How To
17 min read

How to Start an Ecommerce Business in 2022

Nicole Hankey

August 4, 2022

Introduction

Looking for a new way to boost your income? Have a creative idea or hobby you’re thinking about monetizing? Already have a product you want to offer the world? 

If any of this sounds like you, you’re in the right place. 

Launching your own ecommerce business may sound overwhelming, but it doesn’t have to be. We’ve put together this guide to help you get started.

Read on to discover how to start an ecommerce business and get up and running in no time!

What is an ecommerce business?

An ecommerce (electronic commerce) business is a business conducting retail transactions electronically over the internet. 

For example, think of any website you like to shop at, like Amazon or Etsy. Anywhere you shop online is an ecommerce business. 

There are three main categories of ecommerce businesses, depending on who is selling and who is buying. They include:

  • B2B (business-to-business, like Shopify)
  • B2C (business-to-consumer, like Amazon)
  • C2C (consumer-to-consumer, like Etsy)

Even if the term “ecommerce” is new to you, you’re probably already pretty familiar with it. So, why should you start your own ecommerce business?

Most importantly, ecommerce businesses can be insanely profitable! 

In the US, ecommerce sales are projected to pass $1 trillion this year. Meanwhile, global sales will likely reach $5 trillion

While brick-and-mortar stores are still standing, the online shopping trend is only growing. 

Different types of ecommerce businesses

Depending on your product and business goals, you have different options for structuring your ecommerce business. We explore each type below.

Dropshipping

Dropshipping is a $15 billion industry that offers an attractive entry point for beginner entrepreneurs to explore the ecommerce world. 

In this model, the seller acts as a go-between for the supplier and buyer. 

This is a great option for new business owners because dropshippers don’t have to stock their inventory. Instead, they rely on the suppliers to source products, which they only have to pay for once a customer has placed an order. This eliminates any inventory cost and overhead. 

However, supplier costs and the need to offer competitive pricing to customers often results in very low-profit margins.

To stand out in this model, dropshippers need to excel in their: 

  • Store design
  • Store functionality
  • Customer service 

These are the areas where dropshippers can distinguish themselves from the competition and set themselves up for long-term success. 

Private label

Many retailers use the private label ecommerce model, so you might already be familiar with it. 

They partner with manufacturers, but they have total control over the branding and supply chain. Think of store brand grocery products, for instance. 

With this structure, brands can:

  • Build loyal followings
  • React more readily to market trends
  • Not have to rely on suppliers 

For these reasons, private labeling is an attractive option for businesses with already-established brands and significant capital.

The downside to private labeling, however, is that it does take quite a bit of up-front capital to get going. This is because you must order products and inventory from manufacturers and invest in the entire process up-front. 

Also, it can take quite a while for newer brands to build a customer base that will make the profits worthwhile. 

Arbitrage

The arbitrage model can be a little bit sketchy, as it’s essentially reselling.

In this model, sellers purchase products from other retailers, then resell them at high prices on sites like Amazon and Ebay. The concept is simple enough, but it can be risky.

Many brands restrict selling to authorized parties, and if you’re not one, then a platform like Amazon could freeze your account (and thereby your business). 

It’s also difficult to make this model very profitable since most people will realize they can purchase the same products for lower prices at the original retailers. 

However, one trick is to buy items on sale, then resell them at the normal sticker price. This way you can increase your profit margin without turning off potential customers. 

Riskiness aside, this approach can be worth it, depending on your chosen niche. People pay for convenience, so if you choose your products and price points carefully, you could successfully use the arbitrage structure. 

Print on demand

The print-on-demand model is similar to the dropshipping model, with one key difference. 

With dropshipping, ecommerce business owners have no control over the products themselves. They simply source them from suppliers and offer them to consumers. With print on demand, however, sellers can offer fully-custom products to their customers. 

This model is especially popular with clothing brands, allowing creatives to:

  • Design custom shirts and other items
  • Offer them for sale on their website
  • Only print them when orders are received 

Like dropshipping, this minimizes overhead and inventory costs, significantly reducing any barrier to entry. 

It’s also growing in popularity. In fact, the industry grew 12% from 2017 to 2020. This model caters to people’s desire for customization, something a growing number of consumers expect: at least 36% anticipate customization options for products by default. 

Affiliate store

Affiliate links are commonplace by now. You can find them in blogs and websites all over the internet. However, a growing ecommerce business model is setting up a dedicated affiliate store. 

