Do you dream of owning your own online store?
Do you have grand visions of working from your laptop while your ecommerce business rakes in sales on auto-pilot?
Whether this is your first time setting up a small business or you’ve been in the game for a while, this guide will teach you how to start an online store in 7 simple steps.
Our goal is to have your storefront up and running, including products, today. You might even make your first sale!
Here’s a quick index to help you navigate this guide:
- Step 1: Decide on your niche
- Step 2: Choose between dropshipping or holding your own products
- Step 3: Brainstorm a business name and register your domain name
- Step 4: Select products to sell
- Step 5: Create your website with an online store builder (we love Shopify)
- Step 6: Set up a company and get a sales tax ID
- Step 7: Market your new online shop
Ready to get started?
Step 1: Decide on your niche
This basically means what you're going to sell and who you're selling it to. Some first-time entrepreneurs don’t put a great deal of thought into their niche.
Your niche impacts a lot of things, including:
- Your sales figures
- How much effort you’ll have to put into customer support
- Whether or not you’ll have repeat customers
This is why it’s important to take some time to think of a niche that is strategic. Need help deciding? Check out these 10 foolproof strategies for choosing an e-commerce niche.
Your niche is broken into parts: price, audience, market opportunity.
First, let’s talk about pricing.
At the most basic level, we all understand this concept:
if you sell cheaper items, more people are likely to purchase, but your Average Order Value (AOV) will be smaller.
If you sell more expensive items, less people are likely to purchase, but your AOV will be larger.
Okay, so where do I draw the line? Is there a minimum price to keep in mind?
While there’s no hard and fast rule, try to price your items at $100 or above.
Here’s the rationale behind it:
After accounting for operations, warehousing, and marketing costs, most ecommerce store owners end up with a 20-30% profit margin.
Let’s say you’re earning 20% on all the products you sell.
If you’re selling a $20 item, you’re only making $4 on that sale, where if you're selling a $100 item, you’re making $20.
Think of it this way:
The amount of time and energy you spend on processing and fulfilling your order is the same regardless of whether you’re selling $20 items or $100 items.
You might as well get more bang for your buck (or in this case, buck for your time), right?
On top of that, there’s also brand loyalty, popularity, and longevity to consider.
Let’s start with brand loyalty.
In a nutshell, you want to avoid niches which are already dominated by household names.
Here’s an example:
Let’s say your headphones die on you and you need to purchase a new pair.
You’ll either pull out your phone and go to Sony’s website (or Bose, Beats, or Sennheiser’s) or you’ll drop by one of their stores (if you’re the sort who’s particular about test-driving products before buying).
Image Via: imgur.com
Compare that against this other scenario:
Let’s say you’re redecorating and you decide that a chandelier is exactly what you need to jazz up your living room.
You’ll probably pull out your phone, and google “buy chandeliers online” or “chandeliers free shipping”.
See the difference in behavior?
In niches dominated by a few brands, consumers don’t even think about alternatives.
Their brand loyalty kicks in, and they head straight for the brands which occupy their top-of-mind awareness.
Take a look at the stats:
Image Via: themthdegree.com
Obviously this doesn’t bode well for a newcomers to established markets.
So avoid these like the plague and stick with niches and products that don’t evoke much brand loyalty or brands that are already top-of-mind for a certain type of product.
Next, let’s move on to popularity.
Now, I’m not saying you need to restrict yourself to selling “trending” products.
(In fact, that’s probably a bad idea, because you might find your sales flatlining once the hype dies down).
Instead, you should try to identify a niche or product that’s slowly but steadily growing in popularity.
To help you along, here’s a handy tool: Google Trends.
Just plug your keyword in and you’ll be able to see how many people are searching for the term (either worldwide, or within a specific country).
For example, if you look at the term “airfryer”, you’ll see a nice upward trend over the last 5 years.
The graph spikes every year around December (maybe air fryers are a popular Christmas gift?), but that’s okay.
You’d be hard-pressed to find a product or niche that displays a smooth trajectory, but as long as the overall trend is positive, that’s good enough!
Last but not least, consider the longevity of your customers.
This bit requires you to think a few steps ahead, but it’s important to have that foresight when you’re starting a business.
After you make your first sale and you’ve got your operations running smoothly, the natural next step is to work on generating more revenue.
