A woman in a plaid shirt stands at a small wooden table and uses a handheld scanner to scan a label on a small rectangular package. An open laptop sits next to the package. In the background is a narrow storage room with one wall lined with shelves filled with cardboard boxes. Another wall is covered with windows, beneath which is a long desk where a bearded man works at a computer.
Before you start selling your products, you have to figure out where to get them. There are many options, including partnering with a manufacturer or making the products yourself. — Getty Images/svetikd

For new and existing small businesses, selling online is a surefire way to boost one’s reach.

E-commerce business ideas can increase revenue, expand your market potential, and provide new opportunities. Still, any internet startup or expansion requires resources and some risk tolerance.

Although an online store has fewer physical assets than its brick-and-mortar counterpart, it’s still essential to do due diligence when starting an e-commerce business. Below, we explore profitable niches, revenue models, and technology solutions. In addition, we cover startup costs and e-commerce business advantages and disadvantages.

What is an e-commerce business?

An e-commerce business is any company that generates income by selling products or services online or cultivating sales leads. As long as its transactions occur over the internet, the business is an e-commerce business.

While online stores like Amazon or marketplaces like Etsy are the first to come to mind when we think of e-commerce websites, you can also accept electronic payments through booking services and payment links.

[Read more: Top 10 Must-Have Tools for Digital Nomads]

Consider profitable e-commerce niches

The first step in starting an e-commerce store is to determine the viability of your idea. It’s essential to create a product that consumers need. Consumer surveys and competitive research tools highlight market gaps. You can fill these spaces with products or services to solve a problem.

Understanding your competitors and the needs of the market is crucial. This knowledge allows you to fine-tune your offerings in a way that caters to consumers in ways your rivals don’t. It's equally important to ensure your product or service is set at an affordable price range for your target audience. By offering something different from what is already available, you can effectively differentiate your offerings from competitors and stand out in a saturated market.

Types of e-commerce business models

Like brick-and-mortar companies, online firms may sell to other companies, consumers, or both. An e-commerce example of a hybrid model is an organization that sells residential home goods, corporate office supplies, or personal and professional coaching services. After deciding on your initial approach, it’s time to choose a profitable e-commerce revenue model.

Consider the following business types:

  • Wholesale: Your company buys in bulk and sells items on your website or third-party sites like Amazon, Walmart, or eBay.
  • Private label: With this option, your brand typically goes on generic products that you sell on your e-commerce platform or through Amazon FBA (Fulfillment by Amazon).
  • Dropshipping: Shoppers purchase items from your online business, but the supplier fulfills the order
  • Subscription: To earn recurring income, you can replenish consumable goods, offer exclusive access, or curate kits or boxes.

Costs of starting an e-commerce business

Depending on your e-commerce model, online startup costs could range from under $100 to thousands. Many entrepreneurs ask if starting an online store with no money is possible. While doable, few experts recommend it. Therefore, all companies should assess startup costs as one of their first steps.

To determine your initial and ongoing expenses, research the fees related to:

[Read more: 5 Costs E-Commerce Businesses Often Overlook]

The first step in starting an e-commerce store is to determine the viability of your idea.

E-commerce business benefits

Lower overhead costs and expanded customer access are key advantages of setting up an e-commerce business. You can start at a level you’re comfortable with and scale by adding products and channels while automating workflows.

Flexibility is another top e-commerce benefit. Modifying your online pricing strategy and branding is easier and cheaper than changing physical assets. Solopreneurs and small teams can also handle customer service and updates from any internet-connected device.

Challenges of e-commerce businesses

Every small business faces challenges during expansion or startup. These issues depend on your firm’s stage, funding, and strategies. Like brick-and-mortar shops, online stores deal with technology learning curves and customer service complaints.

However, e-commerce businesses must also take strict online security, privacy, and fraud measures. When your company experiences shopping cart abandonment or low conversion rates, it takes resources to analyze and adjust touchpoints. In addition, selling worldwide brings its own challenges and risks.

Compare e-commerce providers

An e-commerce platform replaces a physical storefront. Therefore, it’s the center of your business and an essential component. Your choice affects your shoppers' experience and ultimately impacts conversion rates.

The best e-commerce platforms support your revenue model, skill level, and sales goals. Assess e-commerce providers by considering ease of use, customization options, integration with other tools, security features, customer support, and pricing.

Start your search by checking out these online services:

  • Wix: This all-in-one e-commerce platform supports most online models. Wix has built-in payment processing, retail and inventory tools, event management, and an online booking service.
  • Shopify: With robust global support, Shopify offers integrated fraud controls, payment processing, and currency conversion. Its online store allows unlimited products and supports social selling.
  • WordPress.com: This managed service is for solopreneurs looking to generate passive income, sell subscriptions, and build online stores. WordPress.com is scalable with free and paid plans.
  • Strikingly: If you’re testing the market or have multiple product lines, Strikingly offers multi-site plans. It stands out for having simple landing pages and being one of the quickest platforms to get online.

[Read more: How to Expand Your E-Commerce Online Sales Channels]

Online business planning and branding

Once you have finalized your idea, draft a business plan that thoroughly explains all aspects of your business, including finances, goals and objectives, marketing strategies, and your target market. The outline should include a timeline spelling out how, where, and when you plan to develop and ultimately operate your business.

To build your brand identity:

  • Strategically choose a name that defines your message and is simple and easy to remember.
  • Confirm your business's legal name, web domain name, and availability across all social media channels.
  • Ensure that your brand translates well into markets in different cultures.
  • Design a logo that aligns with your e-commerce business's mission and brand.

Product sourcing and order fulfillment methods

There are numerous ways to source products and fulfill orders. This category involves inventory storage, order processing, product picking, shipping, and delivery. A business’s sourcing and fulfillment strategies will depend on its scale.

For example, many small businesses don’t have funds to invest in a lot of inventory upfront (which makes dropshipping and reselling viable options). In contrast, larger companies with plenty of capital may find it easier to work with manufacturers who can do the heavy lifting for them.

Shipping software and built-in tools on e-commerce platforms calculate customer fees, let you print labels, and manage logistics through the site. Look for features that allow buyers to track packages and automate backend processes through accounting and CRM software integrations.

Marketing and launching your business

Finally, get your business off the ground by marketing and launching your brand via promotional campaigns. There are different ways to market your online business depending on your target audience and the products and services you provide.

Determining the right type of marketing for your company will require some trial and error to see what strategies resonate with your audience and which ones aren’t worthwhile. For example, some companies may successfully promote their brand on social media, while others may find that running advertisements across search engines has led to increased engagement.

Regardless of how you promote your e-commerce business, ensure you track its progress using key performance indicators. These metrics help monitor your business's success and pinpoint areas of improvement.

[Read more: AI and E-commerce: Simplifying the Sales Process]

This article was originally written by Miranda Fraraccio.

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