This works similarly, utilizing affiliate programs and links from other brands and retailers. Instead of setting up a blog though, you set up a typical ecommerce store that’s filled with linked affiliate products instead of your own offerings. 

This is another approach with an ultra-low cost of entry, since all you need to get started is an online store. 

However, the profit margin is also typically low, as the only money you make is from your affiliate commissions. So, you’ll have to make quite a lot of sales in order to see a lot of income from this structure.

At the very least, it can work great as a side hustle!

Wholesale

Wholesale ecommerce is a B2B model that focuses on selling products to other businesses in bulk at a discounted price. It has a huge market (over $13 trillion in 2021), and is growing faster than other US manufacturing and distribution sales. 

As you might have guessed, since this model focuses on B2B instead of B2C, it’s quite a bit different than the other structures we’ve discussed. 

It has a higher cost of entry, but it can also be quite profitable since bulk ordering saves money on production. 

Subscription

Subscription ecommerce models are all the rage. From streaming platforms like Netflix to thrifting boxes like ThredUp, just about anything you want to buy can be purchased as a subscription. 

This is great news for entrepreneurs looking to get into this market. Whatever your niche, product, or service, you should consider marketing it as a subscription. This way, you can lock in recurring sales and build loyal customers more easily than with one-time orders. 

How to choose the right ecommerce business model

With all the options available for ecommerce business models, it can be tricky to decide on the right way to go. This is especially true if you factor in the various niches and markets as well. 

If you’re feeling overwhelmed, consider the following factors to help you pick the right course of action:

  • Do you already have your own product or service? 
  • If so, print-on-demand, private label, or subscription models will likely be your best bet.
  • If not, dropshipping or affiliate stores could be good options for you.
  • What is your target customer? Do you want to sell to businesses or direct to consumers?
  • How much capital do you have available to invest up-front? 
  • This could limit your choices to those with the lowest entry points like dropshipping, affiliate stores, and print-on-demand. 
  • Do you already have an established brand or business? 
  • How much work are you willing to put into your ecommerce business? Do you want this to be your full-time job, or more of a side hustle?

Once you’ve answered the above questions, you should have at least narrowed down your list of available routes for your ecommerce business. 

How to start an ecommerce business in 9 steps

  1. Write a business plan for your ecommerce store

Your first order of business is creating a business plan.. 

A business plan will provide clarity and a sense of direction for you and any other stakeholders, employees, and investors. 

Even if you’re running a one-person show from your bedroom, you should still create a business plan to keep yourself on track and establish your business (which is important for licensing and securing funding). 

A quality business plan should contain 10 key elements:

  1. Executive summary
  2. Business description
  3. Market analysis and strategy
  4. Marketing and sales plan
  5. Competitive analysis
  6. Management and organization description
  7. Products and services description
  8. Operating plan
  9. Financial projection and needs
  10. Exhibits and appendices

Check out our guide to writing a business plan for a more detailed look at how to do this.

Related: How to Write a Business Plan

2. Choose your ecommerce business name

It’s important to choose your ecommerce business name carefully, as it can really make or break your whole operation

After all, it will be

  • All over your branding
  • What your customers will see (and hopefully remember!) 
  • Included on your website, social handles, and anything else related to your business 

Check domain and social media channel availability

Pick a name that fits with your niche, product, and business model. 

Puns are always good. Something catchy and unique that customers will remember is your best bet. 

You’ll also want to make sure it’s not a name that’s already taken, both for copyright and social media reasons. 

I’m assuming you don’t want a lawsuit on your hands, right? So do your due diligence to verify that your name is indeed original. 

Make sure the name you want for your URL is open too. Finally, it’s also key to search the socials you plan on using for marketing to make sure it’s available there, too (or at least a very similar variation).

3. Define the legal structure of your ecommerce business

This is where things start getting a bit technical. If the word “legal” freaks you out, don’t worry. We’re going to keep this as simple and stress-free as possible!

Luckily, if you’re starting an ecommerce business, there are really only a handful of legal business structures you can choose from. 

Read on for a brief summary of your options and pros and cons of each.

Sole proprietorship

Are you running a one-person shop? Then this is probably the ideal business structure for you.

It’s the most simple and straightforward, and the name pretty much explains what it is. This is for a business with just one owner (like you!). 

This route doesn’t require any complicated paperwork, and there’s no need to register federally. However, there may be some local steps required, so you should double check that you’re following any local requirements. 

However, it should still be a minimal process, and you should be able to get up and running immediately. 

