How To Start an E-commerce Business: The Complete Guide

 

The growth of e-commerce has been astonishing, with retail e-commerce projected to reach $6.3 trillion in 2025 and continuing to grow in the coming years. By 2040, it’s anticipated that 95% of all purchases will be made online​​. This digital shift has revolutionized the retail landscape, making an online presence essential for businesses. Traditional retailers like Toys R Us struggled to adapt to this shift and became well-known casualties, while e-commerce giants like Amazon have thrived.

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It is not surprising that many budding entrepreneurs are now following suit. Rather than purchasing a store and setting up a physical product business, many immediately start selling digital products directly to consumers via an e-commerce store. Alternatively, they may purchase an e-commerce business to take it to the next level.

Image credit: Wharton School of the University of Pennsylvania 

What is E-commerce?

First things first, let’s understand what e-commerce is. E-commerce, or electronic commerce, involves buying and selling goods and services over the internet. This includes various business models such as B2C (business-to-consumer), B2B (business-to-business), C2C (consumer-to-consumer), and C2B (consumer-to-business) transactions.

The first secure online transaction occurred on August 11, 1994, when Dan Kohn sold a CD of Sting’s “Ten Summoner’s Tales” through his website, NetMarket. This marked the beginning of modern e-commerce​​​​​​.

E-commerce has evolved significantly with platforms like eBay and Etsy, allowing global transactions. Mobile technology has further driven e-commerce growth, with nearly 80% of global consumers using smartphones for online shopping in 2023.

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What are the Different Types of E-commerce Businesses?

On a surface level, buying and selling goods over the internet seems quite a simple definition, but many types of goods and services can be sold, along with various buyers. That said, here is a list of the most common types of e-commerce businesses operating within the e-commerce market.

1. Business-to-business (B2B)

A B2B e-commerce model involves transactions between two businesses and does not involve individual consumers. Usually, a company will look to purchase or subscribe to services offered by another firm to facilitate its processes. Often, this takes the form of software-as-a-solution (SaaS). 

Airwallex is an excellent example of a SaaS e-commerce solution that recently emerged during the pandemic. Many businesses needed to conduct virtual payments to an increasingly global workforce. Airwallex provided the solution for countless companies to manage international business accounts, company cards, virtual payments, and expense management.

Image credit: Airwallex

2. Business-to-consumer (B2C)

The most widespread model, B2C e-commerce, is when a business sells goods and services to a consumer via e-commerce websites or online markets. B2C models can involve both physical products and subscription services. Most businesses once exclusively found in physical locations now offer their goods online to compete with those without a physical presence.

3. Consumer-to-business (C2B)

The consumer-to-business (C2B) is another e-commerce model. As the name suggests, the relationship is flipped and involves a business looking to purchase products from a consumer. Freelancers usually fall into this category, as do independent photographers who provide stock photos and footage for firms to use on their promotional material.  

4. Direct-to-consumer (D2C)

A D2C model involves an e-commerce business creating and designing its products in-house and selling directly to customers, without intermediaries like Amazon. This approach eliminates the need for external manufacturers or marketplaces, allowing the business to control the entire process.

Warby Parker is an excellent example. Starting in 2010, they designed and sold glasses directly through their website, reducing overhead costs and building direct relationships with customers. This model often results in lower costs and stronger customer connections.

5. Consumer-to-consumer (C2C) 

Similar to how you would have once found individuals selling their wares down at the local market, C2C e-commerce models involve a consumer selling their products to another individual via an online marketplace such as Flippa or eBay.

Individuals who design and create products and sell them directly via their website or a facilitator such as Etsy also use this model. Additionally, entrepreneurs looking to set up lifestyle businesses to strike a better work-life balance also adopt a C2C model.

How To Start an E-commerce Business

Starting an online business can be tricky, especially if you’ve never done it. Many considerations are involved in each stage of building your business, from conception to the moment you begin selling products and making your first online sales. Here are the main stages of starting an online e-commerce business.

Step 1: Identify Your Niche and Products

Suppose you’re at the stage where you believe you want to set up an e-commerce business rather than an affiliate marketing venture, for example. 

You may have dreams of selling your customizable scented candles to the masses. In that case, chances are you will be looking to utilize a D2C or a C2C business model as you are looking to design and create products and sell them directly to consumers. This is the natural starting point when creating your business ideas. 

Your original art pieces are sure to find willing buyers. However, this alone may not be enough to build a successful e-commerce business. Candles are a competitive market. You may love your art pieces, but how can you be sure there is a demand for them?

