Ready to start your own e-commerce business?
Starting an e-commerce business can be daunting.
With a mountain of information and advice – much of it differing – it can be easy to get lost among the noise.
But the arrows are all pointing up, up, up. And, with that in mind, starting an e-commerce business can be very rewarding.
There’s never been a better time to take your product to the online market.
Around £577bn was spent online in 2020, which was a 43% rise from the year before. Adobe’s Digital Economy Index, which produced these figures by analysing trillions of online transactions, also predicted that this year would see similar growth toward a record trillion-dollar year for e-commerce in 2022.
But as a new e-commerce business owner, how can you capture some of this massive market share? We’ve whittled things down into five easy steps: from concept generation to testing, marketing, making that first sale, and measuring performance.
Here’s what we cover:
1. Choosing your product
Finding a product to sell
If you’re reading this guide, chances are you already have a product or concept you’re passionate about and/or meets a need and adds value to your prospective customer base. Many say it will be this passion that you will see you stick through the road bumps ahead and ensure you have the diligence to put in the hours, often squeezed in after your 9-5.
Like Andy Dunn, for example, who founded the online men’s clothing company Bonobos after seeing a pair of turquoise corduroy trousers.
As he told Business of Fashion: “There was so much more joy and thoughtfulness in that product than I ever thought there could be in a pair of men’s pants.”
Dunn started in a saturated market – men’s clothing – but went entirely online at a time when most retailers were physical, offering retail locations that acted solely as showrooms.
Michael Dubin, meanwhile, began the razor subscription service, Dollar Shave Club (which later sold for $1bn to Unilever) after seeing a pile of razors that needed to be sold in a friend’s warehouse.
Consider whether you can also succeed in a similar busy sector by differentiating on experience or application, rather than innovation in product.
You might have an exciting type of packaging in mind: Tea Drops sells tea in tablet form to avoid wastage and mess of tea bags. If you do have something like that in mind you’ll need a product designer to create a sample, as well as a roadmap for finding a manufacturer and bringing it to market.
Don’t have a product in mind yet?
Research your general areas of interest using consultancy reports, trend forecasting websites and bestseller lists from existing e-commerce sites. Don’t discount reputable newspapers and trade magazines, as they can provide a more top-line look at industries.
Here are a few helpful links when looking into what products to sell:
- Amazon’s trend report. Most recently, the e-commerce giant highlighted an exercise dice game and resistance bands as some of its top sellers in its wellness section.
- Consultancy reports. Retail market outlooks from big-name consultancies such as Deloitte and Bain & Company will give you an idea of strong sectors.
- Google Trends. See the level of interest of a search term over time, as well as useful related searches. For instance, entering ‘dog lead’ into Google Trends shows that interest in the term has steadily increased over the past five years, and related terms include ‘anti-theft dog lead’ and ‘extra long dog lead’ – both potential product ideas.
- Statista. Produces reports, forecasts, dossiers and statistics that can be filtered by industry.
Evaluating your idea
Now you have a clear concept, it’s time to evaluate the feasibility of developing, storing and shipping your product. Keep in mind the following factors.
Are you making your own product, instructing a manufacturer, buying from a supplier or dropshipping? Think about the pain points of each option and what works best for your product now, and in the future.
What weight and size will your product be?
Historically, larger purchases such as furniture as tended to be made in-store.
But online retailers such as Wayfair are proving that customers are growing increasingly comfortable in making these sorts of purchases over the internet.
However, take into consideration that storage and shipping will cost more – and how much of that you should pass on to your customer.
Type of purchase
Is your product likely to be a repeat purchase for your customers, or is it a one-off? Is the product seasonal, such as sunscreen or BBQ equipment?
This will help you decide how to store, ship and restock your product.
Shipping and storage
Product dimensions will play heavily into shipping and storage costs. But it’s also worth considering whether your potential product has any other unique factors that you must take into account.
Perhaps your product needs to be refrigerated or is particularly fragile. Account for these details so that you can plan and cost accordingly.
Check out your competitors and think about what your price point should be.
If the market is saturated or your item is fairly common, you may think about lowering your price to attract customers.
