The Ultimate Guide to Launching an E-Commerce Store Part 1: Choosing Your Niche and Business Model
Even before the pandemic, the world was increasingly virtual. People love the convenience of online shopping and services. Budding entrepreneurs can now turn their great ideas into a lucrative business, without the costs of a brick-and-mortar storefront.
Are you eager to start your own e-commerce business? Hold on: while it’s easy enough to start a website, creating one that attracts and converts customers is a challenge. First, you’ll need to identify whom you’re selling to and how you’ll convince them to purchase.
Know Your Niche
Even Amazon started as an online bookstore. While it may be tempting to cast a wide net and sell everything you’d like, it’s better to choose a specific target audience. Then, offer the products and services they want. In other words, work backward from your ideal customers. This will help you launch a product (or set of products) with a good market fit.
Refining your niche also means presenting your products and services specifically to your target customers. If you try to please everyone, you’ll please no one. Don’t be afraid to “niche down” and offer limited products to a narrowly defined group of people. For example, selling “cosmetics” to everyone in the world who has ever used makeup is hard to wrangle. Selling premium cosmetics supplies to aspiring and professional makeup artists will be much more lucrative.
Decide How You’ll Sell Your Product
While many people associate “e-commerce” with “online shop,” it is actually a catch-all term for any sort of website that sells products or services. This could be the virtual counterpart of an established brick-and-mortar business, a dropshipping site with products for multiple vendors, or a virtual storefront where people can purchase physical or digital products and/or book services and consultations.
Let’s focus on the last one. The type of product you’re offering determines the type of site that you need. Many out-of-the-box e-commerce platforms (e.g. WooCommerce) are designed for physical products. If you’re selling digital products, you can use an e-commerce platform or any of these options:
– For online courses or paid-access content, look into a membership platform e.g. Kajabi or Mighty Networks.
– For digital products, e.g. e-books or templates, try a paid download platform e.g. Payhip or FastSpring.
– For online bookings for paid consultations or coaching, you can set up a checkout page on your website with a payment gateway through Stripe or PayPal.
Do your research: you need a platform that supports your sales goals and provides a good experience for your customers.
Determine Your Business Model
There are many types of business models, but for our purposes, we’ll focus on the following models that are most often used in e-commerce:
Distribution: You create products (or components of products) and sell them to manufacturers or retailers.
Retail: You create products (or purchase them from suppliers) and sell them directly to customers.
The retail model can be further broken down into:
Accessory selling: You initially sell customers your core or flagship product, then pitch add-ons, accessories, or upgraded components. Examples: Apple, YETI.
Bundling: You sell related products together and/or allow customers to choose their own mix or customize their product. This model also works for service-based businesses e.g. design and coaching. Examples: Prose, TRX.
Subscriptions: You collect a flat rate from customers every month or year, then provide them a steady stream of content or products in return. Examples: LootCrate, BarkBox.
Develop Your Pricing
Setting prices is the hardest part for many e-commerce entrepreneurs. Today’s consumers expect to find good deals online; they often expect free shipping as well. You will need to set your prices at an appropriate level for your target audience but also high enough to cover your expenses. Even without a brick-and-mortar store, it still costs money to do business!
Consider these expenses when setting your prices:
– the cost of packaging and shipping. If you want to offer free shipping, you’ll need to set your prices high enough to cover these costs.
– the cost of your e-commerce platform. This includes hosting fees, domain registration, and maintenance costs.
– your labor and creativity. If you’re only bringing in enough money to cover your time and expenses, you’re running a charity, not a business.
Next, translate those rates into what customers will see. How much is each product? Are you bundling any products or offering some as an “upsell”? For example, if you’re selling makeup train cases for $29.99 and makeup brush holders for $19.99, you could sell them as a bundle for $44.99 — or upsell the brush holder during checkout for only $14.99.
For digital products and paid-access content, pricing can be even trickier. Just because you don’t need to ship these items doesn’t mean there isn’t an expense to cover, though. Consider the costs of hosting the products, the time and creativity that went into creating them, and the value they provide to your customers.
Evaluate Social Merchant Platforms
We mentioned several options for e-commerce hosting, including basic retail and subscription options. However, there is always the option to use a social merchant site. These platforms come with a built-in audience and lots of SEO and advertising options. The downside is that you typically have to pay the platform a commission fee, and you’re limited in how you can present your products and brand.
Social merchant platforms include:
- Big Cartel
- Facebook (which now offers product sales through business pages)
These platforms could be your primary selling channel or an accessory to your e-commerce website. Evaluate the tradeoff between a merchant platform’s fees and your exposure to potential customers. Many e-commerce businesses offer just a few products on one of these platforms, then drive those customers to their main website.
You’ve now laid the foundation for a strong e-commerce business. This prep work is crucial; you never want to dive right into selling! Do your research and figure out the best way to reach your ideal audience with your products and services. Once this is done, you can begin figuring out your marketing strategy — the next step toward e-commerce success.