Starting an E-commerce Website as your first Small Business
This is a very tempting concept as it would first appear to have very low start-up costs. This article is to give you a step by step process for which you can start an online shopping cart store.
You need a Business Plan and a Marketing Plan. Just because it is an online store, it does not mean you can bypass the thought processes that occur natually as you develop these documents.
Let's start with the basics:
- Idea - The idea doe not have to be new but you must ask yourself why are people going to prefer to buy from my store vs others.
- Competition - Who is your competition and how will you compete?
- Costs - What are you costs in doing business?
- Delivery and Warehousing - What shipping services are you going to use or are you going to have local pick up?
- Advertising - With millions of website and only 10 on the first page of a Google search, how are you going to get on that first page.
- Shopping Carts - There are many to choose from and they vary from a simple PayPal button to more complex retailing systems.
- Analytics - To improve anything you must measure what you are doing now so you have a history of data.
IDEA - The idea is to sell organic candy to moms that care about the health of their family. Ok, simple idea.
COMPETITION - This market is small. Keyword search for "organic candy" is 3600 searches per month. Not very many but that may be a plus when it comes to advertising. To see how much it will cost to advertise online you can use Google Adwords.
COSTS - Here is a short list of what you will pay for a basic store:
- Fixed Annual Costs - URL registration fees, webhosting fees, shopping cart fees, SSL fees
- Variable Cost - product, shipping, packaging, labor, credit card processing fees, advertising
DELIVERY AND SHIPPING - There are a lot of options and most people will use their home as a warehouse and use the USPS or UPS/FedEx for shipping. Most shopping cart apps can automate much of that process. I will discuss this in more detail in future blogs.
ADVERTISING - Google says that to be on the top slot it will cost $17.22 / day to run an ad and you can expect that it will be seen 3600 times per month (US and Canada). So you should plan on spending $516.60 per month. Sounds resonable. Assuming at 2% of these 485 people per day actually stay on your site and convert to a sale, you can then estimate that your sales per day will be 9. If the average sale is $10 then you will have spent $17.22 to obtain $90 of sales. If your margins are 50% then your profits will be $45-$17.22 or $27.78 per day.
What you have to understand is with only 3600 people searching each month for your products your sales are going to be limited. How do you expand that base? You can add more keywords, ie. natural foods, organic foods and so on. The downside is your 2% conversion may be 1% or worse and your cost of $17.22 per day may be higher on those more generic searches.
This is the difference between running a store and operating a store. If you run a store you are in control, you are constantly trying new adverising and playing with website content to improve your sales and profits. If you are an operator you are going to earn an operators income, it is that simple.
SHOPPING CARTS - There are many different vendors. I assume that most of you will start small and grow. Starting with the wrong vendor will become a big mistake. As your store grows these other solutions may not have features that you will need. Coverting from one vendor to anyother is not 100% and the cost and time to convert will be high.
I recommend going with one of the best solutions. Volusion.com is my favorite. $20/mo you an get started. Do not be detered with the complexity you might feel at first. Anything new will take time to learn. Volusion has great customer and technical support too. There are others; 1shopping cart, 3dcart and big commerce. Most of them have trial periods, I suggest you give them all a try before you buy.
ANALYTICS - Google gives you a free system for monitoring your website traffic. Use it, or hire someone that knows how. There is no subsitute. It would be similar to running a business and not keep books. You just would not ever think of doing that would you?
I hope this article gives you a good overview of what you will be facing as you launch your new E-commerce website.
Barry Rickert is the marketing director of SCORE Richmond, owner operator of StudioBuzz LLC with several websites that provide e-commerce services and email marketing services.