When I started my first site, I was a hungry and novice entrepreneur (a.k.a a Wantrepreneur). I shelled out more than $40,000 of my hard earned cash developing an idea that I believed will work. I made all the mistakes there are to make such as attempting to implement all the features I assumed the users will need.
In the end of the day, 90% of the features are useless, and there really is no demand for my app.
Long story short, my first entrepreneurial endeavor became my $40,000 mistake.
To help you avoid the same (expensive) mistakes I’ve made, I will share with you the step-by-step methodology to start a successful eCommerce store.
Step #1 – Find a profitable niche
Sell what you like and what you know: When you are choosing a product, it’s important to pick something you know and are passionate about. Entrepreneurship already has a high learning curve, and you don’t want to make things even harder.
First, list all the things you like to buy and use in hobbies and daily activities.
For example: If you’re into winter sports and like snowboarding, you might start an eCommerce shop in this niche. You can sell everything from boards, boots, goggles, helmets, gloves, jackets and other things related to snowboarding.
Don’t forget that Tony Hawk started Birdhouse, his skateboarding company, because of his love for the sport. You can do the same based on what you like to do.
To get started, here are some categories you can look into:
- Consumer electronics: Notebooks, printers, smartphones, TVs, digital cameras, video game consoles, etc.
- Books. Both digital and printed.
- Clothing and apparel: T-shirts, jeans, suits, dresses, shoes, watches, jewelry, etc.
- Household goods: Air conditioners, furniture, washer, dryers, coffee machines, dishes, kitchen utensils, etc.
- Office supplies: Paper clips, post-it notes, stables, cash registers, photocopiers, pens, paper, etc.
- Sporting goods: Football, basketball, flying discs, surfing boards, skates, skis, cricket spikes, nets for tennis, golf clubs, protective equipment, gym equipment, etc.
- Pet supplies: Food, toys, appeal, treats, litter, beds, aquariums, cleaners, cages, grooming, etc.
- Tools: Knives, camping gear, etc.
What do your friends and peers complain about? If you know people who occasionally complain about something, maybe they need a solution that can be delivered as a product or service.
Even the slightest dissatisfaction with current products or distributors is a sign that there is a need for something better.
It is often a good idea to further investigate and ask people questions like:
- What are the things you’d like to buy online right now?
- What are your biggest challenges at the moment [in that niche]?
- Is there something you can buy that will help you out in your situation?
- What are the hardest products for you to order and why?
- Is there something your current provider is not offering you? What is lacking in their service?
The answers to these questions could give you a good idea of what people are looking to buy.
What are people complaining about on social media channels? Review posts and ask others on Facebook & LinkedIn groups, Google+ communities, Reddit, Quora, Forums, etc.
Your end goal here must be to find out the biggest problem people have in your niche, so you’ll know what to offer them.
Imagine you have a neighbor who often complains about his cat peeing on the floor inside the house. To solve his problem, he might be very interested in buying things like a litter that kills the bad smell or lessons to litter box train the cat.
Check out the top selling items on Amazon and eBay: One of the best ways to further investigate your niche is to simply review the top selling lists on Amazon or eBay. By doing so, you will learn exactly what people are already buying so you don’t need to guess if there is a demand or not for your product.
Just go to Amazon Best Sellers and select your category of desired products from the bar on the left.
Let’s say you want to further investigate Home & Kitchen -> Kitchen & Dinning. When you visit this page, you’ll see the following:
It looks like the most popular product in this section is “Thermometer Instant-read Digital Temperature Gun with Laser Sight and Backlit LCD”. Who would have thought?
Here is how to find the top selling items on eBay.
First, log into your eBay account or sign up for one if you don’t have an account.
Then you need to scroll down to the bottom of the homepage and you’ll see 2 links: Top Products and What’s Popular.
Top Products is visually a more appealing section; however, What’s Popular contains links to all categories and subcategories. So choose the one that suits you best.
For example: When you visit Top Products, you’ll see categories represented with a picture and links to subcategories.
If you’re interested in building an eCommerce store for cameras, it makes sense to check out “Digital cameras” to see what people are buying the most.
As you can see, top selling brands are Canon and Nikon. By making this search, you’ll know which products to offer on your eCommerce store as well.
Read the news: Reading online and industry specific print media is a great way to uncover unmet needs and products already in demand.
When you’re looking for ideas in your niche, pay attention to:
- New product releases
- Industry reports
- Main challenges for consumers
PayPal: A little known fact is that you can also use PayPal for your online research and find what people are buying the most.
To do this, go to the bottom of the Homepage and click Shop. This will lead you to a list of all eCommerce sites that use it as a payment and then you can select the desired category.
