With world-wide ecommerce sales hitting $5.2 trillion in 2021 – and expected to grow by 56% over the next few years, with a projection of sales reaching $8.1 trillion by 2026 according to Statista– ecommerce is definitely a booming sector.
With the average gross profit margin of 41.54% and an average net profit of 10%, and new ecommerce business making over $63 000 in monthly revenue on average – eCommerce is a lucrative business to venture into.
Building A Successful Ecommerce Business
Like it is with any business, it takes many years to be an overnight success. You also need to get the correct nuts and bolts to piece together a viable money making machine in the form of an ecommerce venture.
This post will guide you on how to have a successful ecommerce business.
1. Define Your Niche
Defining your niche is an important part of your ecommerce business ideation.
While Health & Wellness, Home Decor, Fashion & Clothing, and Beauty & Cosmetics are some of the top performing niches on the leading ecommerce platform: Shopify.
The ecommerce industry spans different sectors/niches and sub niches. We have listed some of these below:
- Fashion and apparels
- Electronics gadgets
- Fitness and well products
- Subscription boxes
- Pet supplies
- Book and literature
- Food and beverage
- Outdoor and adventure gear
- Art and photography
- Event planning and supplies
- Automotive supplies, etc- the list is endless.
Don’t despair if you don’t see your niche here. Most likely, yours too can work for ecommerce.
2. Conduct Market Research
How to conduct a market Research for an eCommerce Business
Identifying your niche involves conducting market research to try and answer a number of questions about the business you want to run.
Define your target audience: Answer questions such as: who is your ideal customer? Be clear on their demographics, age, gender, income levels and locations, etc.
Scope the market size and growth prospects: Answer questions such as, is the overall market big enough, what are the growth prospects for the market and the implications on your prospective business? is the market declining or stable. What factors influence the growth and/or contraction of the market?
Analyse the Competition: Answer questions such as, who are the dominant competitors, what would be your strengths and weaknesses, how are your competitors positioned in the market and what gaps can you exploit?
Explore Trends and Industry Insights: Understand current industry insights, read industry reports, make use of Google trends, and other trend tools, reports and resources, – try to map out emerging innovations that are impacting your industry, factor-in how industry trends align with customer preferences.
Scope Customer Needs and Pain Points: Answer questions such as: what problems do customers in the industry have and how can solve these in a unique way. Understand the dynamics of these needs, are they seasonal or perennial?
Pricing and profitability: Also study pricing and profitability dynamics of the industry. Answer questions related to the price-sensitivity of your target customers. Based on this: what pricing approach will ensure both the profitability and competitiveness of your ecommerce venture?
Distribution Channels: How do customers access the types of products and services you want to offer currently? What distribution channels will be the most viable and effective for your business? Also explore the possibility of collaborations with other businesses in the sector.
Customer Acquisition and Retention: Analyze the common customer acquisition channels in the industry. Make sure you understand the average customer acquisition cost in the industry.
Regulatory and Compliance: What regulations govern your industry and the selling of the products and services you want to sell. What changes in the regulatory dynamics are likely to affect your business.
Marketing and Branding: You need to identify what sort of messaging and branding you will push to get your business in the right places and in the minds of your target customers.
Also consider marketing channels that will yield optimum results for your ecommerce venture. Key to this part is defining your unique selling proposition or your distinctiveness.
3. Consider eCommerce Technology and Platforms
This is another critical aspect of your market research and due diligence. Intentionally plan how to approach ecommerce setup and infrastructure. There are basically three options here:
A) Build an ecommerce website from scratch or a hire a developer to do it – this gives you complete control over the e commerce system and its features – the downside is that development for a system like this will definitely be a long curve as you have to ensure that all important features, functions, shipping and payment integrations are in place.
You also need to ensure that your ecommerce website is sufficiently secure, to protect your store data as well as customer data.
This can be a lot of work that may take away your energy from getting your business started, going and growing. You also need to consider hefty cost implications of going this route in terms of the actual development, maintenance and upgrades.
B) Making use of open Source ecommerce platforms: The advantage with this option is that these solutions are free and come with basically all standard ecommerce features you will need for your business. Examples are: Magento, WooCommerce, OpenCart, Zen Cart, Drupal Commerce, Saleo, etc.
The downsides here include, the cost of customisations, the problem of overkill – most of these platforms have features you will not need as they are not tailored for your unique ecommerce needs.
C) Leverage Robust eCommerce platforms such as Shopify, BigCommerce, Wix, Squarespace, etc. The reason we recommend this approach is that when you settle for platforms like Shopify (which is a leading ecommerce platform with over 25% market share globally in ecommerce platforming), from a technological point of view, you have a great deal of what it takes to have a successful ecommerce business taken care of – off the bat.
Platforms like Shopify have a solid set of features and functions, security mechanisms, payment gateway options (Shopify has over 100 of these including Shopify Payments which has zero transaction fees), a vast collection of free and paid themes, etc.
