E-Commerce 101: How to Start an Online Business

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Are you considering starting your own business? For some entrepreneurs, business ownership means hanging out a shingle in a brick-and-mortar location, relying on a storefront to drive customers and traffic.

In the digital age, however, all that has changed. Many entrepreneurs are looking instead to online businesses as a viable option. There are notable advantages to starting an online business, including less overhead, more flexibility, and fewer expenses. 

Starting an online company requires some careful planning and an approach that can differ from those working out of a physical location. Here is your essential guide. Think of it as E-Commerce 101: How to Start an Online Business.

Step 1: Fill a Need

Before you start a business, you need to be sure that you are filling a need or solving a problem for your potential customers. You want to find people who are in need of a solution that you are able to provide. Understanding what people are searching for on search engines, in forums, and from talking with your own networks can help flesh out your great ideas.

Step 2: Assess Viability

Just because you have identified an idea does not mean it is viable. That is why evaluating the practicality of your concept is critical. It is helpful to evaluate core questions, such as whether your product is viable, what obstacles you will face, and what support functions you will need to fulfill customer expectations. Here are some of the factors to consider when assessing viability:

  • Weight and dimensions. This will affect needed inventory space and shipping costs.
  • Fragility. Delicate products require more packing, care, and expense.
  • SKUs. Known as stock keeping units, SKUs help sort inventory and fulfill orders. One product can have multiple SKUs, depending on size, color, style, and other factors. The more SKUs you manage, the more complex your fulfillment work is.
  • Lifespan. Consumable or disposable products have a shelf life that can build repeat business. This is the model used by grocery stores and the emerging subscription box business.
  • Seasonality. Will your product be used year-round? If not, what will you sell in the quiet months?
  • Competition. You need to understand how saturated the space is and how you can compete in it.

Step 3: Establish Your Business

Creating a business online requires several important organizational steps

  • Structure. Business owners can establish their businesses in one of several structures. The most common is a sole proprietorship, which is the simplest and requires no paperwork. However, sole proprietors are not protected regarding the business debts and other obligations. A limited liability partnership (LLC) or corporation provides certain protections for owners regarding debt and liability. The LLC generally has more flexibility and fewer record-keeping and reporting requirements.
  • Filing. If you choose an LLC or corporation structure, you will need to file paperwork with your state. If you are planning to operate mostly within your state, state filing makes sense. However, if your scope is to take the business nationally, then incorporating in Delaware may prove to be advantageous.
  • Name. Your name means a lot! A compelling and unique name helps in the marketing of your business, lessens the likelihood that another business can accuse you of trademark violations, helps when you select a domain name, and fulfills state naming requirements.

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Step 4: Research the Competition

Your online research is an important part of the process. You also want to gather as much information as you can about your competition. These insights will help you position your company, shape your marketing, learn about the industry, influence your pricing, and help create a competitive advantage. Here are a few stages to this process:

  • Find the competition. Google, Amazon, and online business databases can help you pinpoint who the competition is. You want to categorize those competitors into those that are your direct competition (primary), offer a higher- or lower-end version of your product (secondary) and those only partly related to yours (tertiary). You will want to track basic information (name, URL, address, products) for each of the primary and secondary at the very least.
  • Look at the website. This is a great way to understand how others build their websites. Take a close look at their page organization, product descriptions, photography, contact options, and calls to action that compel a visitor to do more. These are things you will want to consider when you build our own website.
  • Understand positioning. How are your competitors framing themselves to customers? Learn how they make a pitch, what they highlight as top features and benefits, and how they frame their competition.
  • Follow them. Follow your competitors on social media, read their blogs, sign up for their newsletters, and consider buying a product to see how they handle messaging and fulfillment.
  • Analyze pricing. The website is ideal for a better understanding of how your competitors price products, shipping, and handling. Compare these prices to those on secondary market sites like eBay and Amazon.
  • Check reviews. Sites like Yelp have lots of information to mine. You will be able to understand what customers like and do not like about the competition and incorporate it into your marketing and customer service.

Couple Shopping Online

Step 5: Know Your Customers

Just as you need to understand your competition, you also need a clear understanding of who your likely customers are. This process is known as building your target market – the segment of people who want, need and are willing to pay for what you are selling.

You want to know demographics, attributes, and behaviors that your customers are likely to exhibit. This target market is likely to evolve and change over time, especially if you add new items or services to your core business.

You should already know the benefits your product provides, the problems it solves, and the competition. Now it is time to build customer profiles. These are broadly defined characteristics that your customers have in common and include basic demographics:

  • Age range
  • Gender
  • Location
  • Education level attained
  • Household income
  • Occupation
  • Ethnicity
  • Marital and family status

These profiles can be enriched by other shared traits or interests, such as hobbies, attitudes, behaviors, and interests.

With the profiles complete, it is time to dig deeper and try to think about the pain points your likely customers are experiencing. That leads to a better understanding of how to position and market your product.

Finally, one of the best ways to gauge your product is to ask potential customers about it. Using focus groups, surveys, and interviews, you can gain a deeper understanding of what might resonate with groups of customers.

Step 6: Learn the Applicable Laws

Online businesses face certain legal considerations that will keep your business clean in the eyes of the law, regulators, customers, and agencies. Here are a few of the common legal factors online businesses need to address.

  • Payment guidelines. You want to be sure that transactions on your website are protected. Before choosing a payment gateway, be sure to understand any restrictions they have on products, how your customers’ finances are collected and transferred, and what security measures are in place.
  • Copyrights, trademarks, and patents. Intellectual property can cover a wide range of items, from ideas to logos to processes to products themselves. Depending on your business, you may need to apply for any of the following:
    • Copyrights protect authored works such as books, music, and artwork.
    • Patents provide limited-duration property rights for an invention.
    • Trademarks cover symbols, words, phrases, and designs that identify and differentiate one good or service from another.
  • Taxes. Online businesses may be subject to taxation from multiple jurisdictions. Some states impose additional fees on certain items or different tax rates for different products. Understanding the state and country differences is critical.
  • Shipping. There are certain items that cannot be shipped by certain delivery services. Be sure you know your product can be sent the way you want it to go.
  • Licenses and permits. Certain items and services need licensure in order to be sold online. Medical devices, for example, are tightly regulated in some states and may require a license or permit.

 Step 7: Build the Website

What would an online business be without a website? There are many steps that go into the design and launch of a great website. Here are a few considerations:

  • Keyword research. Look for what people are searching for online. The words people enter into search engines are what you want to include in your product descriptions, website copy, and blogs. Search engines pick up on these keywords and are likely to increase your placement in search results.
  • Content. What are you going to say about your product, your company, and yourself? How are people going to get more information? What will your website offer to keep people interested and learning more, getting them excited about what you have?
  • Secure a domain. Your web address has to be something that makes sense, is related to your company name, and is simple to spell. There are multiple companies that will check domain registries and help you create a domain name that is effective.
  • Design, test, and launch. Many business owners choose to use an outside designer to build their website. While some products exist that are simple in theory, the many components of good website design make investing in a good designer and marketer a smart investment. Once the site is ready, make sure you and others test out the navigation, interfaces, and sign-ups. Make refinements as necessary.

With the right research, planning, insights, and foundation, your online business can be ready to attract customers and do its job for your company.

At Benetrends, we help entrepreneurs with small business funding and business services support. To learn more about how Benetrends can help get your online business off the ground with innovative funding strategies, check out our Resource Center.

E-Commerce 101: How to Start an Online Business

TOPICS: small business funding

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