How to Start an Online Store on a Tight Budget

Starting your own online business can feel overwhelming. There are so many technical aspects to it, and new challenges keep popping along the way. You are not sure what you should do and how much it is going to cost you. For starters, take a deep breath and say to yourself – one step at a time. In this handy little guide, we will go through each of those steps and show you how to start an online store with as little fuss as possible.

In 2017, e-commerce generated around $2.3 trillion in sales, and this number is expected to double by 2021. In the United States, e-commerce contributes to almost 10% of retail sales on a yearly basis. This number is expected to grow by 15% annually. So, it is clear – online shop is the place to be.

Statista
Source: Statista

Retail e-commerce sales in the United States from 2016 to 2022 (in million U.S. dollars)

Starting an online store used to be a daunting task that could take months and thousands of dollars. Well, things are different in 2018 and there are some great tools that can help you do a month’s work in half an hour, but let’s not hurry. Let’s go step by step.

How to start an online store: Phase 1

Step 1 – Create a business plan

Price: $0 (value – priceless)

I will not waste your valuable time telling you vague, basic stuff like “find your niche” and “understand your goals.” If you are starting your own shop, you know what you want to sell and what your goals are. If you are not sure which product you want to sell, take a step back and click here to look for ideas.

If you have an idea or a product, let’s talk about creating a viable business plan. This plan can change in time, but it is extremely important to have it and try to stick to it. This way, you will be able to keep all of your ‘to dos’ and expenses in one place. Before you create a plan, do a market opportunity analysis. Look at your main competitors, their marketing campaigns, their products, and prices. Ask yourself:

  • Does my product offer something new or different?
  • Can I use a different angle in my marketing campaign?
  • Are my prices higher or lower than my competitors’?

This is where your brainstorming should start. But if you feel that such a session may be too chaotic for your taste, here is a step by step guide on analyzing your market opportunities. Once you do that, you can move on to creating a business plan. Is that empty paper making you nervous?

Let’s break it into smaller sections. Your business plan should include:

1. Description of your business

Who you are, what you sell, what you want to achieve.

2. Your business model, sales plan and pricing

For online stores, this requires an extra explanation so here it is. There are two types of e-commerce business models — stocking products and drop shipping.

Stocking products means you have a warehouse and ship items to your customers. The price of this option varies greatly, so I suggest you look at this article and consider carefully which option fits your needs at this point. It leaves you with a lot of flexibility when you form prices and if you use your online tools wisely, you can save up on some parts of the process.

Order Fulfillment
Source: Shiprocket

The other type, drop shipping, means your online store serves as a liaison between the shopper and a supplier – you never get in touch with the actual product. A third party company will handle warehousing, shipping, and inventory, leaving you to deal with the online store exclusively.

Dropshipping
Source: Dropshipping Business/Pinterest

While this takes a lot of weight off of your shoulders, it also has a price tag. One of the most popular drop shipping services, Oberlo, comes for free if you have up to 50 orders a month. Paid plans start at $29.99/month.

3. Details about your market

Describe your potential customers and competitors. Here is a handy explanation for creating your buyer personas. Before you move on to the marketing plan, you need to understand who your customers are. Don’t categorize them solely by their age or interests. You want to understand who they are, how their average day looks like, which challenges they face and how your product solves their problems.

4. Marketing plan

Think of the ways you are going to promote your product or online store. This is going to be much easier when you create buyer personas. Your customers will no longer be cardboard cutouts – they will be real people you are having a conversation with. Here is our suggestion for starting this conversation in a way that is playful, engaging and not too pushy.

5. Timetable

Although there may be obstacles along the way, try to set a timetable for each stage of your business plan and stick to it.

6. Finances

Calculate the amount of money required for each stage and always identify the source of your finances.

Don’t treat this part of the process as a tick-box practice. Do your best to do serious research – and this guide is here to push you in the right direction. In the following sections, I will provide you with some super useful links that will help you explore the right options for your online store. Write it all down!

