

They are:

  1. Direct to consumer (DTC). This is the most common form of eCommerce business. This model features businesses selling their products or services directly to the end consumer. Order values are low and recurring orders are less common, but the market is large and sales cycles are short. Many of the most profitable eCommerce businesses are DTC.
  2. Business to business (B2B). The B2B business eCommerce model features businesses selling to one another. It is known for having order values and quantities that are high, but the market is much smaller than D2C.
  3. Consumer to business (C2B). This model may sound odd at first, but it is a growing and profitable field. C2B eCommerce has individuals selling their products or services to businesses. Affiliate marketing and freelancer websites are common forms of this model. This model is known for competitive pricing among sellers and businesses can make money off of fees from transactions.
  4. Consumer to consumer (C2C). The C2C model is also called an online marketplace and allows individuals to sell their products and services to one another. The business itself hosts the marketplace and takes a small fee for each transaction between consumers. 

Modern ecommerce platforms like the BlueCart Digital Storefront are equipped to handle all four types of ecommerce businesses. 

Picking an eCommerce Business Model

Now that you know the different types of eCommerce businesses you can choose from, you need to pick the one that works for you. 

First, define your customers and your abilities. Are you aiming to sell to a small group of businesses or to worldwide consumers? Businesses order more slowly, but in higher quantities. Individuals order quickly, but each sale comes with less revenue. You also need to be able to fulfill those orders.

Biting off more than you can chew at this point will make things harder down the road. The most important thing is that you pick the type that most matches your product or service.

Regardless of the model you choose, make sure you start with a solid eCommerce business plan.

What Is an eCommerce Business Plan?

An eCommerce business plan is a document outlining the structure, operations, and finances of your business. This document will give you a roadmap to follow as you build your business and is very useful when seeking investors.

Your plan will likely be ten or more pages, but some sections will require more detailed information than others. Make sure you include as much information as possible that a prospective buyer or investor would be interested in.

How to Write an eCommerce Business Plan

Writing a business plan for an eCommerce business should be done by conducting thorough research and following an outline. This outline usually includes seven important sections, though you can have a number of smaller sections if desired.

The main sections that you’ll need in your business plan for it to be successful are an executive summary, mission statement, market analysis, product offerings, marketing plan, operations plan, and financial statements.

These outline the core tenets of your business as well as give a glimpse into the market you intend to sell to. This will help guide your decisions as you grow and give prospective investors valuable insight into your business.

A solid business plan is a vital element in the foundation of any business. Put enough effort into researching the market and creating a thorough plan. It will give you the structure you need to grow a profitable and sustainable eCommerce business.

After creating a robust business plan, you’ll need to look into getting the proper licenses to run your new business.

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What Is an eCommerce Business License?

A business license is a permit from a local or state government authorizing the operation of a business. Businesses are required to apply for a business license as a way for government agencies to keep track of them for tax purposes. These licenses also protect a business owner from facing fines or closure by their local or state government.

If you make sales without a license, that money can be seized and you can face major penalties. eCommerce businesses are held to the same licensing standards as other businesses.

Some states do allow businesses to operate without a license until they hit a certain revenue level. Certain municipalities may also offer a separate license for eCommerce business, but usually it's the same as the one issued to all other types of businesses.

What Business License Do I Need for eCommerce?

The requirements for business licenses differ by state, so the steps involved may vary. To find the license needed for an eCommerce business in your state, check the SBA website. They have information regarding the requirements and fees associated with business licenses and permits from all federal and state agencies.

How to Get an eCommerce Business License

Getting a license to operate a business varies by location, but usually requires filling out a simple form and paying a fee. You will also need to provide some background information about your business. All information can generally be found by contacting your local City Hall or on your state's Secretary of State website.

Generally, you’ll need to provide the following information. A comprehensive business plan, Doing Business As (DBA) license or incorporation documents, a sales tax license, and any building inspection and permit information.

Once you have the requisite licenses and permits, you can get to work on your business. If you start positioning yourself and work on finding prospects early enough, you can see substantial growth in your first year. That growth also needs to be protected, so eCommerce business insurance is a must.

Do I Need eCommerce Business Insurance?

Yes, all eCommerce businesses need insurance if they want financial and legal protection. Insurance minimizes a business' risk and can protect their inventory and employees from worst-case scenarios. Though there are many differences between brick-and-mortar and eCommerce businesses, they both need insurance to protect themselves.

Best eCommerce Business Insurance

The insurance you need for your eCommerce business depends on what activities you participate in. The insurance you should get is different if you sell products or services, have a warehouse and fulfillment operation, or have a large physical location. There is no one best eCommerce insurance, but there are a few things you should look for when shopping.

