Selling online can be one of the most achievable small business ideas, considering the minimal requirements in capital and technical skills. Starting your own business is more than just a license registration with your state and local government. Everybody can pay a small fee to register a business. However, like any successful projects, you need to have a good solid plan first. To have a good plan, you need to have the basic knowledge about the business. Selling online requires some technical knowledge of how e-commerce works.
How Selling Online Works
The minimal requirements for selling online are the merchandises to sell (if you are selling tangible goods instead of virtual goods or services), a web store/website to display the merchandises, and obviously ability to accept money. To be able to receive money, you will need a shopping cart as well as means to receive money.
There are 2 different approaches for merchandise sourcing: inventory or dropshipping. The conventional way (keeping inventories) to profit from selling goods is to buy wholesale at discounted prices (including lower shipping costs) and sell at higher retail prices. This however requires some starting capital.
For the inventory approach, you first determine what you would like to sell, based on either your interest and/or some market research. You find manufacturers or trading companies that produce or distribute the merchandises. You make a sample order to check on the quality of the items and trustworthiness of the supplier. You arrange storage space (a warehouse or perhaps your basement). You arrange the goods to be shipped to your location. If you are ordering a large quantity, a loading dock might be required. However, when money is involved, there is always risk, e.g., what if the merchandises do not sell as you expected? I have heard stories when someone tried to give away inventory for free so he didn’t have to keep paying for the warehouse. Ironically, when you do that, people hesitate. They wonder if there is something wrong with the inventory.
Dropshipping, on the other hand, takes away the risk of inventory purchase (and hence warehousing cost, etc.), making it easier to start an online-selling business. Dropshipping, in a nutshell, means a “dropshipper” ships the ordered item(s) to your customer(s) directly. For example, your customer pays you $100 for a watch. You turn around and pay your dropshipper $80, and give them your customer’s shipping info. They send your customer the watch. In this example, you keep the difference, $20, as your profit. With this approach, you don’t buy upfront, you don’t keep inventory, and you don’t even have to do the shipping.
There are pros and cons for either approach. Deciding which way to go is a part of your planning process. After deciding which approach to take, you can now move on to build a web store/website.
Website or Web Store
Instead of renting or owning a brick-and-mortar storefront to display your merchandises, you have an online storefront to showcase the items. For example, you can have a store selling salsa shoes. There are also a few different ways to do this.
You can use some service providers who offer ready-made store templates. These services allow you to build a web store quickly and easily by uploading a product feed. They either charge you a monthly subscription fee or a percentage based transaction fee on any sales you make. Alternatively, you can sign up with some market places such as ebay, amazon, or some smaller, less popular ones such as eCrater, bonanza, etsy, etc. Most of these charge fees based on transactions. Some charge listing fees. Some are completely free (eCrater). An advantage of these web stores or market places is that shipping cart is already made ready for you. The market places can also help you in marketing and advertising.
Building your own website gives you the most freedom and flexibility. You don’t ever have to worry about having your account suspended for whatever reason. There is however more work to be done. This of course also gives you your ultimate business identity. Other than operating your own site, you are “owned” by somebody else.
Running Your Own Website
Just like any other websites, you need a web server to have presence on the Internet. For most cases, you will probably use a web hosting company instead of maintaining your own server. In the beginning, a share hosting is likely sufficient for a small site (containing up to thousands of items). Often with shared hosting, you also get shared SSL which allows you more secure transactions. (You can see the difference in your address bar. The URL starts with “https://” where “s” stands for “secure.”) SSL is required for credit card processing.
The main difference between an e-commerce shopping site and other sites (e.g., information or blog sites) is you need a shopping cart. There are a few well-developed free shopping carts including zen cart, and osCommerce, etc. Basic installation of zen cart can take just a few hours. After that, all you need is to upload your product/data feed using a spreadsheet/text file. Further cosmetic or functional customization (plugins or add-ons) are also available. For example, you can use a lightbox and make your images look more professional. If you are not up for the technical challenge, you can also pay someone to install zen cart for you.
Other than using a zen cart store, you can also build a WordPress (or other content management tool) site, and use the free wooCommerce plugin which also has the shopping cart function. You will need additional plugin to be able to upload your products from a spreadsheet. This approach, however, is not as efficient if you have large amount of items.
As your store grows (either in traffic or number of items for sale), you might need more powerful web servers, for example, VPS or even dedicated servers and SSL certificate for secure transaction.
Receive Money Online
Having a shopping cart on your store allows people to pay you. For you to actually get the money, you need some transaction processors. The most popular ones are Paypal and merchant services. Merchant services allows you to take a credit card directly. (Amazon has their own processor. Google used to have Google checkout.) Unfortunately, they are going to cost you fees. Paypal fees are based on the transaction amount, while merchant services require some monthly fees as well. If you have a sizable total monthly transaction, there shouldn’t be much difference between the different processors. A rule of thumb is you want to provide as many options as possible for your customers to pay.
This article summarizes the fundamental requirements and available options/approaches for selling online. For more detailed explanations and hands-on instructions, please see break-down articles on the site.