How to start an ecommerce business

Ecommerce is one of many avenues of starting a business. An ecommerce business is one that sources products and sells them online through a website, apps, social media or online marketplaces.

When starting an ecommerce business, there are a number of key steps that a startup business owner should take.

As with any new venture, starting an ecommerce business should begin with carefully selecting products to sell, researching the market, your potential competitors and writing a business plan.

This should indicate why consumers will buy your products, how you will promote them, and how you will deliver a reliable service to customers.

In this article, we’ll offer a step-by-step guide for ecommerce business owners, covering competitor research, writing a business plan, sourcing products, setting up an online store, optimising sales, marketing and shipping strategies, costs and top tips for success.

Take the leap into ecommerce by downloading our free business plan template to help you outline your goals, plan your strategy and get your business running.

Step 1. Find the right products to sell

The most important decision when starting an ecommerce business is to decide which products to sell.

Focus on profitable products that customers want. If a product you have a personal interest in is profitable, that can help sell and promote it effectively.

“Ask yourself: What’s the issue you’re tackling, and why should anyone care? If you’re passionate about hiking and you know what frustrates hikers, boom—you’ve got a direction,” says Paul Drecksler, founder of ecommerce website Shopifreaks.

Think about the industry the products that you sell will serve. Consider what the most popular products for that industry are, the common problems users face and if there are products that address these issues, as well as more niche ideas so you aren’t alienating anyone. Talk to users and ask them about the products they use. How can they be improved, and which products do they find they regularly replace?

This can help pinpoint emerging trends to capitalise on and what products to avoid. Data from July 2024 from German market researcher, Statista, found fashion is still the most popular ecommerce sales category in the UK.

For all products in consideration, research who buys them, how often and what they actually pay, and what they are prepared to pay. Check customer reviews to understand what product features consumers like and what benefits the products give them.

The better you understand what sells and why a product sells, the more likely your ecommerce business will succeed.

Step 2. Research competitors and writing a business plan

Once you have decided what products to sell, research competitors to find out their strengths and weaknesses and what your target audience wants.

Use this information to improve your business strategy and understand how to differentiate your ecommerce presence and make it stand out from competitors.

Begin by analysing their website, checking what products they sell and their prices.

Check social media comments for feedback and other reliable sources such as Trustpilot to find out what customers like and where the common pain points are. This will help you start to develop a successful ecommerce business strategy.

Write a business plan that details what you will sell, how you will source products as well as customers, and outline the steps you will take to earn revenue and become profitable. Using an online business plan template can really help.

It should include:

• A brief summary of the aims of the business
• Its name, vision and brand information
• What the opportunity is
• Details of the addressable market you are targeting
• Sales product information
• Competitor analysis
• Operational details
• Tips as part of your wider sales and marketing strategy
• Delivery and order fulfilment plan
• Yearly or monthly financial plan

Step 3. Source your products

Once you have decided what to sell, you need to find the most effective way to source products. Prioritising value, quality, reliability and speed will be key drivers in this market.

The quality of the goods you sell is a vital consideration when sourcing products. Your business will soon gain a bad reputation if you sell poor-quality goods. You need your product sources to be reliable and to deliver quickly so you have a consistent supply and can meet periods of high demand.

There are many options for sourcing products, though specific options depend on the product range your ecommerce business sells.

Creating your own is the most the most common way for businesses that already manufacture goods and then add an ecommerce website to sell their own products. This sourcing strategy has become more popular as startups sell their own designs, crafts, handmade jewellery, and other popular products via online marketplaces.

The most popular option is to resell products. Your ability to source at a low cost and resell for a profit is key.

“Finding reliable suppliers is very important,” says Drecksler. “Vet suppliers thoroughly – look at reviews, ask for samples, and test their communication. If a supplier is slow to respond or evasive about details, that’s a red flag.”

Partnering with a manufacturer is another option to source stock. You could become a retailer for a quality partner. This ensures an element of exclusivity to your product range, making it likely that product quality will remain high and a brand can be built far more reliably. The key is choosing the right partner to source excellent products.

Dropshipping is an increasingly popular ecommerce route for sourcing products. Instead of holding stock yourself, when a customer places an order, a third-party supplier ships it to them. You can sell more products without having to buy them as stock. The choice of dropshipping partner is strategic and largely seen by many in the business as crucial. 

Step 4. Select selling channels and set up your online store

As well as selling from your own website you can place products on other online marketplaces to sell.

Remember, your customers will have their own preferred payment methods, such as PayPal and Worldpay, so where possible cater to them.

You can set up an ecommerce website to sell your products relatively easily and the cost of setting up a website can be relatively low. These days, Shopify is a popular solution, and has lots of existing integrations you can use for free.

“Unless you have existing technical skills do not choose coded website options,” asserts Paul Bennett, CEO and Co-Founder of ecommerce app, Hustl. “Avoid stores that make you reliant on developers when starting out. Custom codes will need regular maintenance.”

If you opt to build your own ecommerce website, it can take some work (and cost) to launch. You need a reliable payment processor, known as an online payment gateway.

These use encryption and other security features to protect customer payments, which is vital and will aid with customer retention. You can further improve payment security by investing in an SSL certificate, which provides your site with a padlock in the search bar to promote your site as secure and can improve its search engine ranking.

Using an existing online marketplace provides you with an audience that already uses these sites. This can increase the reach of your products. The drawback is that sites like Amazon, Etsy and others charge commission on every sale you make (though eBay has just stopped most seller fees in the UK) for now. You can also sell on social media websites like Facebook and Pinterest. One option is to use these methods and save up funds to invest in your own website.