The first thing you need to look for is an insurance company that understands eCommerce businesses. An eCommerce business has unique needs and faces issues that may not be encountered by their non-digital counterparts.

In particular, cyber security insurance is vital. Data theft is on the rise and you will be liable if your customers’ data is stolen. Don't make the mistake of going with the cheapest or most basic option and discover that they're out of their depth. 

Second, make sure to get the right level of coverage for your business. Most insurance companies offer different level packages of insurance. The bigger your business gets, the more expensive your insurance should get. You don't want to discover you're underinsured when something bad happens.

Investing in eCommerce business insurance may seem like an unnecessary cost, but it will save you if and when something happens. There's no reason to risk your business and livelihood if you don't have to. Business insurance can protect you from lawsuits, theft, fire, employee injury, and more.

All those savings can add up, so make sure you use a bank that understands the needs of an eCommerce business and has the account types to match.

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Best Banks for eCommerce Business

There are many banks and bank account options for eCommerce businesses, but getting a business checking account is the most important. Here's what to look for when shopping for a bank.

  • Cost. If you're running an eCommerce startup, you know that money can be tight. You don't want an account that costs you money every month just to keep it open.
  • Limits. Transaction limits, minimum balance requirements, and the inability to access your account on the go can hamper your buying power. Small eCommerce business owners are better served by accounts that help their business, not hamper them.
  • Features. Mobile bank apps are one of the best features for a small eCommerce business bank account. There are a few other useful features to look for as well, including transaction alerts, mobile deposits, and ACH transfer options.
  • Integration. Many accounts can actually be integrated into other services you use like Quickbooks, Stripe, and more. Though not necessary, this is a nice feature that can bring value to some eCommerce businesses.

Top 4 eCommerce Bank Accounts

Following the rules above, we’ve put together a list of the five best bank account options for your eCommerce business.

  1. Chase Business Complete Checking
  2. Novo
  3. TIAA Small Business Checking
  4. Axos Small Business Banking

Best eCommerce Bank

Choosing a bank for your eCommerce business can be complicated, so we've broken it out into a few categories that you may fall under.

A business without a bank account is like a house without walls. It might function, but it's not going to be enjoyable. You need to make sure your money is protected and working for you. Pick the bank and account options that best match your company's needs and growth goals.

To make the most out of your new bank account, you’ll need to find a way to account for the payments you receive from customers.

eCommerce Accounting

Accounting is a complicated field and an area where many eCommerce business owners find themselves lacking. Unfortunately, it is also necessary to track your revenue and avoid problems with tax authorities. To make it easier, the best choice for a small business owner is to invest in accounting software.

eCommerce Accounting Software

One of the easiest ways for a small eCommerce business owner to manage their finances is by using accounting software. Investing in the right software will make your life easier and let you focus on bringing in customers and money.

The two most important things to look for in accounting software are platform integration capability and reporting. Like merchant accounts, integrating your accounting software into your eCommerce platform can automate your sales tracking and save you a lot of effort. Most of the big names in the industry can be integrated, but look at your platform for more information.

Reporting is the cornerstone of accounting. Look for software with advanced reporting options that provides weekly and monthly reports. Inventory and sales reports in particular are very important to stay on top of.

Best eCommerce Accounting Software

Though there are many options on the market, we sorted through a lot of the platforms and picked out our favorites. These programs are all easy to use for beginners and are capable of dealing with the unique challenges faced in eCommerce.

Here are the 3 best:

  1. QuickBooks
  2. Wave Accounting
  3. FreeAgent

Now that you know all about the accounting options available to you, you can continue to turn your ideas into revenue and grow your business. The key will be to give your customers the ability to pay in multiple ways.

What is an eCommerce Payment Gateway?

An eCommerce payment is the transfer of money from a customer to an eCommerce business in return for products or services. This money may come via credit card, ACH, EFT, or another method. This is especially true of B2B payments, which can come in more than seven different ways.

How Does an eCommerce Payment Work?

When a customer makes a purchase with an eCommerce business, their payment is made electronically. This payment must go through a few steps before it reaches the seller. These steps are checkout, information transfer, issuer acceptance, transaction approval, and fund transfer.

Through this process, the customers’ information is encrypted and sent to the seller while passing through a number of safety nets to ensure that data is secure and the transaction is legitimate. This is usually done by using an eCommerce payment gateway.

eCommerce Payment Gateway

An eCommerce credit card payment gateway is the middleman in a transaction and handles most steps within the payment process. This includes analyzing and transmitting transaction data and authorizing the transfer of funds between a buyer and seller.