For example: Let’s say we’re into Fashion. By choosing this product category, you’ll see all eCommerce sites ranked by sales volume.
Here we can further explore the top shops in this category by visiting their websites.
Read the product reviews: Product reviews will show you where you can compete in this niche.
When reading reviews, cherry pick the bad, but constructive ones.
You can do this in Amazon by clicking on the 3-star (2-star or 1-star) reviews, then sort them by “Most Helpful First.”
In the screen shot above, you can see the common complaint is that the Iphone 6 case is thin and low pricing, but it doesn’t do a good job protecting the phone.
You can compete with this product by creating a thin and low price case that actually protects the phone.
Step #2 – Analyze the market opportunity
Once you find a potential product with demand, you need to figure out whether there is big enough market in the long term? You don’t want to start your eCommerce site only to realize there are simply not enough people interested in what you’re selling.
Here are a few ways to determine the size of the market and its profitability:
Use Keyword Planner Tool: High volume of searches for your product keywords on Google usually means high demand and a big market. If there are several thousand avg. monthly searches per month, you’ll know you’re on the right track.
For example: If you’re looking to sell digital cameras in UK, this is what the Keyword Planner tool will show you:
You might search for specific brands like GoPro and see there are 20 times more searches for that:
You can further investigate by checking specific products or series:
As you can see, there are a lot of searches for GoPro Hero 3, which means there are tons of people willing to buy it. If you‘re looking to build an eCommerce store for digital cameras, this is a product you‘d definitely want to include.
Use Facebook ads manager: Very similar to the Google Keyword planner tool, you can use the Facebook ads manager to determine the size of the prospective audience related to certain products.
To do this, simply create a new ad. Choose either Clicks to Website or Page Likes from the following options.
Select your link or Facebook page and continue. Scroll down to “Audience”. Choose your location and list your products based on the specific niche. Then Facebook will automatically display your potential reach, or market size.
In this example we once again look for people interested in “digital cameras“ and “GoPro“ who live in the UK. Clearly, the potential reach shows us big market opportunity: 820,000 people interested in these products.
Industry reports: From these you can learn which products are highest in demand and get an idea of how to position yourself.
The report Global Consumer Electronics Market 2014-2018 reveals information about key market drivers, challenges, trends, opportunities, expected market size in 2018, etc.
The information in these reports is very structured, which will save you time when putting all the different pieces of the puzzle together. The downside is that sometimes you’ll have to pay for them.
Google Trends: This helpful tool will show how the average search volume for product keywords has changed over time. By looking at this data, you can analyze if your prospective market is shrinking, staying steady or growing.
If we once again search for GoPro, we’ll notice a rapid advance of search volumes from 2009 till 2014. It looks like the market is booming and will continue to grow at a rapid speed in the following years.
Check your competition: What is the competition like for the products you’d like to sell on your eCommerce store?
If there is none, think twice before you choose this niche. There is probably a reason no one wants to enter it: it’s not profitable enough or is difficult to deliver. On the other hand, if there is already some competition, then someone is making money.
For example: when you search in Google.co.uk for “GoPro”, you‘ll see there are already some eCommerce stores selling these products.
Remember: don‘t be afraid of competition in the market. You can always find a way to position yourself in a way to stand out from the crowd.
Step #3 – Define your target customers
Don’t try to sell to just anybody. Most people are not interested in your products, and they will never buy from you (even if they have the money).
Instead, focus on finding the people who actually need your product, .a.k.a. your buyer personas.
Develop buyer personas for your target customers: These are semi-fictional representations of your ideal customer. They allow you to narrow your niche and the specific people who will want to buy from you so you can focus only on them.
When creating buyer personas you should ask yourself the following:
What are their demographics? (Age, gender, location of residence, etc.)
What are their behavior patterns? (How do they act in the environment in different situations?)
What are their core motivations and goals?
What are their biggest challenges/issues in your niche?
Why would they want to buy your products? What can they accomplish with them?
For example: If you’re selling GoPro cameras, your buyer persona might look something like this.
Adventurous, 15-25 old man who likes to film himself snowboarding. His core motivations are to promote himself on YouTube in order to find more sponsors and advance his sports career. He wants to buy GoPro to shoot from extreme angles, which is something he can’t afford to do with other types of cameras.
You might have several more buyer personas: like a stuntman or a diver, all with different goals and motivations for buying your products.
Estimate the lifetime value of a customer: The second thing you should do is to understand how much money you can earn from a single customer over a period of time. This will allow you to predict in advance how profitable your company will be long-term.