Alternatively, say you’re selling bags made from a rare mushroom ‘leather’. As the material will be rare and expensive to source, customers will expect a higher price point.
At this stage, it’s also a good idea to start working out rough calculations of your profit margins, taking into account design, shipping and storage costs for your product.
Consider if you have the means for the first initial investment, or will need to seek a bank loan or other funding. A small or non-existent profit after factoring in ongoing costs may mean you have to rethink your product or your price.
Validating the target market
While evaluating your idea, you should have come up with a rough list of factors to consider when thinking about your product, from its design to shipping. Now’s the time to think about one of the most important factors: your target market. Consider the following points when thinking about the commercial potential of your product.
Who is your customer?
The more focused your customer profile is, the better your chances will be in ensuring your product’s success.
Age, gender, location and disposable income will be crucial data in when it comes to pricing and advertising your product, but don’t discount less tangible factors.
Emotion, for instance, will play a strong part in purchasing from a small brand.
Questions you will need to answer of the sector or market in which your product exist include the following:
- Is the sector strong?
- What is its market size?
- Who are my main competitors and how are they faring?
- Have they been around for 10+ years, or is the sector relatively new?
- Is my industry naturally competitive – meaning I may need a higher advertising budget to stand out – or is there a vacuum?
- How can I ensure demand?
Pro tip: It’ll be time-consuming to do, but experts recommend creating a few different landing pages to gauge interest in your product. You can always put a button on the site for pre-orders, and contact potential consumers when you go to market.
Obtaining your product
You’ve finalised your product idea and validated your target market. Now comes one of the most exciting parts of the process – making that idea a reality.
There are three basic options when it comes to obtaining your product:
a. Using a manufacturer
If you’ve decided to create a product that is entirely your own, you’ll need a manufacturer who can produce it on a larger scale.
One of the biggest decisions is whether to go local or not.
UK manufacturers are typically pricier, but the impact of the pandemic on supply chains, as well as calls for more transparency around working conditions, have made local manufacturers increasingly appealing.
Don’t be shy to ask around for recommendations when sourcing a manufacturer, as well as looking through directories – Lets make it here is a free directory of UK fashion and textile manufacturers – and preparing a list of questions.
b. Working with a supplier
You may also decide to source directly from a supplier, which means buying an existing product from a wholesaler (which can also be a manufacturer).
If you decide to work with an overseas supplier, it’s often a good idea to hire a manager local to the area who can ensure a smooth supply chain and solve any issues on the ground.
Perhaps the easiest and cheapest of all the options is dropshipping, which means you don’t own, store or ship the products on your website.
Downsides of dropshipping include low margins, as well as no control over stock. If you sell an item in your online store but your dropshipper has a six-week delay in shipping, you’ll be faced with a very unhappy customer.
Bonus: Useful sites to find product designers
- PeoplePerHour: A good option if you’re just looking for a few hours of work, rather than a full collaboration. Freelancers give upfront prices and days to complete, and offer services that include technical drawings, custom packaging and 3D renders.
- TopTal: Used by companies including Airbnb and Shopify, TopTal has a rigorous screening process. Of the 100,000 people who apply to join the TopTal network each year, fewer than 3% are accepted. You can be matched with a freelancer and begin a two-week trial to see if they’re the best fit for your product.
- Coroflot: Freelancers need to submit an application before they can appear in Coroflot, which means that generally you’re getting reputable industrial and physical designers who are specialists in a vast array of product specialities, from 3D modelling to AutoCAD.
- Behance.net: Chances are that if a designer in the UK exists, they have a Behance profile. Hugely popular, there’s a lot to wade through on the site, but the creativity is inspirational.
Manage your e-commerce business with Sage Accounting
Want to take control of your online business? Sage Accounting will help you manage your stock levels, invoicing and cash flow forecasts, so you can stay on top of your game.
2. Researching and preparing your business
Next, it’s time to do some in-depth competitive analysis.
Though you don’t want to directly copy from another brand, it will prove useful to see what your competition’s strengths and weaknesses are to see if you can improve on their offering.
An in-depth analysis may result in tweaks to your own product.