How do you do that? A lot of entrepreneurs try to increase their Customer Lifetime Value (CLV), and they come up with strategies to retarget their existing customers and keep selling to them.
Here’s the tricky part:
Certain niches are absolutely horrible for customer longevity.
It pays to be aware of these upfront, so you don’t find yourself in a bind when you’re 6 months into your business and trying to figure out how to increase your CLV.
One example? The wedding niche.
People automatically assume the wedding niche is highly profitable because, well, people are willing to splurge on their big day.
That’s true, but what they don’t realize is that the “lifespan” of each customer is crazy short.
You might have 100 customers today, but these 100 customers will have churned within 3 months — and they’re never coming back.
While other ecommerce stores will be able to work on customer retention and sell to their existing customers, it’s a different story for you.
In order to scale your business, you’ll have to spend aggressively on ads and other forms of marketing.
You’d be stuck in an endless loop of customer acquisition. And once you stop, your sales drop too.
Pretty scary thought, right?
Alright, before we move on to the next section, here’s a quick summary:
Unprofitable niches are typically associated with cheaper-priced products, evoke a ton of brand loyalty, aren’t growing in popularity, or don’t have customer longevity.
Profitable niches, on the other hand, are associated with more expensive products, don’t evoke brand loyalty, are growing in popularity, and have customer longevity.
One final thing:
I recommend not blindly going into a niche you know absolutely nothing about.
If you find a niche that fits the above criteria but is new to you, take your time to do some market research.
At the end of the day, the more you understand your competitors and how the niche or industry functions, the better your chances of building a successful online store.
Step 2: Choose between dropshipping or holding your own products.
The next step in starting up an online business? Deciding whether you want to dropship or hold your own products!
Dropshipping has become super popular, but as with anything else, it comes with its own set of challenges.
In this section, I’ll run you through the pros and cons of dropshipping versus holding your own products so you can make an informed decision on the best choice for you.
Let’s start off with dropshipping.
Image from Linkedin.com.
In some ways, dropshipping can feel like the ultimate ecommerce store hack.
You don’t hold inventory, which means:
- You don’t need capital to purchase your items
- You can list more items on your ecommerce store, at zero risk
- No warehousing costs
- No picking and packing activities
Basically, dropshipping levels the playing field.
With dropshipping, virtually anyone can get into ecommerce.
Even a guy who’s too broke to move out of his parents’ basement.
Even a high-schooler who still gets his allowance from mom and dad.
But here are the not-so-good things about dropshipping:
First, you have zero control over fulfillment.
Sure, the idea of putting your feet up while a third-party company takes care of your fulfillment is pretty enticing.
Image via: giphy.com
But here’s the problem.
When they screw up (and they will, at some point or another), your customers will be pointing fingers at you.
For ecommerce stores who handle fulfillment in-house, it’s easy enough to apologize, rectify the problem, and move on.
But dropshippers who have to communicate with manufacturers who are in a different city, or even continent...
Obviously, not as easy.
On top of that, product returns are also problematic.
Most sellers on AliExpress (which is the most popular dropshipping platform out there) don’t do returns.
And even if they do, it’ll take an eternity for you to send your customer’s defective product to the manufacturer, get the replacement from them, and ship this back to your customer.
So you have two options:
1. State in your store policy that you don’t entertain returns at all
2. allow returns and absorb the cost.
If you’re starting out with a limited budget, you might be tempted to nix returns altogether.
But don't do that. Bad!
You’re a new brand that no one has ever heard of and you need to build trust with your customers.
Image Via: mission3media.com
So if you have a strict no-returns policy, it’ll probably put off your potential customers from shopping at your store.
Here’s what I recommend:
Offer returns, but only for defective items, and state that the item needs to be sent back to you within a shorter time period (perhaps 7 days?) to qualify.
At the same time, keep track of the returns that you do get.
If one manufacturer is consistently sending out defective products, stop working with them and look for a different manufacturer instead.
Okay, on to the last disadvantage of dropshipping - the lack of branding.
So here’s the thing:
You can request for your supplier to not include any promotional materials inside the packages they ship to your customers, which makes it less obvious that you’re dropshipping.
But you most likely won’t be able to get them to use any kind of custom packaging with your company name or logo on it.
