How to start an eCommerce business: a complete guide
This post was last updated on October 30, 2022.
You’ve finally mustered up the courage to start your own online business.
Now, you’re left with one crucial question: where do I begin?
Learning how to start an eCommerce business (the right way) is crucial for building a long-lasting, defensible brand. In this guide, we'll cover 11 essential steps for laying the foundation of your online store.
How to start an eCommerce business
01. Choose a business structure
Before you can become the next Jeff Bezos, you'll need to set the foundation for your eCommerce business by selecting the right legal structure. Your overarching business structure defines your liabilities, tax status, management structure, and more.
(Important disclaimer: the content here is for informational purposes only and should not be treated as professional legal advice)
The five most common business classifications include:
Sole proprietorship - The simplest of the bunch, a sole proprietorship is an unincorporated business with just one owner who pays personal taxes on profits made from the business. There is no legal distinction between the business and its owner.
Partnership - Like a sole proprietorship, a partnership is an informal business entity where two or more owners split the profits and report them on their individual tax returns. There are two main types of partnerships: general partnerships and limited partnerships.
Limited liability company (LLC) - An LLC is a formal business entity that can be formed by one or more individuals and protects your personal assets from business debts or lawsuits. LLCs come with fewer requirements than a corporation and offer pass-through taxation.
Corporation - A corporation is a formal business entity that can be formed by one or more individuals. Corporations are legally distinct from their owners and can essentially operate like a person (e.g., own property, borrow money, pay taxes).
Nonprofit - While this business entity is required to file articles of incorporation, nonprofits are exempt from paying federal income tax, as their purpose is to generate money for a particular charitable cause.
If you’re not sure which one is right for you, consult a CPA. A few FAQs to keep in mind:
Do I need to register my eCommerce business? If you’re forming an LLC or corporation—then yes, you will need to register your business. The same applies to sole proprietorships and general partnerships that want to file for a DBA (otherwise, neither one is actually required to register with a state). Talk with a CPA or tax attorney for additional guidance if you have any questions.
Should I apply for an employer identification number (EIN)? Your business entity may not be required to have an EIN, but an EIN will allow you to open a business bank account, enjoy an easier time obtaining financing, and even prevent identity theft. An EIN is also required if you plan on hiring employees, even if you’re a sole proprietor.
Do I need a business license to sell online? It depends. Requirements vary from location to location; some may require you to obtain a business license from the get-go, while others will only require you to get one after reaching a certain revenue threshold. Learn more about which business licenses and permits may apply to you.
02. Select an eCommerce-specific business model
Not to be confused with your legal structure, your eCommerce business model helps to answer this question: What type of eCommerce business will I operate? You’ll likely be selecting from one of three popular models:
Direct to consumer (D2C) - A D2C eCommerce model refers to brands that cut out the middlemen, including wholesalers, resellers, and retailers. It means that you sell your branded products directly to your customers from your online store. D2C eCommerce legends include Casper, Warby Parker, and Glossier.
Business to consumer (B2C) - Similar to D2C brands, B2C businesses sell products directly to consumers. However, they operate like a traditional retailer and sell other brands within their store.
Business to business (B2B) - As the name suggests, a B2B model is when you sell products directly to another business. This business may either be the end user of your product or resell your items to other customers.
At this stage, you’ll additionally want to consider how your products will be marketed and distributed. Here are a few examples of what we mean:
Private label - A private label enables you to bring your vision for a new product to life. Under this arrangement, you work with a third-party manufacturer, but sell these items under your brand name. You retain control over how the products are produced, how they’re priced, and how they’re branded. Private labeling can apply to your entire catalog or to a portion of your products (think: Costco’s Kirkland line or Amazon’s AmazonBasics line).
White label - White labeling means that you buy and sell products that are already successfully sold by another company. However, you can add your logo and potentially customize other aspects of the design. Print on demand is a popular form of white labeling that allows for greater personalization.
Dropshipping - In a dropshipping business model, customers purchase products from your store. However, all orders are routed to your suppliers, who are responsible for shipping those items directly to your customers. A dropshipping model is popular for reducing startup costs and simplifying inventory management, since you never have to store or ship items yourself.
Wholesale - If you choose to become a wholesaler, you'll be expected to offer products in bulk (at a discounted price) to another business or retailer. While often considered a business-to-business (B2B) strategy, wholesaling can be combined with a business-to-consumer (B2C) strategy. For example, you may sell individual units of your product to the general product while servicing wholesale clients.