Critical reviews of a rival product’s quality could lead you to source a more durable finish, for example, or a large amount of YouTube views might persuade you to create your own video content.
Find as many competitors as you can (we’d recommend a minimum of 10), and note down their following characteristics:
- What is their aesthetic?
- Is their homepage product-heavy, or do they have a more streamlined aesthetic?
- How big are the pictures of their items, and how many pictures do they offer for each item?
- Do they offer video of the product in use?
- What kind of specs do they use to describe their product?
- How easy is their checkout process?
- What are their shipping times, and do they offer any features such as BOPIS (Buy online, pickup in store)?
As well as their website, look closely at your competitor’s social media pages.
- What platforms are they most prominent on?
- Is the majority of their content around promotional material, or are they more content-based?
- Do they have an influencer programme in place?
Useful links to check out competitors
- Spyfu: From £23 a month, you can search for any domain on Spyfu to see keywords that have been purchased on Google Ads, as well as organic ranks and ad variations over the years.
- Ahrefs: A seven day, £5 trial will allow you to see organic search traffic and backlink profile of any website.
- Built With: Built With allows you to see how your competitors built their sites: think things like analytics platforms, web hosting providers, and extra plug-ins you might also want to invest in.
Write a business plan
So you’ve got your product (or product samples), and have researched your competition and target market thoroughly.
Now it’s time to compile all this information into a business plan so you have some clear, achievable goals.
As you write, keep reminding yourself that this document is primarily for your eyes, so make it readable and don’t worry about having to follow your objectives to the letter of the law.
Plans invariably evolve, so your business plan shouldn’t have to be static. Business plans can be anywhere from five to 30 pages, but should contain the following:
a. Sales and marketing
A description of all of your sales channels, as well as marketing activities and goals.
b. Financial projections
Graphs are useful to employ for your financials. Make sure to include initial investment, regular outgoings and predicted sales in order to create projections of profit, loss and cash flow. When it comes to tracking your financials, good cloud accounting software that works for e-commerce businesses will help you stay on top of the numbers.
c. Market and competition analysis
An evaluation of your industry sector, as well as your competition.
Name the key suppliers in your chain, as well as terms of the relationship and current status.
e. Summary to add
Combine the four items highlighted above with a short summary at the front of the document (this is easiest to write after you’ve completed the other sections), and create some overarching goals across all sections that you can consult every month.
Sage’s downloadable business plan offers a fuss-free, comprehensive template to work from.
Pro tip: British Business Bank’s Start-Up Loan programme offers loans from £500 to £25,000, at 6% interest alongside free mentoring and support to individuals who are starting a new business.
Name your business
It can’t all be hard work. Naming your business is one of the most fun parts of the whole thing.
There are a few points to bear in mind when choosing a name for your online business:
Don’t be too obvious
Think of some of the great e-commerce sites of the past 20 years: Amazon, like the jungle; Alibaba, a person who acquires a large fortune.
Or individual e-commerce brands: Patagonia, Goop, SkullCandy.
You can reference what you’re selling, but most successful brands hint at their offering, rather than making it too direct.
Make sure to brainstorm
You may already have a name in mind, but creating a business plan and thoroughly researching your industry can often lead e-commerce founders to rethink their original name.
This is where brainstorming comes in handy.
Compile a list of terms that come to mind when you think of your product (these can be both practical and whimsical), and start to free-associate.
Once you have a few names in mind, it’s worth taking a straw poll of friends, family and business contacts (consider a LinkedIn poll) for feedback.
Ask them how they would spell your product name, what it immediately brings to mind, and if there are any negative connotations of which you should be aware of.
Do a quick check to see if your domain in .com or .uk is available. It’s also well worth running a few internet searches for your company name, as well as checking the UK’s Intellectual Property Office to see if a trademark exists under your proposed brand.
And take a look at the company name availability checker on the Companies House website.
Run out of ideas? Here are some name generators to try
- Business Name Generator: A free site that offers names that you can filter by keywords, industry and character count.
- Frozen Lemons: Pay a £49 fee and name ideas for your business will be sent to you after 48 hours.
