Good news: Starting an ecommerce business doesn’t have to break the bank. But entrepreneurs should be warned it typically still requires some money to get an online retail store off the ground, even though it is possible to make cost-effective choices along the way.
As the old saying goes, “It takes money to make money.” At least the costs associated with starting an ecommerce operation nowadays tend to be much less than the start-up costs for a brick-and-mortar retail store because your storefront need only be online.
Here’s more on what to expect in terms of start-up costs when you launch an ecommerce business.
Expect These 5 Ecommerce Start-Up Costs
No two ecommerce stores are exactly the same, and there are a few different routes you can take to open a store. However, there are a handful of near-universal ecommerce start-up costs of which entrepreneurs should be aware so they can factor them into their budgets.
Getting a seller’s permit
To make your ecommerce operation legal, you may need to get seller’s permits from your state of residence — at least if you live in one of the 45 U.S. states with sales tax. As The Motley Fool explains, businesses with state sales of 200 or more per year or with revenue of $100,000 or more annually need to register. Some states carry even stricter requirements, so be sure to do your due diligence and make sure you’re operating within the law.
Registering a domain name
You will need to either buy the rights to use a domain name or otherwise set up a ready-made ecommerce store using a platform. Both options will charge a varying fee, although it’s usually reasonable when you consider the potential return on investment successful ecommerce stores can experience.
Developing an ecommerce website
Again, you will either need to develop a custom ecommerce website — on your own or by paying a designer — or else pay a fee to utilize a plug-and-play template through your ecommerce platform of choice. Both options require an investment.
Buying products to sell
As Yahoo Small Business outlines, a major part of figuring out how to start an ecommerce business in a cost-effective manner boils down to sourcing. Where are you going to get your products? How much demand is there for these products on the market and at what price are they selling? Perhaps nowhere is buying low and selling high as important as when it comes to ecommerce margins.
One strategy entrepreneurs often use to start an ecommerce business without investing thousands of dollars up-front on buying products — a risky and expensive move — is drop-shipping. This involves selling products through your own ecommerce website but using a third-party supplier to actually manufacture and ship the products for a fee per product. This absolves your company of needing to buy large quantities of stock ahead of time or handling the shipping logistics.
Marketing your products and brand
Last but not least, you must budget a healthy amount for marketing — particularly social media and email campaigns. It’s unrealistic to expect customers to find you on their own without you working to expand your brand’s digital presence across channels.
With lots of research and a pinch of creativity, it is absolutely possible to minimize your ecommerce start-up costs. It doesn’t have to cost tens of thousands of dollars just to launch an online store these days, so this need not be a barrier to new entrepreneurs entering the marketplace. However, it’s not feasible to expect to start an ecommerce store for $0, either. There are a few non-negotiable front-end costs that every successful ecommerce store needs to function.
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