E-commerce: selling products or services online from the comfort of, well, anywhere you like!
Sounds like a dream, right?
Picture this: monitoring your growing sales from a tablet while lounging on a beach somewhere exotic. Creating a digital storefront is enticing for a reason. Overheads are low, barriers to entry are small, and if you play your cards right, scaling is a breeze. E-commerce could be your ticket to turning a small idea into a thriving business.
Instead of pouring time, energy, and money into setting up a physical store, you can focus on what truly matters—your products and marketing strategy.
But e-commerce is a broad space. It ranges from small-scale sellers offering handmade goods to giants like Amazon. So, how do you get started? What’s the first step?
While the field is vast, most e-commerce businesses share some common elements. In this guide, we’ll walk through the critical steps, from developing your business idea to creating a financial plan to set you up for success.
Step 1: Ideation – What’s the big idea?
The beauty of e-commerce is its flexibility. You can sell virtually anything online – from artisanal candles to personalized clothing. But before you start building your digital empire, you need a solid idea. What do you want to sell?
It’s easy to get caught up in a specific product idea early on, but keep an open mind. Whether you’re passionate about selling unique clothing or niche tech gadgets, your idea needs to balance passion and profitability.
Start by brainstorming:
- Your skills
- Your hobbies
- Your passions
- Your knowledge areas
Identify the key aspects of you that sets you apart – your unique selling point (USP). This is the secret sauce that will make customers choose you over competitors.
For example, maybe your products:
- Use sustainable materials
- Feature eye-catching, original packaging
- Are backed by a personal brand or personality (think influencers
- who sell via their own online stores)
- Offer a superior pricing or delivery model
Once you’ve honed your idea, take a hard look at your weaknesses. What gaps will you need to fill? Whether it’s enlisting a friend’s design skills or finding a reliable supplier, now is the time to plan for the resources you’ll need.
Step 2: Market Research – understanding your customers and competitors
With your idea in place, it’s time to connect it to reality through market research. This step is vital – it helps you gauge demand, spot opportunities, and avoid costly mistakes.
Your focus should be twofold: understanding your target customers and analysing your competition.
Start by diving deep into your niche. Use tools like Google, YouTube, and social media platforms to explore what’s out there. Look for:
- Customer pain points: What problems do existing products fail to solve?
- Top values: What do customers care about most – price, quality, or convenience?
- Competitor strategies: Who are your main competitors? What are their strengths, and where are they falling short?
Don’t skip the review section. Competitor reviews, especially the 1-star and 5-star ones, can provide invaluable insights. What frustrates their customers? What do they love?
As you research, build a clear picture of your competitive edge. How will you differentiate yourself and attract customers? Your findings will also lay the groundwork for your business plan and marketing strategy.
Step 3: Choosing an e-commerce business model
Now that you have a viable idea and solid market insights, it’s time to decide on your business model. This model is how your new business will make money and operate on a day-to-day basis.
Here are some popular e-commerce models to consider:
- Direct-to-Consumer (DTC): Sell your products directly to customers via your own website. This model gives you full control over branding and customer relationships.
- Wholesaling: Purchase goods in bulk and sell them for a profit. This requires more upfront investment but can yield higher margins.
- Dropshipping: Collaborate with a supplier who delivers products straight to your customers. You focus on marketing, while they manage the inventory and shipping.
- Subscription: Offer products or services on a recurring basis, creating steady income through subscriptions.
Your chosen model will shape everything from your pricing strategy to your marketing efforts. Make sure it aligns with your product, target audience, and long-term goals.
Step 4: Pricing Strategy – finding the right prices
Pricing is far more than a number – it’s a series of tough decisions that reflect your new brand and market positioning.
Start by revisiting your competitor analysis. How do they price similar products? Are they targeting budget-conscious shoppers or positioning themselves as a premium brand?
Decide how you want to compete:
- On price: Undercut competitors to attract price-sensitive customers.
- On quality: Offer superior products that justify a higher price point.
- On convenience: Make buying from you easier and faster.
- On service: Provide exceptional customer support to win loyalty.
Remember, pricing is also about profitability. Will your chosen price cover your costs and deliver a healthy margin?
This is where financial planning tools like Brixx come in handy. With Brixx, you can forecast your revenue, track your costs, and ensure your pricing strategy supports your business goals.