Choose your sales channels
Choosing sales channels for your e-commerce business can be instrumental in deciding whether or not your first month as an operational company is a success.
Amazon and eBay dominate the UK e-commerce landscape, says Web Retailer, but there are other options than these kinds of marketplaces.
Direct to Consumer (DTC) selling through your own website is attractive to owners, as profits are not eaten up by a third party.
However, marketing strategies must be innovative and often require significant budget.
A third option is to go wholesale: selling your products online in bulk to other online e-commerce stores. But bear in mind this normally needs previous wholesale experience, as well as a lot of warehouse space.
Understanding and using Search Engine Optimisation (SEO) is one of the most important things you can do as an e-commerce business owner. Vital for driving organic traffic, it will cut down your marketing budget and help you get more sales, for free.
Keywords are one of the most important things Google takes into consideration when ranking its websites. There are a couple of easy rules to remember when applying them.
No single keywords
Using extremely common, single word keywords such as ‘shoes’ guarantees you will get lost in the shuffle. Make sure to use multiple keywords to give your website a better chance of appearing high in the rankings; this will cut down on competition and really pin down your brand identity.
No stop words
Don’t use ‘in’, ‘and’ or other stop words unless you absolutely need to for content to make sense. Try and not use them in meta titles and header tags.
Content, content, content
The more fresh, quality content you populate your site with, the more naturally and frequently you can insert keywords. If you don’t want to keep up with a blog, consider incorporating customer reviews or updating a resource list on a regular basis.
- Ahrefs: This backward link checker gives an overall view of followed and not followed links for any target, allowing you to see how trustworthy Google finds you – and your competitors.
- Wordtracker: Allows you to find new keywords for your market.
3. Setting up your e-commerce website
Register your e-commerce business, brand and domain name
Getting your business off the ground as an e-commerce owner can be fairly simple. But there are a few important choice to make.
Should you register yourself as a sole trader or a limited company?
A lot of e-commerce startups in the UK opt to become a sole trader, as it’s free to set up and you can change things, such as your company name, with little fuss.
However, you’re also required to register for Self Assessment to pay tax, so make sure you keep track of all your receipts, or employ an accountant if this is not your strong suit.
It might take a bit more time, but don’t discount the benefits of becoming a limited company.
This means any company debt won’t affect you personally, as well as helping the optics of your business. Some e-commerce owners say manufacturers will give them better prices, and it is easier to get outside funding.
If you’re unsure which option is best, out of becoming a sole trader or a limited company, it’s worth speaking to an accountant.
You can register your brand as a trademark at gov.uk. This means you can sell and license it, as well as take legal action against anyone who uses your brand without your permission.
Buy your domain name
Once you subscribe to an e-commerce platform, many will include a free domain name for a year. Most experts recommend buying a .com or .uk site to increase customer trust, as well as being easier to remember.
It’s also worth buying up domains similar to your brand name to stop you having to pay more for them down the line.
Your domain name doesn’t have to be just your brand name, and for SEO purposes it’s often worth adding your product sector into the name (think ‘ExcaliburElectronics’ rather than just Excalibur).
Pro tip: Make sure not to use any numbers in numerical format, as they will look spammy and are thought to decrease consumer trust. If you must use numbers, spell them out.
Choose the right e-commerce platform
As well as using third parties such as Amazon or Etsy to sell your product, e-commerce founders may also prefer to have their own platform to sell their product direct to their consumer. But how do you know which is the best fit for your business?
In recent years, a host of platform options have sprung up.
Many have their own payment systems and features such as inventory management already incorporated, which will make your website super simple to put together.
Here are four of the best e-commerce platforms for your business:
|From £13 to £22, depending on what features you choose. £22 gets you more video hours, more storage space and priority customer support.
|From £21.30 to £178. The more expensive plans will allow you to custom filter your products, as well as accommodating up to £285,000 a year in sales (you will need to upgrade to a custom site if you anticipate more sales than this).
|From £21 to £213. The pricier options will allow you to assign inventory to more locations, as well as show calculated rates with your own account or third-party apps at checkout, and allow you to set individual product prices for different countries.
|From around £7 to £700. As a plugin of WordPress WooCommerce is free, but you pay extra for extensions such as shipment tracking, PayPal, and an SSL certificate.