Due to the simplicity of this structure (you literally start your business by running it), it’s a popular choice for dropshipping, print on demand, and really any small ecommerce businesses. 

Your taxes are determined based on your income bracket and profits.

The downside to the sole proprietorship structure is that you are 100% liable for your business, and your name and your business are one and the same. That means creditors can go after both you and your business for any unpaid debt. 

For most people, as long as you make wise choices and are responsible, this shouldn’t be too big of a worry. However, it's good to keep in mind.

Partnerships

If you’re starting a business with a couple of friends or investors, then you will likely want to go the partnership route. There are three choices here:

  • General partnership
  • Limited partnership
  • Limited-liability partnership

A general partnership (GP) basically functions the same as a sole proprietorship, except there’s another person or two thrown into the mix. There is virtually no paperwork, and you and your partner(s) share full liability for your business. 

A limited partnership (LP) is a step up from that, with one partner responsible for running the business, and the other partner as a “silent” investor, removed from the actual operation aspect. This requires a little paperwork, but is still minimal compared to other options. You will need to pay a registration fee for this one.

A limited-liability partnership (LLP) reduces the liability of the partners involved. For this, you’ll need to file for permits, register for an EIN (employer identification number), and pay a fee of a few hundred dollars. 

For all partnership structures, you should definitely create and sign formal partnership agreements as part of the process. 

Limited-liability company (LLC)

A limited-liability company (LLC) is the most complicated option, but if you’re a larger company, you’d most definitely want to go this route. This is because it severely reduces your liability and gives you more legal and tax benefits. 

This requires quite a bit more paperwork, and you might want to hire a lawyer to help you through the process. 

The step up from an LLC is a corporation, which you should only really consider if you have more than 100 employees. 

4. Apply for an EIN and business licenses

If you’ve decided to go the LLP or LLC route, then you’ll need to file for an EIN. 

If you’ve chosen to stick with a GP or LP, you’ll only need to worry about any local business licenses or permits. For these, just check with your local small business association and fill out any required paperwork. 

Applying for your EIN is pretty simple: you can just go online to submit the forms directly with the IRS. 

5. Choose your niche and products

Now that you’ve waded through the technical aspects of forming your ecommerce business, it’s time for the fun part: choosing your niche and products!

You may think the ecommerce space is getting a little too crowded, so how could there be any room or interest in yet another business to join the mix? While the competition is only accelerating, there’s still plenty of opportunities to establish your brand and make money. 

Naturally, some niches and product categories are more competitive than others. Take a look at this chart from Oberlo that shows the top ecommerce categories in the US for this year. 

Source: Oberlo.com

As you can see, consumer electronics and clothing have a pretty wide lead on the other categories. 

Keep in mind, though, that while the top categories may be the most competitive, they’re also where the most consumer interest is. This means they provide bigger opportunities to drive a profit. 

If you’re feeling a little lost on coming up with your ideal niche and product list, use the following tips as a launching point. 

How to find trends and search volumes with keyword research tools

If you’re exploring the ecommerce space, then you probably already know that SEO is important to online success. 

However, did you realize you can also use keyword research tools for more than just optimizing your web content? You can use them for inspiration on trending 

  • Products
  • Queries
  • Niches 

This can help you narrow down where to start, and make sure you’re on target with your audience’s needs. 

You don’t need to be an SEO expert or pay for expensive software to research keywords. In fact, you can try out a bunch of free AI content writing tools to help get you going. 

Decide whether to create your own products or resell

Choosing to launch your own product line or resell other products will be one of the first decisions you need to make as you embark on your ecommerce journey. 

We covered the different ecommerce models earlier, and, depending on which one you opted for, it will probably inform this choice as well. 

If you’re a creative person with plenty of ideas already in mind, then creating your own products is a great way to go. However,  if you struggle on the creative end of things and prefer to focus on business aspects, you should consider reselling. 

How to validate the products you want to sell

Regardless of the specific model and product line you decide to go with, you’ll definitely want to be able to stand behind what you’re selling. Customer trust is vital to a successful business, and word of mouth is a great way to build (or destroy) a new brand. 

So, before blindly shipping out new orders, make sure to test out the quality with a few samples! 

If you’re dropshipping or printing on demand, you can usually request samples from your suppliers/manufacturers for a minimal cost, and it’s definitely worth it to do so. This way you can validate things like: 

  • Sizing
  • Design
  • Quality 

If you’re reselling already-existing items, make sure you check the quality and note any issues before selling. Be honest with your customers about any wear, defects, or anything else that might affect the quality of the product. 