Step 2 – Secure financing

Opening and maintaining an online store, even the simplest one, cannot come for free. This is why you need to keep a strong grasp on the required finances and unexpected expenses (which are to be expected, ironically). There are several ways to earn your initial capital.

Option 1: Practice on the marketplace

Price: $0-$39.99

If you are starting small, from your garage or living room, one of the options is to start by selling on eBay, Etsy, Amazon, or one of the established online marketplaces. This can help you promote your product, gather some positive reviews or even make a few loyal customers.

As you are selling this way, you can track your stats and see who your customers are, which products they prefer, which products they avoid, how often they return the purchased items, etc.

Screen Shot 2018 10 18 at 8.53.51 PM

Selling through an established marketplace can be a relatively cheap and painless way to adjust your business plan and avoid costly mistakes further down the road.

Detailed pricing: On Amazon, an individual selling plan is free, but you get charged a per-item fee of $0.99. Amazon Professional Selling Plan (for more than 35 sales per month) costs $39.99/month, without per-item fees. Referral fees are based on product category:

  • As a percentage of sale price: 6% to 20%, usually 15%
  • Minimum referral fee: $0-$1

Variable Closing Fees apply strictly to books, music, videos, DVDs, video games, consoles, and software, and they depend on category, shipping destination, and the type of shipping service.

Bonus advice:

If you are confident that your idea is something special, you can find your target audience and simply conduct a survey about a specific product they would like. This is what Brian Puillam did when he founded Backplane, a company which sells products for improving body posture. Before he finalized his product, he interviewed his potential customers, nailing down the aid they wanted to the smallest detail. Dan Maisano of EasyWhey, who started his own protein drink to-go, followed a similar pattern.

whey
Would you guess this is just what people needed?

“I had seven products sold before I had anything more than the idea in my head. No website, no business cards, not even the product yet,” he says. “I had seven people actually paying me for what was simply an idea, and because I was able to do that I knew I was on to something that would actually work.”

You can read about this strategy here.

Option 2: Crowdfunding

Price: $0-$16-$500

Another option for people with a groundbreaking idea is crowdfunding. Kickstarter and IndieGoGo are the most popular platforms for these projects. This is not a bad option for someone who wants to promote their brand and gather a circle of loyal customers.

However, growing and nurturing a robust network of backers needs some time and dedication. In this article, I laid out a plan that combines two powerful tools for lead generation and crowdfunding management. These come with extra costs, but they can be worth it.

Quiz
Yep, this can help you attract people to your crowdfunding page!

Detailed pricing:

For example, Kickstarter fee is 5% of total funds raised + payment processing fees 3% + $0.20 per pledge. Pledges under $10 have a discounted micropledge fee of 5% + $0.05 per pledge. If your project isn’t successfully funded, there are no fees.

Crowdfunding management platforms’ prices are negotiable. Some of them come for free, while some can charge you up to $500 per campaign. Here is a detailed list – I suggest you try them out because they are actually a great practice for your online store.

Screen Shot 2018 10 18 at 8.12.47 PM

Source: JamesMathe.com

Lead generation software, on the other hand, can skyrocket your crowdfunding campaign and can be paired with any pledge manager. Leadquizzes comes with 14-day free trial and paid plans start at $16/month.

How to start an online store: Phase 2

nrvice

Step 3: Create an online store

There are several ways to start an online store – you can choose between hosting your own website or working with an e-commerce platform.