This means your customers won’t have the best unboxing experience.
Basically, they’ll receive a nondescript box with a few shipping labels slapped onto it.
There won’t be anything on the box, or inside the box, to indicate that it’s from your store.
If you’re just trying to make a quick buck off ecommerce, that’s fine.
But if you want to build a brand, this is a major roadblock.
You may be able to get your suppliers to put your materials in the box, but that’s rare and will likely cost you a pretty penny.
Now then - we’ve covered all there is to know about dropshipping, so let’s move on to holding your own products.
The disadvantages are obvious:
- Buying inventory costs money
- Storing inventory costs money
- Picking and packing costs time and/or money
Basically, holding your own products is more expensive and an all-around pain.
With dropshipping, you can outsource certain aspects of ecommerce.
But when you hold your own products, you’re responsible for everything, and there are a lot more pieces of the puzzle that need to come together.
On the bright side, the benefits of holding your own products are awesome:
First, you get to make sure your customer’s experience is perfect.
Here’s why this is important:
Statistics show that the majority of unhappy customers won’t actually tell you they’re unhappy - they’ll just churn into oblivion and never patronize your store again.
Image from HelpScout.net.
If you’re doing just enough to get by, you’re hurting your own customer retention rates (and revenue!) without realizing it.
To ensure you don’t unintentionally flush that revenue down the drain, you need to step it up when it comes to customer service.
- Shorter delivery times
- Well-designed packaging
- Knowing your products inside and out
And, of course, fixing problems as soon as they arise.
Still not convinced?
When you screw up, your customers tend to talk about it more.
Image from HelpScout.net.
Who hasn’t posted an angry Facebook status or complained to a friend about a business that had poor customer service?
You don’t want to be talked about for the wrong reasons, so make sure you nail your customer experience.
The second benefit of holding your own products is better profit margins.
When you purchase products from a manufacturer, you typically adhere to a Minimum Order Quantity (MOQ).
Because you’re buying in bulk, you’ll get a discounted rate.
You can either hold on to your higher margin or pass down the discount to your consumers, which will drive more sales.
Either way, this means more revenue for your store!
Last but not least, holding your own products allows you to nail your branding.
We talked about how it’s important to have your brand on your packaging and/or products if you’re in this for the long haul.
But it’s not just about consumers recognizing your brand.
Products delivered in well-designed, branded packaging are perceived to be more desirable and attractive.
If you got a battered, unmarked cardboard box (save for a shipping label in a language you don’t understand), how would you feel?
Probably like you just bought something from the black market. Or maybe some guy in his basement trying to con you.
Image Via: giphy.com
But if you get the same product in a beautifully designed package, you’ll be a little more excited. There’s a reason people film unboxing experiences!
Image from Nashvillewrapscommunity.com.
One final point on branding:
Awesome branding and packaging also encourages consumers to share your product on social media.
You can even include a call-to-action on your packaging and tell consumers to use your branded hashtag when they post about their purchase on social media. (Organifi does this REALLY well.)
Now, before I move on to the next step, let’s talk briefly about the subscription box model, which is hugely popular right now.
With this business model, your customer specifies whether they want a 3, 6 or 12-month subscription (or any other options you offer).
You either collect the entire sum upfront, or bill them every month.
The great thing about this model is that there’s customer longevity. Your customers keep paying every month (assuming you're awesome, which I'm sure you are!).
If you’re excited about the idea of recurring monthly revenue (you should be! It’s the holy grail of business), read our guide to creating a subscription box business plan.
So a quick recap:
- Dropshipping requires no capital and is the easiest method to get started, but has the lowest profit margin and poor branding.
- Buying wholesale requires more capital up front and the need to pack and ship, but gives you a higher profit margin and better branding.
- Subscription box stores can be either, and they're just all-around awesome.
Once you’ve chosen a business model to work with, it’s time for the fun part - coming up with your business name and registering a domain.
Step 3: Brainstorm a business name and register your domain name.
Your business name isn’t as make-it-or-break-it as the niche you choose, but it’s still super important.
But, if you’re not careful, it could put a halt to starting your online store!
People obsess over picking a name - I know I have. My advice is to give yourself a hard deadline of 1-2 weeks to choose the name if you’re really stuck. Otherwise you'll spend months trying to figure it out and never pull the trigger on starting.