E-commerce website functionality
Now you have a platform to sell your products on, it’s time to get into the nitty gritty of website functionality.
But don’t worry if these terms are new to you. They’re easy to comprehend and implement.
Get your SSL certificate
The SSL certificate converts your website URL from HTTP to HTTS and is a way of telling your customer that their details are secure and that they can trust your site.
For an e-commerce business, an SSL certificate is an absolute non-negotiable.
Some platforms will include an SSL certificate within their features, or you can purchase one separately. Tech Radar has a good list of options.
Get a hosting package
Many of the e-commerce platforms will already contain free website hosting, which can store more data.
However, if you’re looking at getting a separate host, UK Web Host Review has a good rundown of your options.
Get an internet merchant account
If you’re going to accept credit card payments from customers to your e-commerce site, you must have an internet merchant account.
This is a business service set up with a financial institution, normally a bank, which authorises payments and transfers collected funds into your account.
Some e-commerce platforms will already offer their own merchant, which avoids the hassle of setting up a third party payment provider.
However, you should still have a look at your options, as fees vary according to which provider you choose.
A PSP is a payment service provider, a service that allows a merchant to accept a variety of different payment types through a single channel.
Stripe, Square and PayPal, for example, are all PSPs.
You can install PSPs on to your e-commerce platform, rather than using their own proprietary payment gateways.
4. Preparing for launch
Finalise your business plan and methods for attracting customers to your e-commerce website
So your site is in staging and your domain names are all bought up. What’s next?
It’s time to finalise your business plan and have a think about the best way to attract customers to your website.
Business plans will invariably pivot and evolve before and after they are finalised, so don’t worry if you still need to change aspects of your plan at this stage in the game.
Perhaps your sales channels have narrowed, or you have a new third party for inventory management. Whatever it is, make sure your plan is updated and your goals align with these new changes.
At this point, you’ll want to think about attracting customers to your site.
Perhaps you’ve started to build interest on Instagram for the past few weeks, or have been making TikToks relevant to your sector.
Have a plan in place that can be ramped up until day zero. You may want to earmark some budget for social ads on the day of launch to boost visibility.
Sort out payments
Payments are one of the most important parts of your site.
You want to make sure your customers can make payments easily, safely and quickly when they reach checkout, and that they have a few different ways to pay.
Figures estimate that shopping carts are abandoned at a rate of around 88%, according to Statista. So you need to make sure the process is as simple as it can be.
Are there too many pages on the way to checkout?
Do you require customers to create a guest account?
What your shipping rates?
If you can answer these questions, it will be instrumental in helping sales.
5. Post-launch tasks
Acquiring your first customer
After all that hard work, your site should now be live.
You might be tempted to sit back and let the sales roll in, but this is the best time to really push and guarantee maximum engagement. Make a LinkedIn announcement, start fulfilling your pre-orders if you have any, and begin link building.
You won’t have an email list yet, but you should be able to gather a selection of contacts, whether it be friends or industry connections.
Create a personalised newsletter highlighting what your business offers and why your offerings can add value, and send it to all of them using a tool such as MailChimp.
Even though your product is based online, think about utilising offline too for sales. Speak to a local radio station or newspaper, for example, if you have a unique product or business story, and advertise in trade magazines.
Marketing your store
After your first big push, you’ll need a marketing strategy in place that may employ fewer platforms than you primary product push, but will employ those platforms on a longer-term basis.
Use industry research to figure out what the best platforms are going to be for your product, whether it be Google Shopping, Google Ads, social media such as Pinterest or Facebook, or newsletters.
If you want to get your own DTC (direct to consumer) market share, you have to make sure there’s a good mix of organic and paid traffic coming to your site regularly. This might require the services of a SEO marketing agency, a PR agency or an affiliate programme.
Talk to those in your sector about what works best for them.
In the beginning, it can be a challenge to measure performance, as a limited amount of data makes it hard to derive any actionable insights about your customer.