If you are hosting online shop on your own

Price: $209-$500

  1. Choose the domain name – the name of your site, www.exampleonlinestore.com ($7.99 with GoDaddy)
  2. Choose a hosting service – service that will be a “home” of your website ($20.99/month with GoDaddy)
  3. Set up an SSL certificate – making sure that your site has all the needed protections both for you and your customers’ data ($59.99/year with GoDaddy)
  4. Install an e-commerce software – free with PrestaShop, XCart, Magento Open Source. Click here to see our list of top rated free e-commerce software.
  5. Install the additional features for your site, depending on your customers’ needs ($0-$5,000)
  6. Sign up for payment processor (Paypal, Stripe), payment gateway (Stripe, Paypal, Authorize.net) and merchant account (setup $0-$250, monthly fee $10-$50, plus transaction fees, plus optional $120-$1,000 for credit card terminal). If this sounds crazy confusing, check out this article that explains in detail how payments work online.
Online payments
Source: FinancesOnline

Feeling overwhelmed? Well, I won’t lie to you, that’s because it is. And I didn’t even talk about website design and all the support you may need along the way. First of all, this option requires you to be tech-savvy or to have a professional team of developers. Second, it can get pricey.

While this type of online store provides more independence, flexibility, and savings in the long run for developed businesses, for a beginner, it can be a source of frustration, complication and needless expenses.

If you are not an absolute pro (meaning, if you had to click on more than two explanatory links on this list) I’ll go and say – this is not an option for you.

If you are selling through an e-commerce platform

Price: $287

E-commerce providers will take care of your online store’s design, shopping cart, safety, PCI compliance, backups, payments, and additional features. This comes for free or with a monthly fee. When you use e-commerce platform such as Shopify, the list of steps becomes way shorter.

1. Choose a domain name (optional)

When you create an online store in Shopify, you automatically get a name that reads yourstorename.myshopify.com. However, if you are into brand building, I strongly recommend that you purchase a domain from Shopify ($13) or from GoDaddy ($7.99)

2. Create your store

I will break this process into several further steps, but you won’t even feel them. One of the perks of Shopify is that you can create a fantastic online store with zero coding skills. Shopify’s dashboard is simple and intuitive. So let’s begin.

luxy

3. Choose a theme

You can choose from the long list of free and one-time paid themes. They all come with simple modifications that allow you to change your store’s design. For example, you can upload color palettes, logos, fonts, and adjust the homepage look to include more or fewer items, slides or banners.

haus

ball and

nick mayer art

Would you believe that all of these websites came from fairly simple pre-designed templates?

4. Add products to the store

Try to upload pictures of your actual products, and put some time into taking those photos and editing them. A good image can make or break your product, so invest time and work into that. Add as many product details as you can. These products can be grouped into collections based on their customers, size, type, etc.

Screen Shot 2018 10 18 at 9.05.21 PM

5. Set up the payment gateway

Shopify offers several payment gateway options. You can go for Shopify payments, which enables you to process credit cards and track your finances directly on your Shopify dashboard. You can also choose a third-party payment gateway, based on transaction fees, customers’ debit and credit card types (VISA, Mastercard) and checkout process.

Shopify’s own transaction fees are between 1.8% and 2.4% + 20p, plus optionally $89-$1,000 for credit card terminal.

Don’t forget that this still leaves you with the steps such as signing up for payment processor (Paypal, Stripe), payment gateway and merchant account (setup $0-$250, monthly fees $10-$50, plus transaction fees that vary on Stripe, Paypal, Authorize.net, etc.)

Shopify

6. Set up taxes info and shipping

On the Products page in the section Inventory and variants, you can set up tax and shipping charges. While this may require some research on your side, do not skip this step because it enables you to accurately display prices and additional costs.

On the Shipping page, you can adjust shipping rates based on the product’s weight and other considerations. Make sure you update this info, so Shopify can accurately calculate the final price.

Detailed pricing: Shopify paid plans start at $29/month, but keep in mind that your store will need some extra apps further down the road. Some basic beginner apps can stack up your expenses to $200-$300. Keep reading to see the details.

Conclusion

And that’s it – a full guide on how to start an online store! Now it is ready to go live. But the real work begins now – it is time to promote your business. How are you going to do that? Well, take a look at this – here, I collected a list of some fantastic Shopify apps for beginners, as well as apps that can lead you to your first sales. And if you are one of those techies who are not on Shopify, give it a read anyway! Most of these apps and software can be added to your online store even if you have an independently hosted website.

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