For example: Imagine you have an eCommerce store for pets and someone decides to buy a Labrador from you. Here is a list of the things he’ll need to pay for:
- Initial cost of the Labrador: $700 (or $0 if you adopt, which we support.)
- Collar, leash and ID tag: $35
- Food per year: $3,000
- Toys and treats: $200
- Kennel or dog bed: $100
In the first year, this customer will bring you $4,035 and at least $3,335 after that. If he stays with you for 5 years, his lifetime value is $17,375.
Wow! that’s a lot of money people are spending on their dogs.
Step #4 – Validate your idea
Finding a product and a market is great.
But how would you know if people will actually give you money for your product?
You don’t need people to tell you that your products are great and funky – you need them to open their wallets. If they’re not willing to do that for you, you’ll need to find out why.
- Your price range maybe too high.
- You might be competing with a more refined and better version of your product.
- You could be selling to the wrong people.
- There simply isn’t a demand for your product.
To find out the reason, simple ask
What’s preventing you from buying my product?
To save you unnecessary use of time, money, and headaches, you must refine your product or find a new niche that actually sells.
If you’re going to fail, then fail fast, so you can move on.
Here are some ways you can use to validate your idea:
Sell your products in person: You don’t need a website for your first few customers. Connect with your target audience and sell to them directly. Then if you find out that there are people interested in buying your products, it makes sense to build an eCommerce site and to upscale your business.
How do you find your target audience in person?
One way to meet potential customers is to join a Meetup group. You can literally find many different hobbyists with different interests.
If you’re selling pet products, here are all the dog meetups in the world.
If you’re selling campaign gears, here are all the camping meetups in the world.
There really shouldn’t be any excuses not to do this.
Sell your products on Amazon or eBay: List your products on already-established marketplaces. eBay and Amazon will bring traffic to items, so the only things that you need to worry about are the demand and your rankings.
Click here to learn how to start selling on eBay, and here for Amazon.
Launch a crowdfunding campaign: This is one of the best ways to prove your business idea and to get traction fast. Unfortunately, it only works if you’re selling your own products. If this is the case, go to Kickstarter or IndieGoGo and create your campaign.
A great example here is Pebble, the amazing smart watch company, which managed to raise $10M+ from its Kickstarter campaign.
Build landing-page offers: Pick several products and build customized landing pages for them. Then drive traffic with PPC ads (Facebook ads or Adwords) and count your sales.
You can use this method to ask people to buy straight away, or to pre-sign for your products before your official launch. It would be a good idea to test both ways.
You don’t even need a developer to build landing pages. Just sign up for an Unbounceaccount, and you can create them with the drag-and-drop builder within minutes.
Set up a test store: The easiest way to do this is to sign up for a 14-day free trial at Shopify. Choose a basic free template, list some products, and drive PPC traffic. If you make sales before your trial expires, then there is a market opportunity for your business idea.
In general you can validate your idea for a few days up to a week or two, depending on your market and response time. Be sure to do this properly before moving to the next step. If you don’t make any sales in advance, consider finding another business idea.
Step #5 – Position your brand and product
The internet is full of products to choose from and most of them look the same. If you don’t find a way to differentiate yourself from the rest of the market, you’re destined to fail.
Don’t compete with others: People remember no more than 7 companies from the same niche category and usually the market leader is first in their mind.
It’s smart to create a new niche category where you can be first in rather than competing with numerous existing companies in a brand category. You do this by positioning.
How to position yourself in a new category: Start by asking yourself what aspect of your customer’s need is critically important to them. Is it:
- Specific results
Whatever it is, base your eCommerce category on this key need that is currently unmet.
How to niche your category? eBay was not the first eCommerce site. It launched after Amazon but is the first to allow independent people or companies to sell products on auction. Zappos was also not the first eCommerce site. There was already Amazon and eBay, but it was the first to introduce online shopping for shoes.
You can transform each niche into a new one by adding a new perspective, such as shoes for the urban man or busy woman. It’s important to define the product category and position yourself as the number one choice.
The concept of positioning was first introduced in the book Positioning – The Battle for Your Mind by Jack Trout, and we highly suggest reading it if you’re serious about building a successful eCommerce business.
Products: The next obvious step is to consider some physical aspects of your products that will inevitably affect your eCommerce business.
Weight and size: Bigger and heavier products are usually harder and more expensive to deliver. If you’re offering gym equipment, spend some serious time considering how you’re going to deal with the shipping.
Fragility: If it’s easy for your products to break during delivery, you’ll have lots of turnovers and this will result in a bad reputation for your company. The last thing you want is your customers to receive broken porcelain dishes.