Calculate your profitability

Let’s be real, you’re here to make money. So, you want to choose the right niche and focus on products that will maximize your profit.

You can run some simple math in your head (or not, no judgment!) to check the margin on any given item you’re creating or selling. 

Just subtract the manufacturing cost (whatever the per-item cost is to make it and ship it) from the total price the customer will pay you (not including tax, of course). 

What’s left is what you make from that specific sale. 

If it’s too low, you can consider raising the price slightly. You may also consider changing up your supplier to reduce the cost. Of course, this simple calculation doesn’t account for your other business expenses like:

  • Your website
  • Domains and web hosting
  • Designs

So, here’s how to determine your overall profitability:

  1. Find your net income (revenue - expenses).
  2. Divide your net income by your net revenue (or net sales).
  3. Multiply the result by 100 to get your profit margin percentage. 

How to find the right vendors to source your products

If you’ve decided to go with the dropshipping model, you need to source your products. 

There are an overwhelming number of options for you, but don’t worry. With the growing number of dropshipping businesses taking off in recent years, there have been many people before you that have put in the research to find the best vendors

You’ll want to look at things like:

  • Types of products
  • Prices
  • Shipping times/rates
  • Customer service
  • Branding
  • Sustainability

Also, note that you’re not limited to just one vendor for your ecommerce store. 

While it certainly simplifies things to source your products through just one supplier, you can try your hand at mixing and matching your vendors as well. This will provide your customers with more selections than your competitors. 

Competitive ecommerce niches to avoid

You may worry that the ecommerce market is getting a bit oversaturated due to its rising popularity and ease of access. 

While that has some truth to it, you can still make a lot of money and find success starting an ecommerce business today. The trick is to avoid the most competitive niches. 

As we covered earlier, electronics and clothing are the hottest niches right now. But what if your whole idea is to start a clothing company? 

You don’t have to go back to the drawing board! Instead, just focus on creating something truly unique. 

Everyone is making screen printed t-shirts. So what can you offer that’s different? Custom artwork? Embroidery? 

Even if you’re in a highly-competitive category, you can make your products stand out from the pack. 

6. Choose an ecommerce platform

Everyone has their preferences when it comes to online platforms. There are quite a few options for setting up your ecommerce store, so we’ve listed out the most popular ones to get you started.

 

  • Shopify: This one is arguably the most popular. It boasts an impressive amount of integrations with suppliers and other apps, lots of customization capability, and plenty of tutorials and support. 
  • Squarespace: This is the best for setting up a gorgeous, functional website with ecommerce functions included. 
  • WooCommerce: This is great for those of you wanting to get started on a tight budget, as you can get up and running with your existing WordPress site for free. 
  • BigCommerce: This is a strong platform for experienced small business owners. 

7. Set up your domain and ecommerce site

Now that you’ve chosen your ecommerce platform, it’s time to secure a domain name and launch your website. 

As we mentioned earlier, you’ll want to workshop your brand name a bit and make sure it’s available as a domain and on social channels. 

We have some free tools that can help with this part of the process. 

The free name generator tool helps you narrow down your brand and website name. If you like one of the suggestions, simply run it through a search engine (or several) to check if it’s available. 

Screenshot of the Copy.ai Name Generator tool

Depending on the ecommerce platform you chose, you’ll probably have plenty of options for your website theme and setup. If this isn’t your area of expertise (and you don’t have the time to learn), you can opt for hiring a freelancer on Fiverr or Upwork to do this part of the work for you.

Keep in mind, however, that these ecommerce platforms usually make website building very easy and intuitive, so you can always save yourself the expense and do it yourself if you’re interested. 

8. Create your brand logo

One other piece that’s crucial to your ecommerce brand is your logo. This is what your customers will see plastered all over your marketing, website, and even products. You want it to look great and stand out from the crowd. 

You can use free and easy tools like Canva or Adobe Express to design your own or get really into it with Procreate or Adobe Illustrator.

If graphic design isn’t your cup of tea, you can again hire a freelancer to take care of this vital task for you. 

9. Market your ecommerce store

Congratulations! Most of the upfront work is done: you set up a business, a brand, a website, and a product line.

Now you’re ready to make your first sale. 

This is where marketing comes in. To really get the most out of your brand new ecommerce business, you want to define a solid marketing strategy. 