Step 2: Conduct market and product research

Before selling products, you will need to conduct valuable product and market research to ascertain whether your business idea is viable. Is there a good niche for your product? Is there a market demand?

The product research will help you determine which market sectors you should target, whether your product will likely succeed within those markets, and the level of competition you should expect to face. 

You can use analytics tools such as Google Trends to help determine e-commerce trends and whether your product or targeted niche is on an upwards trajectory. A comparison site such as SimilarWeb (a chrome extension plugin) enables you to spy on your competition and find things like quickly:

• An estimated average of monthly website traffic a site gets.
• The bounce rate.
• The average visit duration.
• A percentage breakdown of the top 5 countries that visit a specific website.
• A traffic source breakdown in percentages (search, direct, email, social, referrals, display ads).

Image credit: PetEdge

You can also use keyword research tools like Ahrefs or Semrush to determine the monthly search traffic demand and keyword competitiveness. In the example below, you’ll notice that dog grooming tables receive around 6,600 searches per month, and Semrush gives this particular keyword a keyword difficulty score of 57. This grade shows how competitive an individual keyword is. 

Image credit: SEMRush

It’s important to point out that this keyword should not be the only deciding factor. Other related keywords, such as “dog grooming equipment” or “dog grooming tools,” will leave plenty of room for business expansion by offering pet clothing, dog accessories, dog food, etc.

Image credit: SEMRush

Step 3: Establish Your Brand and Business Plan

A business plan is an invaluable tool for any prospective business. It enables you to set out expectations, timelines, budgets, and priorities for the business. Potential investors and partners will expect to see a detailed plan before proceeding with any investment. 

Image credit: Business Model Analyst

You will need to make sure that the name you choose for your business is also available as a domain name online. While businesses have changed names further down the line, it can be an awkward and time-consuming process, so try and nail it from the beginning. 

You could consider using a business name generator or suffixes, prefixes, adverbs, or a portmanteau.

Step 4: Handle Logistics and Supply Chain

Another primary consideration is how you will get the products you sell to your buyers. Depending on what type of product or service you have chosen to offer, there are several avenues and types of e-commerce that you may wish to pursue:

• Service-based: You may choose not to sell a physical product but rather a service, which will likely follow a D2C or C2B model. Freelancers often offer a consultation with prospective customers to determine what a customer requires before agreeing to take on any work.
• Digital products: Create and sell digital products such as ebooks or virtual courses rather than physical products. An essential advantage of this form of e-commerce is that there are no shipping costs to account for, as your customers will be able to receive the product instantly.
• Physical goods: If you want to sell and market your creations via your e-commerce website, you will need to consider shipping costs and fees. This pursuit may be more of a labor of love and will be difficult to scale without additional e-commerce resources.  
• Dropshipping: This method of selling can almost be considered a hybrid of physical and digital logistics. You, as the retailer, sell and market products, and the supplier handles the shipping. The massive benefit of this type of e-commerce is that there is no need to worry about inventory management. The supplier handles that aspect.

Step 5: Build and Optimize Your E-commerce Website

Often the difference between a sale and a near miss; a functional, easy-to-use e-commerce website is vital for the success of an e-commerce business. Optimize your product pages to convince customers to add to their shopping cart or choose to use your service. Customers now often expect a satisfactory shopping experience rather than just a quick purchase.

If you are selling physical goods, clear and prominent images should take center stage, showing them in the best possible light. If you are offering a service, you should include a compelling portfolio of previous work and customer testimonials to help persuade the customer to proceed.

Image credit: Flippa

Your product page has only one purpose; convert a possible sale into a sale. Product descriptions should maximize search engine optimization (SEO) potential by using keywords and internal links to other website areas (blog posts, reviews) that benefit visitors. Make sure a clear call to action (CTA) is on all sales pages.

Image credit: Calvin Klein

In this example, Calvin Klein has a very noticeable “add to bag” button that stands out on the right. You’ll also notice that Calvin Klein offers flexible payments using Kiama or Afterpay and free shipping for orders over $49.

Step 6: Market and Promote Your Business

Your products are in place. Your website is fully optimized, and your product pages are sure to catch a customer’s attention. Now you need to make sure the right people are seeing your business.

Social media is now an invaluable tool across all walks of life. When leveraged successfully, it can significantly drive traffic and sales for e-commerce businesses of all sizes. The trouble is that everyone is looking to use these platforms due to their prevalence and power. So, how can you ensure your business stands out in such a crowded field?

Step 7: Implement a Social Marketing Strategy

To make the most out of social media marketing, you will need to arm yourself with several marketing strategies to give yourself the best possible chance of driving traffic and increasing revenue.

