Starting an e-commerce business – what to know

Chloe Thomas, founder of marketing agency indiumonline, discusses the key considerations entrepreneurs need to make before embarking on an e-commerce venture.

Chloe Thomas, founder of marketing agency indiumonline, discusses the key considerations entrepreneurs need to make before embarking on an e-commerce venture.

Despite the now traditional news stories of retail businesses going into administration, starting an e-commerce business can be a great way to build for your future.

For every retail failure there are many stellar success stories, and even more of comfortable survival. If you want to start out in e-commerce there’s a few things you need to think about before putting any money where your mouth is!

One of the problems with e-commerce is that getting started is way too easy – find some stuff to sell, buy a website in a box (or just create an eBay account), upload your logo and you are live. What you have is a website – not an eCommerce business.

Whilst launching a successful e-commerce business includes all of that, it requires much more. Before you do anything more than putting pen to paper you need to decide on three things:

  1. What your e-commerce business structure will be (where you’re going to sell)
  2. What your product range scope will be (what you’re going to sell)
  3. What your Unique Selling Proposition (USP) will be (why customers should buy from you).

Those three decisions will influence everything else you do. So outlining them will help you decide if your business idea is worth investing time and effort in. There are seven e-commerce business structures, defined by how customers can buy your products. Three of these are structures that can work well for start-ups:

  • Online only, you have your own website
  • Boutique bricks and clicks, you have one or two physical shops and a website
  • PiggyBacking, instead of having a website you use eBay, Amazon, Etsy etc to host your online store.

If your idea requires a business structure more complex than those, it’s going to be harder to build success, so it might be time to look for another idea.

The product range scope is about how varied your product selection is, not how many products you are selling. Right now the most successful online businesses are those at either end of the product range scope – either department stores (see Amazon) or the very, very niche (see Very few businesses can launch successfully outside the niche end. So if your product range contains a wide variety of product types (lamps, and beds, and towels) then you would be well-advised to re-think.

A niche product range scope gives you lots of benefits; your money won’t be spread across so much stock; you will do better in the search engines because your website will focused on certain keywords; your blog will be easier to write; and (most importantly) customers will “get” your business quicker – if they don’t understand they won’t buy.

The third thing you need to identify is your USP (unique selling proposition). What is it that makes you different? Customer service? Product? Price? Branding? Whatever it is, you need to become the best at that in your marketplace – can you? If you’re going to be truly successful then you need to avoid a USP of price – being the cheapest just erodes your margin, and due to economies of scale it is much easier for the companies with the biggest turnover to compete in this area.

I’d suggest you need to create a USP on customer service (making it so easy for the customer they just keep coming back), product (if they want welly boots you’re the only place to go), or knowledge and information (if they want to understand what camera tripod to buy you have everything they need to know). The last will also help you a lot with your marketing because having lots of great content will help win you traffic from the search engines.

Measuring each of your e-commerce business ideas against these three areas will help you work out which idea is the best. It is also a great way to stress test an idea – how easy is it to identify the e-commerce business structure, the USP, the product range scope? If you’re struggling then the idea isn’t solid enough to become a business.

Once you’ve got the idea that’s passed the tests, it’s time to move onto building a business plan. The key areas within this will be:

  • Website – costs and plans
  • Marketing – costs and plans
  • Products – costs and plans.

You need all three of these to work together to make sure your business will be a success.

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