Social media marketing

Don’t neglect the power of social media marketing. Harness the ubiquity of social media channels to advertise your new store and products. 

USe the following tips to help you market your products on social media:

  • Set up accounts for your brand
  • Link to your web store in your bios
  • Create a post schedule with regular content highlighting your products and company 

If you’re not sure where to get started, check out our guide to using TikTok for business. We’ll also teach you how to market your brand, products and services on TikTok

Paid advertising

Aside from just posting on your brand’s social media accounts, you can also use paid advertising on social media, Google, and other sites to market your business. 

You might not have the budget for this at first, but as you scale, you’ll definitely want to add this into your marketing strategy for maximum results. 

Content marketing and blogging

Another excellent way to draw traffic to your ecommerce business is through content marketing and blogging

You can host a blog on your ecommerce website directly, or you can have an external blog that you link to regularly. 

Alternatively, you can guest post on other blogs in relevant niches and plug your products there. 

SEO

Regardless of how you decide to market, you’ll want to maximize your website’s SEO

You can do this by diligently researching and optimizing your:

  • Keywords
  • Product descriptions
  • Web copy
  • Blog (if you have one) 

Try using Copy.ai’s Product Description tool to help you out. 

Email marketing

Don’t underestimate the power of a well-crafted newsletter

If you can, tie this into your content marketing and blogging strategy. It can really give you an edge over your competition and drive more traffic and sales. 

Just don’t be annoying! Only send your customers emails they’ll actually want to read, and include content that provides them real value. 

Tracking and analytics

Pretty much all ecommerce platforms will have tracking and analytic capabilities that you can use to monitor and improve your website’s performance. There are also plenty of third-party apps you can use, too. 

There are lots of KPI’s you should track, but you’ll want to pay special attention to:

  • Visits
  • Clicks
  • Bounce rate
  • What people added to their carts
  • Abandoned carts. 

Use this information to your advantage and further tailor your marketing strategy and web copy to what your audience wants. 

Marketing automation

For things like paid ads, social media posts, content publishing, content syndication, and emails, use technology to make your life easier with automation. 

This can save you valuable time and energy that you can devote to other aspects of running your new business. 

For example, you can auto schedule:

  • Posts
  • Ads
  • Emails 

This way, you don’t even have to give them a second thought. 

Customer service

A great customer service experience isone of the best ways you can distinguish yourself as an ecommerce business. 

With so many people flocking to set up their new online shops, they often neglect to really cater to their customers. They’re looking for a quick way to make money, and they don’t always care about putting the customer first and delivering outstanding service. 

So, if you really want your brand to succeed, pour into your customer relationships. 

Whether on your social platforms, support center, feedback, or however else you interact with your customers, make sure you’re always providing a fantastic experience. This will build brand loyalty, and they’ll be more likely to recommend you to their friends and followers. 

FAQs on how to start a successful ecommerce store

Here are some answers to common questions about starting your own ecommerce business

Can you start an ecommerce business without money?

Yes! Well, pretty much. If you go the bare-bones DIY route, you can:

  • Take advantage of free plans and tools
  • Use dropshipping or print on demand
  • Manage every aspect of the business yourself 

This technically allows you to get started with no upfront cost.

However, you will probably want to at least pay for a:

  • Decent ecommerce platform plan
  • Website
  • Domain
  • Other helpful tools 

Despite those expenses your startup costs will still be next to nothing. 

How much does it cost to start an ecommerce store?​​

Factoring in subscription costs for a website platform and domain name, you’re looking at between $20-100 a month. However, this entirely depends on the:

  • Size of your business
  • Platform and plans you choose
  • Features you need 

If you’re stocking all your own inventory (or manufacturing it yourself), then you should plan on paying thousands of dollars upfront. 

How profitable is an ecommerce business?

How profitable your ecommerce business is will depend on a number of factors. However, the average amount of revenue per customer for Shopify stores is $72. 

So, you could be making hundreds to thousands of dollars a month if you do it right. 

Final thoughts on starting an ecommerce business

If you made it this far, you’re all ready to go with a legal, well-planned ecommerce business, complete with a website and marketing plan. 

Starting an ecommerce business isn’t for people who want a get-rich-quick scheme. It’s for serious entrepreneurs and people who are driven to start their own brand and business. 

It takes hard work and dedication, but luckily, with the tools and information we covered, you should be raking in success in no time

Don’t forget to use Copy.ai’s free tools to help you out on your ecommerce venture!

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