Subscription service - Starting a subscription box business or offering product subscriptions in your store are two great ways to earn more predictable income. To be successful, you’ll need to establish a tight strategy for fulfillment, marketing, and customer service.
03. Choose the right products
The possibilities are endless when it comes to selecting a profitable business idea. But you may already have an idea of whether you want to sell shirts versus candles, beauty products versus tech.
If not, take some time to research trending products or evaluate what you’re most passionate about. Food for thought: these nine categories have the highest growth potential, according to eMarketer. Among them, auto parts and food and beverage are expected to post the greatest growth this year.
Here are some other tips that can help you decide which products to sell:
Start with your audience - Identify, research, and listen to your potential customers. Utilize social media, forums, and everyday conversations to glean insights into their preferences.
Discover trending products - Browse top-selling items on online marketplaces like Amazon or by searching Google. Tools like Google Trends and Algopix can also help you identify top-trending products. For example, let’s say you’re starting an eCommerce business selling supplements. Researching trends in the vitamin industry might lead you to create a product that will meet the needs of a breakout search term like “best prenatal vitamins.”
Fill a need in the market - Ensure that your product addresses a pain point that your target market experiences. In general, the more niche your solution, the better.
Follow your personal or professional passion - Look for products that share space with your personal values and beliefs. Do you love knitting and gardening? Then maybe it’s time to start an eCommerce business selling whimsical planter sleeves.
Leverage keyword searches - You favorite SEO or keyword research tool, like Moz, can be incredibly conducive to discovering frequently searched products, validating a concept, and/or analyzing competitors in a particular product category.
Factor in your profit - Determine the potential for your business to scale by calculating revenue-generated-per-dollar and/or per-hour-invested. A break-even analysis will further help you determine the breakeven point for each product and how feasible it is to make a profit.
Understand your product’s potential lifecycle - Some products are built to last. Others naturally fizzle out over time. Knowing your expected product life cycle—the time from when the product is introduced to when it ages out—can help you create a multi-year plan for your eCommerce business.
04. Decide how you’ll get your products
Determine the right product sourcing method for your products. The four most common ways to source products are dropshipping, buying from a wholesaler, partnering with a manufacturer, or taking a DIY approach.
To determine your best product sourcing method, start with these questions:
Which parts of your product are you looking to customize, if at all?
How much capital do you have to invest in new inventory?
Will you need to outsource other parts of your operations, like fulfillment or warehousing?
How do your competitors source their products?
What is your contingency plan if one supplier or sourcing method experiences issues?
How will you scale your business?
05. Determine your unique selling proposition
Identifying your unique selling proposition (USP) is critical for understanding how your business differs from your competition. For example, “plastic negative” water company, Mananalu, differentiates its products by supporting a larger cause. Mananalu water is packaged in refillable and recyclable aluminum bottles, ensuring that it’s eco-friendly.
Similarly, you could establish your USP based on factors like:
Aside from helping you stand out from the competition, your USP should guide your product positioning and how you shape your overall branding.
It also opens opportunities to collaborate with companies and influencers who share your values. Take, for example, the planter sleeves boutique we mentioned earlier. That unique product is relevant for plant enthusiasts who identify with the "cottagecore" movement. Cottagecore influencers and related businesses would naturally be powerful allies for promoting that business without being in direct competition.
06. Write a strong eCommerce business plan
Document all the essential details of your business in a formal eCommerce business plan. This written document should clearly describe how your business will run, operate, and develop. The strongest business plans keep your team aligned, plus help you attract the right business partners and investors.
Essential business plan elements include:
Products and services
Marketing and operations plan
Management and organization
Don’t know where to begin? Try this business plan template.
07. Choose an eCommerce business name and logo
As part of your larger eCommerce branding strategy, decide on a business name.
Begin by creating a list of options. You can perform keyword research, choose names related to your niche, or try alternate spellings to make your name stand out. Or, you can give our free business name generator a whirl.