Now, onto some do’s and don'ts to help you pick a name:
✅ DO choose a name that’s easy to pronounce.
Spelling is hard, people! So make the name SOUND like it’s spelled, and make it easy to pronounce. Otherwise people might go to the wrong URL.
✅DO choose a name with some significance.
If it’s related to the niche you’re in, it makes it easier for people to “get” your business. If there’s a deeper, more personal meaning to it, it’ll make a great backstory for media pitching.
✅ DO be as original as possible.
An entrepreneur based in Kentucky, Victor Moseley, opened a lingerie shop called “Victor’s Secret”. Victoria’s Secret promptly filed a lawsuit against them.
✅ DO choose a name with an available .com domain.
While .cos and other domain endings are becoming more popular, people will still instinctively type in .com. You want to make it as easy as possible for your customers to find you!
❌ DON’T choose a name that's too long.
Your business name should be 1-3 words, MAX! I would strongly advise sticking to one or two words. Again, the easier a name is to pronounce and type, the more people will remember it.
❌ DON’T choose a business name that’s a combination of words and numbers.
This is a no brainer, but I had to add it. That is, unless you’re trying to look dodgy and unprofessional.
❌ DON’T choose a name that references a specific product or product line.
You might be tempted to do this if you’re planning on focus your efforts on selling just one (awesome!) and highly innovative product. But what happens when you decide to branch out in the future? You’ll be stuck to that one product.
If you need some more help coming up with a name, check out Shopify’s Business Name Generator!
Step 4: Choose products to sell.
You’ve chosen a niche. You have a business name and URL. Now...
How do you figure out what the heck to sell?
Easy - by looking at social proof.
Head over to Amazon’s best-seller list, and check out the most well-received items under your niche.
Do the same with eBay’s best-seller list.
Keep a document or spreadsheet of all your ideas. Some things to keep in mind…
- Avoid name brand goods (we talked about this already)
- Look for a selling price of $50-$100 for good margins
- Try to find things with low shipping costs
- Choose something you know a bit about (and, preferably, care about)
- Find things you can innovate on (look at the reviews to see what people DON’T like about a product, then make one that’s better)
Need product ideas? Check out this post about trending products.
Once you choose the specific items you want to sell, it’s time to look for your suppliers.
There are plenty of suppliers on both AliExpress and Alibaba, but here’s the difference:
You can buy products without adhering to MOQs on AliExpress:
But if you’re on Alibaba, most of their items come with an MOQ:
If international suppliers aren't your thing, SaleHoo has a Supplier Directory that lists high-quality suppliers (and it's fairly cheap for a membership).
Their Market Research Lab is also pretty useful for finding hot products:
This tool allows you to compare different products and evaluate them based on sales trends, competition ratings (ie whether there are a ton of other stores selling the same product), and more.
When looking for a supplier, here are a few tips to keep in mind:
- Communicate, communicate, communicate. The more you talk with them, the better you’ll get a feel. And don’t be afraid to hop on the phone.
- Avoid suppliers with excessive or weird fees.
- Make sure you ask them questions early and often. Their customer support is your customer support, especially if you’re dropshipping.
To learn more about finding the right supplier, check out this guide.
Step 5: Create your website with an online store builder
When it comes to creating an eCommerce store, the most painless, fuss-free solution is Shopify.
(We’re only a smidge biased. But look it up and try it out — I think you’ll agree with us!)
Now let’s walk you through how to create an online store using Shopify.
Step 5a: Sign up for a free trial
On Shopify’s main page, you’ll see an option to sign up for a free trial.
You’ll have to fill in a few details, but this will just take you two minutes.
Once you’re done, you’ll be redirected to your dashboard.
Step 5b: Choose a template/theme
Scroll down from your dashboard and click on the “Customize theme” button.
This will bring you to the “Themes” page.
Once you’re there, scroll down again, and click on “Explore free themes”.
Here you’ll find about 10 free themes that you can choose from.
If you don’t like these, you can also opt to pay for a premium theme. Or, if you want something custom made, you can hire us to help you out.
Pro Tip: It’s not necessary to do this right now, but you’ll definitely want to optimize your theme for conversions further down the road. Bookmark this article and check out these great Shopify apps: Sales Motivator, Product Discount, and Customer Specific Pricing.