Start by setting a series of goals you want to achieve through social marketing. Creating demand for your products is a given, but are you also looking to build a loyal customer base? Do you wish to increase your brand awareness and any messaging or values? Are you hoping to network and collaborate with similar sites to create mutually exclusive partnerships?

Image credit: Hubspot

You should also be aware of who you’re hoping to target. Every product will appeal to specific demographics more than others. Knowing who your ideal customer is and where you might find them is essential. Facebook groups, Twitter, and Instagram hashtags are good places to start. 

Image credit: Wordtracker

Your ideal customer (or buyer persona) may change over time, but having someone to target from the outset can give your business an initial direction.

Step 8: Track Metrics and KPIs

Analytics has become essential when determining how successful a business is in terms of cold hard facts and figures. Key performance indicators (KPIs) will give a snapshot of progress and success, and metrics can often highlight trends to inform future marketing decisions.

Some key metrics you should pay close attention to are:

• Website traffic: An account of how many people visit your website. When used in conjunction with marketing campaigns, you can determine whether these have had a meaningful impact on increasing traffic to your website.
• Bounce rate: The percentage of people who leave your website after visiting just one page. A high bounce rate often means that your links and promotional material may be effective, but something on your website is amiss or not appealing.
• Visitor conversion rate: The percentage of visitors who follow through to purchase. Low conversion and high bounce rate are often correlated and point to problems the customer experiences when on your website.
• Mobile users: A big reason e-commerce is so powerful is that customers no longer have to sit at their desks to shop online. Work hard to ensure that your website is fully optimized for mobile users, as they will likely make up a large percentage of your website visitors.
• Email engagement: An email list is no good if the subscriber does not engage with the content within emails or ignores them altogether. Email engagement helps determine how effective your newsletters and product updates are and whether they need modifying for higher engagement.

Step 9: Create Consistent Content Marketing

Suppose your social marketing strategy aims to build a loyal customer base. In that case, you will need content on your website or social media channels that will entice them to give you a chance and stick around long term for future products or additional service features.

There are several types of content available for you to try. Blog posts are often an effective way to demonstrate your expertise in the area of your niche. Video content can be a fun way for your customers to get to know the person behind the product and can help foster more meaningful relationships with your customer base.

Image credit: Flippa

Instagram can be a highly impactful way of delivering content. Aesthetically pleasing photos of your products or portfolio examples (if you provide creative services) will give potential customers the impression that you treat your branding seriously. These are often quicker to produce than videos or blog posts but can be as effective in driving traffics through backlinks via referral traffic.

Whatever type of content you choose to offer, consistency is critical. If you post a compelling piece of content that draws attention to your product but then wait a month before posting again, all momentum will have vanished. Devise a schedule that you can stick with and utilize marketing automation such as Buffer or Hootsuite to keep on top of things.

Always keep in mind that the purpose of each piece of content is to result in a sale. Make sure your call to action (CTA) is clear and concise and that what you share provides consistent value to the customer.

Summing up

There is no question that e-commerce is now a permanent part of daily life for anyone with access to the internet. Products you would have once had to visit a brick-and-mortar store can now be purchased with just the click of a button. Thanks to software-as-a-service options and subscription models, it has never been easier for e-commerce businesses to start.

Success in e-commerce requires a strategic approach, consistent effort, and adaptability. By focusing on a seamless shopping experience, leveraging social media, and analyzing performance metrics, entrepreneurs can build and grow thriving e-commerce businesses.

Flippa is the market leader for business owners in buying and selling all forms of online business, including e-commerce sites and companies. Use Flippa’s online free website valuation calculator, browse e-commerce websites for sale, app, and domains, list your online business for sale or learn more about how we value e-commerce websites.

FAQs

What is an AB test?

An AB test, also known as a multivariate test, tests two different variations (e.g., an ad, landing page copy, button color, etc.) to determine which variation has a higher conversion rate.

What is a website builder?

A website builder is software that allows you to create a website without code easily. Some examples are Shopify, Wix, WordPress, Squarespace, and Weebly.

What is a target market?

A target market is a group of people your business’s product or service targets. Often this will be further segmented into specific demographics, such as gender, age, income, location, and interests.

What is Amazon FBA?

Amazon FBA stands for “fulfillment by Amazon” and is a service offered by Amazon that allows sellers to outsource their customer’s shipping allowing Amazon to handle the end-to-end process.

How can influencer marketing help my e-commerce business?

Influencer marketing can skyrocket sales for e-commerce businesses using the right influencers. Not every influencer will drive a positive ROI, so it is critical to research and ensure they have a following that aligns with your brand.

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