Starting an ecommerce business is different from other types. There are unique concerns and potential difficulties involved compared to other digital business types.
While some websites make money from referral sales known as affiliate marketing or display advertising, ecommerce is a different animal. The products are owned by your business, compared to affiliate marketing where it’s a hands-off approach with no capital required for stock. However, the good news is that the potential profit margins are higher than either dropshipping or affiliate marketing.
Here are 5 tips to get started with ecommerce.
1. Understand the Differences Between Dropshipping and Ecommerce
Many people looking get confused between dropshipping and ecommerce. Often, they believe that they’re the same or almost identical.
To be clear, dropshipping is where a dropshipping company owns and stocks a product in their warehouse and will dispatch it when a customer’s order is received. The product usually doesn’t have your brand and is only one of many products sold by their business.
Margins are slim with dropshipping because the company participates so much in the process. After paying for pay-per-click (PPC) advertising, there’s often not much left.
Ecommerce is where you own the product. It may be shipped from your warehouse or stored in a third-party center, like Amazon. With Amazon, their warehouse stocks the product, and will dispatch it as needed. There are layers of fees associated with this, but the larger selling platforms provide plenty of opportunities to generate sales.
2. Decide Early Whether to Partner with Amazon or Another Site
Amazon is the preeminent ecommerce site. It has by far the highest traffic. However, it also does extremely well in converting visitors into buyers in a multitude of ways. Also, setting up a seller account is not that difficult to do and there’s a Seller’s app to keep you updated.
Working with another ecommerce platform may offer lower costs. With that said, fewer customers will already have accounts elsewhere. Prime membership including free shipping is also a major reason for customers to stick with Amazon. Customers trust Amazon and that helps increase their conversion rate for sales.
Furthermore, more paid traffic generation will be required with another platform because they bring fewer potential customers to the table.
3. Confirm There’s a Market for Your Product(s)
Producing a product (or getting it made for you), shipping it to a warehouse, and then hoping it sells is a bad plan. Instead, research whether people are already purchasing this type of product or are looking to do so.
While you can create a product and promote it to find your target customers, it’s far less risky to sell something where people are already purchasing an inferior version of it already. Then you can release a better version.
4. Get Setup Correctly
Register the business and establish your brand name. Consider applying to trademark the name and logo too.
Ensure you have the correct business licenses for your type of business. Look at the Small Business Association website for more information.
Also, don’t forget to arrange to get an Employer Identification Number (EIN) for the business.
5. Know Why Your Product Will Sell
It’s difficult to avoid being overly optimistic about your product and believe it’s a category beater. However, it’s necessary to get a bit of distance to see things dispassionately.
Selling on popular ecommerce platforms can drum up steady sales but it also gets you in front of greater competition. So, if your “widget” is similar to several others and lacks one or more unique selling points, then you’ll be fighting on price alone. And that’s a race to the bottom.
Know why customers purchase your products instead of alternatives. Find ways to prove/disprove the theory before throwing good money at production.
Ecommerce requires deeper pockets than other online sales such as affiliate marketing or dropshipping. However, when done right, the potential upside is higher and more sustainable.