Founder/CEO of DeadSoxy.
Consumers are spending more time and money online than ever before, and the trend is only gaining momentum. Just consider that in 2020 alone, consumers spent more than $860 billion online with U.S. merchants, according to estimates by Digital Commerce 360. Furthermore, Statista reported that in 2021, more than 2.14 billion people worldwide are expected to make purchases online. That’s a whole lot of potential customers.
The societal effects of Covid-19 and spending much of our time in our homes for the past year accelerated e-commerce trends dramatically. It’s now official: Digital purchasing has gone mainstream.
For entrepreneurs looking to break into the e-commerce space, the good news is that technology has made starting a business easier than ever before. If you can get it right, there’s a lot at stake — and the pot is only getting bigger. But any time the stakes are high and the barrier to entry is low, competition is going to be considerably tough. Starting an e-commerce business is no exception, and it’s legitimately hard work. You have to be all in, all the time — at least until you can build up your business enough to need a team to help.
As the CEO of my own e-commerce business, my journey is like so many others: I had an idea, which turned into a passion project that started getting traction and became a full-time obsession. Building a premium sock brand is the hardest thing I’ve ever done, but it’s also the most rewarding thing I’ve ever done.
I’ve learned a few valuable lessons on how to begin building a successful online business. I’m going to share some of what I’ve learned with you in this series.
So, let’s get started and first explore how to lay the foundation for building an online business:
Ask yourself: What product are you going to sell?
To get started in e-commerce, you must first answer one big question: What are you selling? Do you want to be responsible for producing the product, or are you more interested in reselling a purchased product?
To help you answer this, think about what you’re setting out to build. For example, are you wanting to dropship a few products to make a little extra money? Or, are you wanting to build an e-commerce brand that has the possibility to be acquired? In other words, do you want to build a brand, or do you want to sell other brands’ products?
Almost every e-commerce entrepreneur faces this question early in their journey, and it’s not surprising why. Both choices have their pros and cons that need to be considered before deciding on the direction that fits your goals. Considering these questions is also a crucial step because your answers can help you get a better sense of which products or services you plan to sell and set the course for your business’s planning stages, implementation and execution.
If you’re not sure which products you’d like to sell, it’s time to do some research. I recommend tapping into the multitude of resources available online to help, as well as weighing a few important factors.
The pros and cons of building your own brand: If you choose to build a brand, you’ll need significantly more capital upfront (in order to develop products, buy inventory, develop a marketing strategy, design your website, etc.), and you’ll need to build up your brand before it’s profitable.
Creating something new or building a better product and selling it under your own brand will also require you to consider product development. Additionally, keep in mind that most products you create will have minimum order quantities, so you might end up needing to buy more inventory than you originally planned, and all that inventory ties up a lot of cash. This problem compounds if your sales are slower than expected. When inventory and minimum order quantities come into play, things like sell-through rate, storage costs, fulfillment costs and how to move aging inventory all become really important factors.
Then you’ve got to build the brand and get in front of potential customers. This isn’t an easy task, but it can certainly be done.
The pros and cons of selling other brands’ products: For those looking for a lighter lift and wanting to make a sale as soon as possible, dropshipping and selling other brands’ products might be a better option. Just keep in mind that this route isn’t without its drawbacks. Although this method might be quicker and a bit less work to get started, you’re totally dependent on a third-party brand’s products, production quality, pricing, marketing and more. Dropshipping is a margin and marketing play. Purchase an item at X, sell it at Y. You profit the difference (minus the expenses).
And no matter which route you take, I strongly advise exploring products in a field that interests you. Ideally, you would be interested in the product or space enough that you can become an expert or authority on it. Don’t plan to create an online business around a product that isn’t exciting to you. Building a successful commerce brand will require a significant amount of time, and it will become a lot easier if you actually want to learn about the product or field where you’ll be investing so much of your energy.
Decide what product you’re selling and what path you’re taking so we can get into the meat of this series. In Part 2, we’ll cover market research and competitive analysis. Stay tuned.