Once you’ve chosen a theme, it’s time to enter your products.
Step 5c: Upload your products
Shopify’s eCommerce website builder is pretty user-friendly, so this will be a breeze...
...just click on “Products” on the left-hand panel, and then click on “Add product”.
Rinse and repeat till you’ve got all your products up.
On top of filling in the standard information, such as product name, description, etc, be sure you also input your meta description for better SEO!
For more info, check out these articles:
Step 5d: Fill in your other pages
Products all done?
Great - now to fill in your other pages.
Using the same left-hand panel, click on “Online Store”, which will open up a secondary menu of options.
Click on “Pages”, and then “Add page”.
To start off with, you’ll want an “About Us” page, a “Shipping and Exchanges” page, and a “Contact Us” page.
Pro Tip: If you’re not much of a writer, don’t worry - you can auto-generate sample refund policies, privacy policies and even terms of service statements using Shopify. But we’re not lawyers - if you have legal questions, talk with a lawyer!
Here's how it's done:
Click on “Settings” (all the way at the bottom of that left-hand panel), and “Checkout”.
Scroll down all the way...
...and there you have it!
Step 5e: Look through the rest of your settings
The final step before publishing is to check over your settings and make sure everything’s accurate.
On your Checkout page (which you used to generate your policies), you can specify whether you want your customers to check out as guests or if they’ll need to create an account before checking out. (Choose the guests — make checkout as frictionless as possible.)
On your Payment Providers page, you can enable different payment methods. (PayPal and Credit Cards are a good idea! Bitcoin might not be bad either. Check out this article to learn more.)
On your Shipping page, you can set shipping rates for different zones. We have a huge guide to all things shipping you should check out for this.
On your Notifications page, you can customize the emails your customers will receive upon completing an order.
And you’re done with your website! Great job.
Step 6: Set up a company and get a sales tax ID
Once you’ve got your website, your suppliers, and your products, it’s time to think about setting up a business entity.
The main benefit to this is that your business will operate as a separate entity from you, the owner.
Essentially, this means you’re not personally liable for what happens to your business, and your personal assets are protected from any liabilities which your business might have.
You don’t necessarily need to incorporate right out of the gate.
While incorporating your business protects your personal assets, you can start as a sole proprietorship without any official paperwork. However, you’ll be taking a risk doing this.
My advice is to wait until you’re making a certain amount (say, $1,000 per month) before you incorporate. That way, the business can pay for its own incorporation and you know you’ll be doing it for the long run.
Read this article to learn more about incorporating and making sure you're doing everything legally.
Again, we’re not lawyers - if you have questions about what to do, please consult with a business lawyer! Take our advice with a grain of salt.
Now let's talk about online business sales tax.
Here’s what you need to know:
Once you create your own online store, you’ll have sales tax nexus in any state which you have physical presence (including property, employees, and inventory) in.
Let’s say you’re from Michigan, and your office (or garage), employees, and inventory are all contained within Michigan.
This means you only have nexus in one state. You only have to pay sales tax on orders placed by customers in Michigan.
Fast-forward a couple of years later, and let’s say your HQ is still in Michigan, but you now have warehouses in Texas as well.
This means you have nexuses in two states.
While you can collect sales tax in all states you have nexus in, you need to get a sales tax permit before you do that.
How do you register for a sales tax permit?
Simple - go to your state’s Department of Revenue website and register there.
Some states’ sales tax permits are free, and others will cost you a nominal sum.
Once you’ve registered for your permit, the state will give you instructions of when and how frequently your payments are due (either monthly, quarterly or annually.)
It’s a bit of a hassle to go through the paperwork, but don’t put this off! It’s illegal to collect sales tax without a permit in most states, and you don’t want to get into trouble with the law.
Step 7: Market your new online shop!
Hang in there - you’ve reached the last section of this bumper guide on how to start an online store.
You now know how to set up a company, how to set up your website, and how to meet your online business sales tax requirements.
All that’s left is to create a marketing plan for your online store, which we’ll talk about in this section.
Content marketing and SEO
You probably already know this, but Search Engine Optimization (SEO) is amazing.