However, it’s crucial to collect all the information you can from your store’s visitors.
How long they spend on your site, how likely they are to buy your product, and how likely they are to purchase your product again are three important questions that will help inform your selling strategy and product choice.
If your abandoned cart rate is high, you’ll know your products are appealing but something is going wrong when it comes to the final step. Perhaps there’s a high shipping fee, or a lack of payment options.
Or maybe you’re getting a lot of visitors to the site through a certain platform, but they don’t actually buy anything.
That may be an indicator that you need to cut spend on that platform, and look to redistribute it somewhere that has offered you better conversion rates.
The more data you gather, the better informed you’ll be to make decisions that positively affect your e-commerce store, and ensure a steady stream of customers.
Frequently asked questions about starting an e-commerce business
Can you start an e-commerce business with no money?
It’s possible to start an e-commerce business with (almost) no money. One of the cheapest ways to do it is by dropshipping.
Dropshipping doesn’t require you to own, store or ship the product. Instead, you market it with your own little patch of internet real estate. And when customers order through your website, you order through your own supplier using their information.
Though there can be lower profit margins than if you were to produce the product yourself, dropshipping is one of the cheapest ways to own an e-commerce store. All you need is the funds to launch a website.
How much does it cost to start an e-commerce business?
The cost it takes to start an e-commerce business can vary drastically depending on your product. But there are some static costs that don’t vary much across sectors. Every e-commerce owner will need the following:
- A product: Take into account the product’s design, manufacture, storage and shipping.
- A website: Take into account web hosting, platform subscription, a domain name and web hosting.
- Marketing: Take into account social media spend, subscription to affiliate programmes, and SEO agencies.
Add all of these factors to get a rough idea of your initial outgoings, as well as monthly spend.
Is e-commerce profitable?
E-commerce is a sector in full bloom, with retail e-commerce sales worldwide estimated to be approximately £3tn – with no downturn in sight.
Offline retailers such as Gap and Nike have seen massive success in online sales. Meanwhile, new e-commerce businesses such as Gymshark, Dollar Shave Club and Glossier have made seismic waves.
However, for every success story is an e-commerce company that just never made it off the ground.
Essential attracted £232m in funding but shut down after three years after it released its only product, the Essential Phone.
Is starting an e-commerce business worth it?
Before you head into the world of e-commerce, it’s worth asking yourself whether this business is for you.
Internet Retailing suggests that 90% of e-commerce startups end in failure within the first 120 days, so it’s vital to do your research before you invest time or money into your venture.
But as high as the barrier to success is, the emotional (and financial) benefits can be huge.
E-commerce founders champion the benefits that owning your own business brings, including huge opportunities for learning, a complete sense of autonomy and the chance to do something that truly inspires you.
How do I start an e-commerce business such as Amazon?
Amazon famously started off selling books online, but the company only became the giant that it is today by its willingness to experiment – and to fail.
Often its services seem wildly disparate to its core offering. Who would have imagined that there would be demand for an e-commerce company to make TV?
But it has been Amazon’s willingness to break traditional retail strategy that has been its making.
When customers wanted to read books on a device, Amazon went into hardware to develop the Kindle. In IdeaCast, Harvard Business School’s Sunil Gupta attributes Amazon’s success to a trifecta of factors: logistics, technology and, above all, a customer-first perspective.
Final thoughts on starting an e-commerce business
So now you should have everything you need to start your own e-commerce business and get set up for success.
Some key takeaways to remember. Do your research on the product that you’re looking to sell. Create a business plan and keep it up to date. Use your accounting software to stay on top of your financials. Ensure payments can be made easily.
And finally, don’t forget about the importance of adding value for your customers and making life easy for them.
How to take your business online-only
Need some help starting your e-commerce business? This free guide will provide you with the inspiration and top tips to support you in your bid to build your online company.
Recommended Next Read
How AI is helping Gousto win customers and cut carbon
Never miss an episode
Subscribe by email and get Sound Advice delivered to your inbox every two weeks with the Sage Advice newsletter with a ton of related articles, templates and problem solving guides for small businesses so you can put our sound advice into practice.