Cut down your list of possible names to your favorites. Make sure your names are:
Easy to read, say, spell, and remember
Available as a domain
Not being used by another business (check your state’s list of registered businesses)
08. Choose an eCommerce platform and create your website
You're now ready to bring your brand to life through your own online site. As a first step, choose your eCommerce platform wisely. Consider whether a platform can give you:
A professional-looking, easy-to-customize eCommerce website builder
The capabilities for maintaining a reliable, high-performing site across both mobile and desktop
Tools for simplifying, optimizing, and automating your back-office operations
A pricing model that makes sense financially for your business, both now and in the future
Wix eCommerce is a powerful, secure platform that offers built-in tools for inventory management, pricing management, marketing, and more. Choose from hundreds of designer-made templates and customize your site as you see fit.
Don’t forget to connect a payment gateway to your store to enable transactions. Wix Payments allow you to accept various forms of payment, including credit card, debit card, BNPL solutions, and more.
Do your research and pay close attention to fees and surcharges required by your chosen providers.
Tips for designing your online store
Be clear about what you sell - Make it easy for customers to understand your business and products by providing high-quality images and strategic copy throughout.
Prioritize SEO - Study eCommerce SEO best practices to give you product pages the best chance at ranking on Google and other search engines.
Use simple CTAs - Use clear calls-to-action like “Shop Now” or “Buy Now” to avoid a confusing user experience.
Keep your store well-structured - A handy navigation bar will help customers find your key product pages. If you sell multiple items or categories, consider creating submenus and product collections for easy browsing.
Use high-quality imagery - Focus on taking clean, consistent product photos that showcase your brand in the best light.
Showcase user-generated content (UGC) - Think of ways to invite and showcase customer reviews and other social proof that can increase conversions.
09. Manage your eCommerce business finances
Once you learn how to start an eCommerce business, heed these eCommerce money management tips to ensure that your business thrives. There are a number of considerations that you should factor in when planning your business finances:
Factor in recurring costs
Budget for marketing expenses
Plan for seasonality
Use proven inventory management strategies
Set aside enough funds to fulfill returns
Minimize shipping costs
Understand product invoicing
Know how to handle chargebacks and returns
It's important to keep returns to a minimum to reduce costs, protect your brand's reputation, and increase customer satisfaction. Choosing the right return policy and featuring it in an easily accessible place on your site will pay big dividends in the long run.
10. Create a marketing plan
Whether you decide to tap into email, content marketing, or influencer marketing, there are plenty of ways to beef up your eCommerce marketing strategy. As you decide which techniques are worth investing in, pay attention to the following tips:
Test, test, and test again. Marketing is both an art and a science that requires constant experimentation. Ask yourself, would a promotion help drive sales? Could a more efficient checkout increase conversions? Will a blog help sell more products? Try some of these 13 proven ways for how to sell products online.
Keep profits top-of-mind. Profitability isn’t always easy to track and reach, especially in year one of owning a business. But you should always be keeping a pulse on your profits. Make sure that you know how to (properly) calculate your profit margin as you invest in marketing tactics, plus purchase inventory to keep up with growth.
Watch your customer reviews. Positive customer reviews help to build trust with customers, improve search engine rankings, and increase site traffic. Consider spotlighting reviews on your homepage and product pages. In fact, Wix users that add third-party review apps to their stores see an average 10% increase in overall sales and AOV within the first 60 days of integration.
Consider a multichannel or omnichannel approach. A multichannel eCommerce approach means that you sell products beyond your online store. Additional sales channels can include social media, third-party marketplaces, comparison shopping sites, or mobile. Each channel brings the potential for attracting new customers. For optimal results, consider an integrated omnichannel retail approach.
Optimize the customer experience. From refining your product pages to optimizing the checkout experience, make sure that your customer experience is in tip-top shape before funneling more people to your site. You’ll want to ensure that your site is protected against site crashes too, and won’t buckle under the weight of new traffic.
Personalize for the win. These days, your customers expect your store to be tailored to their needs, whether they're casually browsing your products or seeking the best bang for their buck. Take a look at these eCommerce personalization examples for ideas on how to make your site even more attractive to each unique shopper.
Bring your eCommerce business to life
Ready to start an eCommerce business today? Start by defining your business model and doing your product research. Then when the time is right, use the Wix eCommerce website builder to build a professional online store and to get hooked up with a powerful set of back-office tools and automations.
Marketing Writer, Wix eCommerce
Geraldine is a marketing writer for Wix eCommerce. She uses her broad experience in journalism, publishing, public relations and marketing to create compelling content and loves hearing user success stories.