Seasonality: Some products are only sold around Christmas or in the summer. It might be difficult to build a profitable, long-term business around them. If you’re thinking of starting an eCommerce store for swimming suits, consider what you’re going to sell during the winter.
Availability: Consider what would happen if your distributor decided to stop supplying you with products. Can you order from an alternative? It’s always a good idea to have 2 or more options.
Restrictions & regulations: There might be some laws or regulations you need to be aware of in any market. Some products might be prohibited or allowed only in certain situations. Consult with a lawyer to be sure.
Shipping costs: Most people expect free shipping nowadays. You should calculate the price of your products with this in mind so you don’t have to charge an additional shipping fee.
Step #6 – How to price your product
One of the hardest things to learn in business is how to price your products properly. If your prices too low and you’ll make no profits, if prices are too high and you’ll lose revenue.
To figure out the right price, follow these simple steps:
1. Calculate your costs: Don’t sell your products for less than what it costs you to deliver them. Summarize what it costs you to:
- Purchase the products
- Acquire customers
- Deliver the product
- Pay for salaries, office materials, website maintenance, etc.
For example: Let’s imagine you’re selling jeans and you have the following costs: to buy the product $5, to acquire the customer $4, to deliver it $3 and you also spend $2 on other expenses. This means you should not sell these jeans for less than $14 and preferably for more if you want some profit.
2. Check out the prices of your competition: One of the easiest ways to determine how much to charge for certain products is to find out what other websites are charging.
For example: If you’re going to sell shoes on your eCommerce store, go to Zappos and check out the prices.
Keep in mind you can always sell the products for more or less depending on how you position yourself.
3. Use suggested retail price: Most often manufacturers will suggest how to price products for end consumers so you don’t need to think about it. Use this as a starting point and experiment further to see how much your customers are willing to pay.
4. Use keystone pricing: Double what it costs you to purchase the product. That’s the easiest pricing model for eCommerce businesses.
For example: if you bought a pair of glasses for $5, you‘re going to sell it for $10.
5. A/B test your pricing: If you can justify a higher price than your competitors and think you can get away with it, then test the higher pricing with the original pricing. See if you’ll lose lots of sales.
How much are your customers really willing to pay?
Sometimes the retailer price has nothing to do with how much it costs you to buy the products. In certain situations, customers might be willing to pay more for what you’re offering because they simply want it that much.
To learn more about pricing, we suggest you read Your Ultimate E-Commerce Product Pricing Guide.
Step #7 – Technical stuff
Last but not least, you should consider the technical aspects of building an eCommerce business. You can’t start an online business without a website so you should take care of:
Domain name: The unique name that identifies your website. It will usually cost $10-$12 for a .com domain. You can buy one from the following sites:
Content Management System (CMS): A application that provides an user interface to publish, edit and modify your website’s content.
Go sign up Shopify. which provides you with all the tools you need to start selling products online. You can quickly setup a shop.
Hosting: This is the server that stores your website so it can be accessed from all over the world. For an eCommerce site, it’s often required to use at least a vps hosting or dedicated hosting server plan.
Some great hosting providers to choose from:
The price for VPS hosting is around $15.96/month and for dedicated hosting about $139/month. If you choose to use a CMS platform like Shopify, you don’t need to worry about hosting as it is already included in your plan.
Note: You’ll only need hosting if you choose not to use Shopify for some reason.
SSL certificate: People won’t trust you with their credit card details if you don’t secure their data.
You do this by using Secure Sockets Layer or SSL. That way no one can steal your customers’ credit card information, and they can feel safe when buying from your site.
To implement SSL, you need to buy a certificate. You can do so from GeoTrust, and it will cost you around $299. If you’re using Shopify as a platform, you don’t need to purchase a SSL certificate as it is included.
Payment options: The last technical aspect you should think about is how you will get paid. Keep in mind that more payment options increase sales and conversion rates. That’s why it’s smart to offer as many as you can: credit card, PayPal, cash on delivery, etc.
You also need a payment gateway to accept money from your site and transfer it to your bank account.
Here is a list of vendors you can use:
- First data
The downside is these payment gateways charge a commission for each transaction, which will lower your profits (often around 2.9% + 30¢)
If you’re using Shopify, you can use their own payment gateway, in which case you will have a lower transaction fee (between 0.5% and 2% depending of your plan).
Time to take action
Starting a successful eCommerce business might seem like rocket science but it’s not. Follow these steps, research several ideas and choose a niche you believe will have the highest potential. In the end, it doesn’t need to be perfect, just good enough to get you started.
If people are willing to pay for your product, you’ll have years to redefine and improve as you’re building your online empire.
Do you have any additional suggestion on starting a successful eCommerce store?