It also ensures that sellers don't fall victim to fraudulent sales by communicating with banks to ensure transactions are legitimate. Data encryption adds a layer of protection on the consumer's end as well.

B2B Payment Systems

For B2B eCommerce companies the types of payment systems are the same, but there are additional features included. First, these systems usually feature ways of checking a buyer's creditworthiness to ensure they can pay.

This limits the risk taken by the business and establishes trust. Second, they also offer an escrow-type service where they temporarily hold money in limbo until a transaction is complete. This is to ensure that the seller can fulfill the order to the provided specifications. Lastly, they have robust reporting capabilities. Detailed reports can ensure the customer gets what they ordered, the seller gets paid the correct amount, and that everything is properly accounted for.

Once you have your payment software chosen, you can focus solely on increasing your revenue and growing your business. This is best done by increasing your knowledge of eCommerce businesses, their challenges, and their opportunities. We suggest reading some of the best eCommerce books on the market.

Best eCommerce Books

There are so many eCommerce books and courses on the market that it can be confusing trying to figure out which ones are worth your time. We looked at finding the most information-packed, but enjoyable reads on the market.

Our top picks offer first-hand information, personal and business insights, and truly make it much easier to understand the complexities of eCommerce. They are valuable for eCommerce business owners and managers of any level. We consider these must-read books for any professional.

Here are our top 3 books:

  1. Digital Business and E-Commerce Management
  2. Ecommerce Evolved: The Essential Playbook To Build, Grow & Scale A Successful Ecommerce Business
  3. Don't Make Me Think, Revisited: A Common Sense Approach to Web Usability

Best Books On Starting eCommerce Business

We also looked at books that are written specifically for new business owners to help them grow their business from the ground up. These books can help take you from ideation to profitability and cover topics like finding funding, creating a site, building customer relationships, and more. Case studies and revenue planning are offered to help entrepreneurs understand the dos and don'ts.

Here are our top 3 books for starting out:

  1. Starting an Online Business All-in-One For Dummies
  2. Launch: An Internet Millionaire's Secret Formula To Sell Almost Anything Online, Build A Business You Love, And Live The Life Of Your Dreams
  3. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future

Best eCommerce Strategy Books

If you’re looking to grow an existing business, you’ll be more interested in books on strategy. We selected three books that are rife with contemporary information that can help you increase your profits. Revenue scaling, marketing automation, SEO, data protection, and more are covered in these two books.

They are:

  1. E-Commerce Business Model 2020
  2. Digital Marketing Strategy: An Integrated Approach to Online Marketing
  3. SEO 2021

Running an eCommerce business isn't easy, but the books we've listed above can help you take control of yours. Whether just starting out or looking for a way to increase sales, there's a book or course for you. Once you're done with all those books, you should also check out an eCommerce blog or two so you can stay on top of current trends in your industry.

Best eCommerce Blog

Not all blogs are created equal and your time is valuable. We’ve compiled a list of our favorite blogs on eCommerce that offer real value to their readers. These blogs are all from market leaders who have experience growing eCommerce businesses and understand the unique challenges you’ll face along the way.

Here are our top 3:

1. BlueCart

Our team has a serious passion and comprehensive understanding of the challenges you face as you work to grow your business. Would you trust a list of the best sites from a lesser site? Not to mention we have our own eCommerce platform, the BlueCart Digital Storefront. eCommerce is in our blood and our content shows that. We also have many useful guides on inventory management, sales, marketing, and more!

2. A Better Lemonade Stand

A Better Lemonade Stand (ABLS) is a forward-thinking eCommerce strategy blog from Richard Lazazzera, formerly the head of marketing at Shopify. He uses his own experience in the industry and emerging trends to cover topics for all stages of an eCommerce business. No matter what stage you're at or what you're looking to do, you can find many articles on ABLS that will help. It is highly comprehensive and, in our view, second only to our own content.

3. Neil Patel

Neil Patel has been a major name in SEO and digital marketing for more than 20 years. He's grown several multimillion-dollar businesses and worked with giant companies like Google, General Motors, and Viacom. Neil's blog focuses mainly on digital marketing, analytics, and SEO. If you're looking to increase sales for your existing eCommerce business, this blog can give you the tools to succeed. His site also has a number of free tools for checking the current SEO rankings of your site and your competitors.

There are many other blogs out there that may have value to your business. Stick with those published by people who have an active role in your industry and with experience in growing a successful eCommerce business.

It’s a Start

Starting and growing an eCommerce business isn’t easy. Using the tools above and staying on top of the changing market can keep your business growing and avoid the pitfalls of your competitors. By starting with a strong business plan, financial tools, and information on your audience you can achieve success.