The good part with platforms like Shopify and BigCommerce is that if the default settings don’t suffice for your business, these platforms have vast apps and plugins ecosystems where you can install additional plugins and apps to extend and enhance features like SEO, email marketing, reports and analytics, social media integration, etc.
If you exercise due diligence in the steps to conduct a market research outlined above you will be in a great position to start the groundwork and to write a comprehensive business plan for launching a successful ecommerce business.
The steps outlined above must be followed up by writing a comprehensive ecommerce business plan.
4. Write Your ecommerce Business Plan
Many entrepreneurs consider their business ideas all figured out and well laid out in their minds – and therefore neglect the importance of putting together a thoroughly prepared business plan for their ecommerce venture.
Before we look at the different components that must go into an ecommerce business plan, we need to mention a few important benefits of putting your business ideas down on the proverbial “paper”.
Help you to stay on track: A business plan sets the parameters of your business strategy and execution, it spells out what to do to achieve specific goals.
Operational Plan: A business plan becomes a roadmap of the steps you need to take to bring your business to life. This way the business plan becomes your operation plan.
Monitoring and Evaluation: Business plan becomes your important tool for monitoring and evaluation.
Financial Projections and Plan: The business plan also articulates your marketing strategy as well as it helps you to put financials into perspectives: costs, revenue and profit
Note: A well written business plan can be used to solicit funding for your business.
How to Structure An Ecommerce Business Plan
There are many different ways to write a business plan so nothing is cast in stone really. However, your ecommerce business plan should include the following:
Executive Summary: This should capture your e-commerce business, its mission as well as vision. You should also outline your company history, current status as well as future goals. If your business has a history, make sure you highlight your key achievements and milestones.
Description of your business: This aspect must be focused on detailing the nature of your ecommerce business. Outline the products/services you will be offering as well as your Unique Selling Point (USP).
Your business plan must indicate what your target market is and also outline customer demographics.
Market Analysis: This is an important aspect of preparing to start a successful ecommerce business. This is where you present in a structured way, insights you gathered from the market research exercise.
Present the data and insights on industry trends, competition landscape as well as customer behaviour. Clearly define your target market and demonstrate that you clearly understand their needs sufficiently to address them satisfactorily.
Strategic planning: Streamline strategies for market entry, differentiation, growth and scaling. The strategic planning component will also guide your decision making as well as resource allocation in implementing the business plan.
Pricing Strategy: Spell out a profitable pricing strategy and how you intend to incentivise preference for your products over those of your competition (from a pricing point of view).
Financial Planning: This part must include your financial forecasts and budget. This will guide your resource allocation, financial goal setting as well as back up funding proposals if you need to solicit funding.
A business plan is also a financial plan, it helps you quantify the financial implications of the business (expenses, revenue, profit).
Operational Efficiency: Your business plan must spell out the day to day operations of your business. A structured execution plan is crucial for the success of your ecommerce business.
Business Case for Investors: If you are going the funding route, your business plan presents a solid business case and credible business proposition. The bottom line here is to demonstrate a data driven and well researched viable business model.
Measurable Objectives: The potency of monitoring and evaluation in an ecommerce business plan lies in the clear and measurable objectives and key performance indicators (KPIs). This component must include a rationale for performance evaluation, adaptations and adjustments as needed.
As we mentioned earlier, a business format is not cast in stone, feel free to add any other components you may feel are necessary for your case. You may also want to spell out an implementation alignment plan which communicates the goals and expectations for all employees or members of the team.
5. Build Your Ecommerce Website
Having followed all the steps outlined, you must be good to get going with your business. Once you have gathered all the resources required, you need to set up a user friendly and secure digital store as outlined above.
Do your due diligence in sourcing quality products from reputable suppliers. Make use of high quality images when setting up products in your ecommerce store.
Write clear and accurate product titles and descriptions and organise your products into easy to search, navigate and browse catalogues.
If you have settled for an ecommerce platform like Shopify and BigCommerce, choose a theme that aligns with your industry and product types, customize the theme and align it with your brand. Configure payment gateways as well as shipping options within your ecommerce platform admin.
Final Thoughts
Remember that setting an ecommerce website is just one part of the puzzle. Marketing is a great deal of what will vault your ecommerce business to success.
Execute your marketing strategy tenaciously. Leverage the power of social media marketing, advertising as well as integration (in the form of pushing your products to social platforms like Facebook, Instagram, etc).
As your business begins to pick up momentum, keep tabs on your reportage data and analytics so you can map out what product lines are performing best so you can find ways to invest more in these and also come with mechanisms either to eliminate or boost poorly performing product lines.
Consistently leverage data to keep up with trends so as to grow and scale your ecommerce business.
Try and get started with taking at least 2-3 important steps a day, remember the best way to start is to start.
All the best in your journey!
