How do you start an e-commerce business in 2022?
With the global e-commerce market set to hit $5.1 trillion in 2026, it’s no surprise that e-commerce product businesses are one of the fastest growing sectors of the small business population. If you want to start an e-commerce business in 2022, here are 7 steps to help you get started.
Customer Research
Before you do anything else, work out what it is you want to sell, and who you want to sell it too. Customer research is absolutely crucial when it comes to launching a successful business.
Many people start product businesses because they want to create or curate products that they love. Being passionate about what you sell is absolutely vital, but so is having a market for your goods.
Talk to as many people as you can about your ideas. If you’re not sure where to start with gathering feedback, take a look at The Mom Test book. Most people do not spend enough time on this stage, but it can be absolutely invaluable to help you avoid costly mistakes.
The benefit of e-commerce is that you can reach customers over a wide geographic area, so keep that in mind when you are doing your research. Why not reach out online to your ideal customer, wherever they are, and talk to as many as you can?
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Decide on your product range
Decide on what it is that you actually are going to be offering your customer
Armed with research from your ideal customers, you can start to put together the actual range that you want to sell. Don’t get pulled into the idea that you have to launch with everything. Having a small range, or even one item, can be a great way to get started and help you learn as you go along. That’s the beauty of e-commerce, there is no shop floor to fill, so don’t be afraid to keep it highly edited.
Postage and Packaging
Identify how you are going to package and ship your products
Hardly the most exciting topic, but essential nonetheless. Before you start sending out your products to customers, you need to work out how you are going to be packaging and sending them.
Make sure that your packaging is sturdy and fit for purpose – nothing puts customers off quicker than a damaged item. When the item is in it’s package, try shaking it. If you can hear it moving, ask yourself if you need to add anything to protect what’s inside. Mail an item to yourself as a test run to check the condition that it arrives in.
Be aware that many customers will appreciate recyclable and zero-plastic packaging. Keep a close eye on the costs of both the packaging materials as well as the postage costs. Try and resist the lure of branded packaging which can drive prices up way higher than standard options. If you want to create that bespoke look, consider other elements such as stickers to personalise your packages at a lower cost.
Check your pricing
Check how much profit you are making on every single product
Once you have the items you want to sell and the packaging and posting options figured out, you can calculate your profit margin. It’s very important that you work out your profit margin for every item that you are planning to sell.
The profit margin is the price of the item, minus any taxes, and then taking away the cost of the products. It is usually expressed as a percentage of the selling price minus tax. In other words, a $10 item which costs you $3 would generate $7 profit, or have a 70% profit margin.
Don’t forget to include all the costs that are involved, from the cost of the item itself, to the cost of packaging and even the cost of getting the items shipped to you. If you are making the item yourself, don’t forget to cost in your time.
In an ideal world, you would have a profit margin of 60-70%, especially if you were intending to sell your products on to other retailers at a later date. However, many businesses, especially those who are resellers, or selling products that they have bought from other businesses, will have a profit margin around 50% or even lower.
While it is possible to grow a business with a profit margin of 50% or below, it definitely will make things harder for you, so keep an eye on this margin and keep looking for ways to increase it. Every single other cost in the business has to be paid for by the profit generated from each sale, so maintaining that at a reasonable level has got to be a priority.
Keep it lean
Just like your product selection, you want to keep your stock levels and other expenses in the business as low as possible as you get started. Unless you have a huge budget for starting your business, you will be in a much better position if you keep your start-up costs and inventory levels lean as you start to learn about what your customer really wants, and who you are as a business.
Choose your route to market
Choose how you are going to actually sell your products – on your own website or a marketplace?
In many ways, having an ecommerce business only requires having products, access to the internet and a way to take payments. Some lean startups begin with an Instagram account, taking PayPal
You may also choose to start on a marketplace such as Etsy, Amazon or EBay, but fairly quickly, most businesses will need their own website. For e-commerce, it’s hard to beat Shopify for a simple, do-it-yourself solution to creating a website that sells.
Decide on a marketing strategy
How are you going to reach out to your ideal customer?
Once you have decided on what you want to sell, and how to sell it, it’s time to think about how you are going to get people to come to the business.
To start with, focus on one key marketing channel. Where are your ideal customers spending their time online? If you’ve done your research properly then you’ll be able to easily answer that question. Start with their most popular platform and keep showing up. Think about what types of information and posts would be most interesting to them, and then start trying different ways to communicate. Especially at the beginning, there is an element of trial and error to find the types of messages that really resonate with your ideal audience.
It can feel overwhelming when you first start out, but keep focused on what your customer wants, identify products that will delight them, check that the numbers make sense, and then make a start! Make 2022 the year that you bring your e-commerce business idea to life.