Step 5: Building a marketing plan
Your online store might be fantastic, but without traffic, it’s just another website floating in the vast internet void. That’s why a well-thought-out marketing plan is crucial.
Start by identifying your target audience. Ask yourself:
- Who are my ideal customers?
- Where do they spend their time online?
- What kind of content resonates with them?
From here, choose marketing channels that fit your audience. For example:
- Run targeted social media ads on platforms like Facebook and Instagram.
- Engage with relevant communities in online forums or Facebook groups.
- Partner with influencers or bloggers for sponsored content.
Remember, early marketing efforts are all about experimentation. Test different channels, track your results, and refine your strategy based on what works.
Step 6: Setting up and running your e-commerce Business
As you approach the launch of your e-commerce venture, it’s vital to address the operational aspects that keep your business running smoothly. It’s easy to get caught up in marketing and product design, but neglecting the basics like taxes and compliance can cause major headaches down the line.
Here are some questions to consider as you set up:
- Do I need insurance?
- What kind of taxes will I need to pay?
- How will I manage my inventory?
- How will I handle shipping and delivery?
- Do I need any patents or trademarks?
- Should I open a business bank account?
- What terms and conditions should customers agree to?
- How will I ensure GDPR compliance?
- How will I pay employees or contractors?
- How will I keep financial records?
Keep a running checklist of these questions (and others that come up) to ensure nothing slips through the cracks.
While operational tasks might seem mundane, they’re crucial. Unaddressed, they can lead to costly problems. For instance, if you’re holding stock, inventory management will take up a lot of your time initially.
Balancing stock levels is tricky: order too little, and you can’t fulfil customer demand; order too much, and you’ll tie up funds unnecessarily. With no sales history to guide you, it’s a delicate balancing act.
Step 7: Creating a financial plan
Your financial plan is the backbone of your e-commerce business. It answers the big question: can your business make a profit?
Even if finance isn’t your strong suit, you can’t skip this step. Understanding your numbers helps you avoid costly mistakes and boosts your confidence when pitching to investors or applying for loans.
Start Forecasting with Brixx
Financial planning tools like Brixx simplify the process. Brixx is designed for startups, allowing you to map out a three-year financial forecast even if you’re not a finance expert.
1. Setting up your Brixx plan
Your first step is to start a new plan:
Begin by creating a three-year forecast. Long-term planning may seem daunting, but it’s essential. Investors and lenders often expect detailed financial projections, and strategic planning helps you prepare for growth.
Your Brixx plan starts as a blank slate, with placeholder income and expense components. Customise these to fit your business. Add sources of income, running costs, asset purchases, and funding sources.
2: E-commerce income forecast
Let’s say you’re launching an eco-friendly soap business with a multitude of scents. Start by forecasting your product sales. For instance, you might sell premium soap bars for £3.99, with a cost of £1 per bar. In Brixx, you’ll enter these as income components and estimate your monthly sales. Use the inventory feature to link costs to your sales forecasts. This way, your inventory costs automatically adjust as your sales estimates change.
Section 3: Operational costs
Next, focus on fixed costs such as website hosting, marketing, and rent. These don’t vary with sales but are crucial to your business operations.
Marketing spend, in particular, will fluctuate as you test campaigns and learn what works. Brixx allows you to organize costs into groups (e.g., “Operational” and “Marketing”), helping you track where your money is going.
Section 4: Asset purchases
If your business needs equipment (e.g., laptops, office furniture), these count as assets. Unlike regular expenses, assets depreciate over time, which affects your business’s financial value.
Section 5: Funding
Once your income and expenses are forecasted, you’ll see whether your business will need additional funding. You can model different funding options in Brixx, such as personal savings or loans.
For example, you might inject £10,000 of personal savings or take a £20,000 loan. Each option affects your cash flow differently, so it’s worth exploring both.
Exploring different growth scenarios
With your base plan in place, use Brixx to model growth scenarios. For instance, what happens if sales increase by 25%? What if they drop by 25%?
These scenarios help you understand your business’s resilience and plan for different outcomes. You can also map out long-term goals, like expanding your product range or hiring staff.
Conclusion
Launching an e-commerce business involves a lot of moving parts, but with careful planning, you can navigate the challenges. By using tools like Brixx, you’ll gain a clear picture of your financials and set yourself up for success.
Take it step by step, and soon you’ll be ready to turn your business dreams into reality. Get started with Brixx today for free!