Another challenge when choosing selling channels is the competition to draw customers to your products. Many ecommerce retailers pay extra to get a highlighted or premium sales spot on an internet page. You may not have the funds to do this, at least initially.

Step 5. List your products to optimise sales

To build one of the best ecommerce platforms you need to list products in a certain way that will effectively target and attract potential customers.

Presenting your products well so that they stand out from the competition can be achieved by writing brief, engaging and clear product descriptions. Listings need to include all relevant information to reduce returns, minimising negative customer feedback.

Think about what phrases a potential customer will use to search for your products online and include them in the description. This helps customers find your products. Use search engine optimisation (SEO) to add keywords that will also help customers search and find your product listings.

Drecksler believes success in customer acquisition doesn’t have to be expensive. “I see people throw money into paid ads and then wonder why their business tanks when costs go up or targeting changes.

“If you can build a following on social media, or start an email list, you’ve got a direct line to your customers without being at the mercy of algorithms and ad platforms.”

Step 6. Market and promote your ecommerce business

First select a name, a logo and images that define and reflect the visual identity, ethos and personality of your business. 

“Think about your brand identity early and invest in getting it clear, appealing and consistently delivered across all customer touchpoints,” says Bennett.

Then bring customers to your products. For an ecommerce business, you must drive targeted traffic to your product listings, wherever they are, converting mere interest into sales.

Do this by promoting marketing campaigns to customers via business email, social media or with inserts into sales deliveries presenting up or cross-selling options. Utilise targeted cost-per-click (CPC) adverts to present customers who view your products online with upgraded or alternative options.

Offer seasonal sales, digital coupons or discounts for bulk purchases. Use social media to engage with online communities who are likely to be interested in your products, and offer real-time chat window availability to someone who is always on hand to help your customers, whenever they need you

Reviews on your website or Trustpilot can help build and win customer trust. Giving customers an easy option to review your products and services and try can build a positive online reputation. Focusing on customer experience, value, reliability and good returns processes will stand you in good stead.

Understand what motivates customers to buy from you, what their needs and wants are so you can target your ecommerce marketing strategy to the right customer cohort.

You don’t need to be on every platform. Be selective. Learn which ones customers who buy your products use and focus on them.

Step 7. Choose your shipping strategy

You can handle order fulfilment and shipping yourself to start with but as your ecommerce business scales up and you need extra staff and resources to deliver effectively, outsourcing it will reduce costs and allow you to focus on other areas.

“High shipping costs can scare customers away,” says Drecksler. “Be strategic and consider options like flat-rate shipping or offer free shipping on orders over a certain amount.”

Choosing a reliable shipping and delivery option will potentially save you and your business from lots of problems and please customers in turn. If you do handle it yourself, you must deliver a reliable service.

Shipping strategically can make your business stand out and reduce costs for yourself and your customers.

“Supplements are often sold in pill bottles which means their dimensions make them a ‘small package’,” says Bennett. “An eco pouch solution can be sent as a large letter, nearly halving the shipping costs, saving space on storage and appealing to eco-conscious customers.”

Your shipping partner must be able to deliver when they say they will and handle returns quickly and efficiently. If international shipping is needed, you may need to find multiple partners for each country you sell to.

Your shipping and delivery strategy could cover:

• What packaging materials to use
• How to produce and print off shipping labels
• Which courier to use, or whether to use an ecommerce fulfilment warehouse
• Shipping rates –What you pay and what you charge customers
• What to charge for overseas deliveries
• How to use marketing inserts in shipping packages
• Insurance and tracking shipments
• Customs declaration forms, tariffs, taxes and duties

How much does it cost to start an ecommerce business?

As with any new venture, startup costs depend on what level you want to enter the market, product range and type, operational costs and scaling up timetables. Increase spending as revenue grows.

Initially, start small, test the market and build the business up organically. “Don’t invest a crazy amount into the first stock, take the hit on the higher cost per unit whilst you are testing the market,” said Bennet.

“You could probably start a Shopify business for under £100 up front including the subscriptions needed and registering the business.”

Typical costs can include:

• Premises costs
• An ecommerce website that can accept payments
• Product manufacturing costs
• Shipping and order fulfilment costs
• IT costs
• Staff salaries and setup fees

When creating a budget and cash flow forecast, separate costs into one-off costs and ongoing regular costs such as staff wages and rent.

You can market the business yourself to begin with using email campaigns, social media and targeted customer communications.

How profitable is ecommerce?

Amazon is an ecommerce store. In 2022, its net profit was $225 billion. This shows ecommerce can be extremely profitable and that more people are looking to set up an ecommerce store every day.

The UK is the most advanced online shopping market in Europe and Europe’s most profitable ecommerce market, according to the International Trade Administration. Only the United States and China are more profitable worldwide. In 2024, the UK currently has more than 50 million ecommerce users nationwide.

The Office for National Statistics (ONS) put internet sales as a percentage of overall retail sales in August 2024 at 25.8%, up from 19.1% in February 2020, the month before the COVID-19 pandemic impacted online shopping habits.

Final thoughts

Launching an ecommerce business is an exciting opportunity. The UK has an advanced market for online purchases. To be successful, plan carefully, select the right products and be flexible to integrate lessons learned.

“Running an ecommerce business isn’t just about launching and sitting back,” says Drecksler. “It’s a continuous loop of testing and tweaking, being aware and ready to pivot.”

Research your suppliers and shipping partners and be ready to embrace different options like dropshipping or partnering with manufacturers if that helps you sell more products and keeps customers happy.

Ready to start? Download our free business plan template to map out your strategy and build a strong foundation for success.

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