You can have two online stores selling the exact same things, but you’ll see phenomenally different results if only one store is search optimized, and the other isn’t.
At the end of the day, selling stuff online is really a numbers’ game.
You’re trying to maximize the number of people who visit your online store.
And maximize your conversion rate.
And maximize your retention rate.
You get the idea. That’s where content marketing and SEO come in - high-quality content helps you rank, drives traffic to your store, and builds trust with your visitors, which increases sales.
Social media marketing
One golden rule of marketing: you want to have a presence where your consumers are hanging out.
So be sure to keep your social media pages updated and active!
I recommend setting goals for your various social media channels, because if you’re clear on what is it you want to achieve, you can reverse engineer the steps to get there.
I recommend coming up with a content calendar.
You can create and schedule your posts ahead of time and make sure you’ve always got something planned for the major holidays.
If this sounds like a lot, don’t sweat it.
Just choose ONE channel that you want to focus on first, and start small.
Also: Link your social media to your store by learning how to add your Facebook pixel to Shopify (plus 5 easy tips to maximize it).
Most first-time entrepreneurs are hesitant to try PPC (because they’re worried they’ll end up busting their budgets).
I always get the same question:
How should I spend on PPC? Is it expensive to run these ads?
To which my reply is:
It depends - I know some ecommerce stores who spend $10k or more per month.
To someone who isn’t well-acquainted with PPC, this might sound like an insane amount of money.
But what if I told you that these companies have a 100% ROI on their PPC ads, meaning they get $20k worth of sales for every $10k they put into PPC?
That $10k ad spend doesn’t sound so ludicrous anymore, does it?
Well, here’s some good news:
According to Google’s Economic Impact Report, businesses make an average of $2 in revenue for every $1 they spend on AdWords.
So even if you’re not a wizard at PPC and your ads are mediocre, you can still make a decent profit off them.
To get started, read this guide on competitive PPC analysis.
Also, don’t forget that PPC isn’t just limited to Adwords - you have Facebook ads as well. Here’s a guide that will help you set up Facebook retargeting ads.
Whenever I tell online store owners the statistic I’m about to share, their jaws always drop.
You know how I just mentioned that businesses, on average, make $2 for every $1 they spend on Adwords?
Well, with every $1 businesses spend on email marketing, they make an average of $44.
Yup, you read that right. $44 for $1. Money machine!
Don’t let anyone tell you email marketing is old-school, or outdated, or boring…it’s actually insanely powerful and effective, and one of the most profitable types of marketing that exists.
Here are some resources to get you inspired:
- How to Build an Email List
- 5 types of emails your eCommerce store needs to be sending
- How to make the most of your list
Influencer marketing can pay huge dividends…
...if you do it right.
There are loads of fake influencers out there who bought their followers. Avoid those at all costs!
In fact, to navigate the muddy waters and find the golden nuggets, check out this guide.
Parting Advice: Plan your marketing
So we’ve just covered a lot of ground in terms of marketing strategies, and it’s understandable if you feel a little overwhelmed at this point.
Take a deep breath, and stay with me.
All you need is a high-level plan which will allow you to have a birds eye view of everything that’s going on.
Start off by determining your financial goals for the year. How much revenue do you want to hit?
Then break it down and figure out your monthly revenue goal.
Based on estimates, work out how many products you need to sell each month.
Once you know how much you need to sell, start working on your action plan.
A final word on starting an online store
Congrats, young Padawan.
You’ve made it all the way to the end of this guide…
...and you’re now a fully-fledged expert on how to open an online store.
Before I leave you, here’s one final piece of advice:
Don’t wait for that “perfect” moment.
Just go ahead and start an online business today!
As George Patton famously said, a good plan violently executed now is better than a perfect plan executed next week.
And, let’s face it…
You might tell yourself that you’ll start your own business online next week when things are less busy at work.
But when next week rolls around, you might be down with the flu. So you postpone it.
And the week after? It’s your partner’s birthday, so you postpone it again.
And the week after? Your dog is due for his check-up, so you postpone it again.
You get my point.
There’s never gonna be that one moment where the stars are all aligned. So stop waiting for that moment to happen, and just make it happen instead!
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If you found this guide useful (and I hope you did, because I poured my heart and soul into it!), please share it with your friends who are also aspiring entrepreneurs.