7 Questions to Ask Before You Open an Online Store

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Maybe you’re ready to start a business; maybe you’ve been selling on a marketplace or social media; or maybe you’re a long-time brick-and-mortar retailer. Whatever your situation, you’re considering opening your own online store.

And it’s no wonder — all the data shows that online shopping is on the rise. Fifty-one percent of Americans cite online as their preferred way to shop, according to a survey by BigCommerce. That percentage is even higher among Gen Xers and millennials; 56 and 67 percent, respectively, prefer to search and purchase on eCommerce sites rather than in stores. Nowhere is this growing preference more prevalent than in the increasing popularity of Cyber Monday, which raked in more than $6.5 billion in sales this year, according to Adobe Insights.

And if you have a brick-and-mortar store, investing in eCommerce could provide even bigger returns. Omnichannel customers — those who shop on multiple channels — are more valuable than those who shop only online. They spend an average of four percent more every time they shop in the store and 10 percent more online than single-channel customers do.

Yet BigCommerce’s study found that only 34 percent of 1,100 U.S. business owners sell through their own website. (Although a larger 40 percent sell through social media, with Facebook the most popular platform, and 16 percent sell through Amazon.)

6 benefits of opening an online store

If you’re one of those business owners who doesn’t have an online store yet, there are a ton of reasons why it should be a top priority. We’ve listed a few above, but there are many more.

We spoke with small business owners about why they made the leap into eCommerce, and they identified six of the biggest benefits:

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An online store keeps your business competitive

As we’ve already mentioned, a growing group of consumers prefer to shop online. And they can find almost anything they can imagine online. So if your business doesn’t have an online store, it would be easy for even your most loyal customers to buy from a competitor if they didn’t have time (or want) to visit your store.

It better caters to your customers

One of the biggest pros of eCommerce for consumers is that they can shop whenever they want — 24/7 — and not just when stores are open. As customers become more used to getting what they want, when they want it (everything from TV to food to doctors), your business can provide similarly convenient services through eCommerce.

It can help grow your customer base

A brick-and-mortar store is only accessible to people who are physically in your community. Not so with an online store. It can be accessed by anyone, anywhere in the world. And given how social media and email have made it easier for people to stay in touch over long distances, there’s opportunity for people to share their favorite local businesses with people across the country or the world.

It can earn you income — even after hours

Since your online store can be open 24/7, that means you can make money 24/7. And unlike a brick-and-mortar store, you don’t need to have someone physically available to make a sale. (You do need someone managing orders, processing, and shipping, but that can be done through regular business hours.)

It can lower your overhead

If you’re just starting a business, building out an online store (versus a brick-and-mortar location) can help lower your initial investment and your ongoing overhead. Think about it — building out a site is nowhere near as expensive as leasing or buying retail space. An online store likely requires far less staff to start. And you may not even need to invest in building inventory if you adopt a method like drop shipping.

It can give you more control over your business

If you already have a brick-and-mortar store, or if you’re selling online through marketplaces or social media, a dedicated online store can give you more control over your brand, marketing, and sales data. It also gives you a greater degree of flexibility with your inventory — you don’t need to have an item in stock at the time of sale to sell it — so you never miss a sale.

7 questions to ask before you build your online store

Once you’ve decided to build an online store, there are some aspects of your business that you need to evaluate before you start to build your site.

If you are already running a business, you should revisit your business plan and potentially update it to include your new eCommerce efforts. If you’re just starting your business, you should write a plan. Either way, these questions below will set you on the path to eCommerce success.

What products will you sell online?

Broadly speaking, you can sell products that are mass produced or you can sell niche, unique products. The latter often does better online since you are likely to meet a specific need and have little competition. Additionally, with commoditized products that are widely available, you may encounter a lot of competitive pricing.

Once you’ve decided whether to go with mass-produced or unique products, you need to decide what those products actually are. Here are a few ways you can come up with product ideas:

  • Find products that you are passionate about
  • Look for products that are easy to market or brand
  • Watch for trends and try to jump on them before they take off
  • Identify a problem and solve it with products
  • Zero in on a niche group of consumers or a niche interest

If you already have a brick-and-mortar store, will you sell the same items that you sell in your store or just a subset of your inventory? Or will you sell something completely different that’s more suited to eCommerce?

Can you sell those products online?

Once you’ve decided what you’re going to sell, you need to think about the logistics of selling those products online. There are three things to focus on here: experience, cost, and shipping.

  • Experience
    Many businesses benefit from having a brick-and-mortar location where people can interact with their products. If you sell online, you need to think about how you replace that in-person experience. It’s pretty standard to have multiple photos (or maybe even video) for each product on your site along with reviews. But think about what else would help customers make the decision to buy.
    Michael Waldon of Candles Off Main sells candles online, which presents a challenge: you can’t smell a candle through a screen. He addresses that problem by sending people free scent samples — they can pick a few scents they want to try for next time when they check out, or they can just call in and ask for them.
  • Shipping
    When you’re determining what to sell online, one of your biggest concerns should be the dimensions and weight of each product. The bigger and heavier the product, the more it costs to ship. If you’re trying to price competitively, you need to determine how much shipping will shrink your margins.
  • Cost
    And, yes, you need to think about cost. If you create the product, how much do materials cost? And how much time does it take (there’s a cost for that, too)? How much does it cost to store the materials and finished products?
    If you’re buying from a manufacturer or wholesaler, what is the minimum that you have to spend? If you’re going to have inventory on hand, you need to consider the cost of leasing or buying space to store inventory. If you’re going use the drop shipping method (more on that below), you need to determine the fees or extra costs you incur from that supply chain.

If it is going to be too expensive or too difficult to sell your products online, you may want to go back to the drawing board.

How will you source and deliver those products?

Next you want to think about sourcing. You can either make your products yourself or purchase them from a third party — a manufacturer or a wholesaler.

If you make the products yourself, you still have to deal with sourcing, but of raw materials. You need to determine what those raw materials are, what they cost, and how to store them. You also need to think about the time it takes to make the product and how to deal with shipping.

If you decide to source products from a third party, you need to do your research — you need to find the products, sample them, and ask for references. In addition, you want to ask suppliers how long it takes them to ship products and if there is a minimum order you have to place.

You might consider drop shipping if you’re going to source products from a third party. If you use a drop shipping method, you don’t actually keep any products in stock. Instead, when you sell a product on your site, you purchase the item directly from the third party, which ships the product directly to the customer.

Drop shipping can help lower initial investments in your business and ongoing overhead, since you don’t have to build and maintain an inventory. It also allows you to offer a wider product offering since you don’t actually have to store the inventory.

Sounds good, right? Of course, drop shipping comes with its own challenges. Long supply chains can reduce profit margins, if you’re not careful. And then there can be issues with suppliers and shipping as well as inventory availability. Whatever sourcing and delivery process you choose, make sure you thoroughly weigh the pros and cons.

What does the competitive landscape look like?

You also want to get a good understanding of which other businesses sell the same or similar product offerings. You might start with a simple online search; use words or phrases you think people would use to find your business and make note of the businesses that show up in the results. In addition to using a search engine, you can also do this kind of search on social platforms.

Make a list of all the brands that show up in your search, then do some digging. Make note of their strengths and weaknesses. Are there opportunities for you to stand out with products? Marketing? New channels?

Competitive analysis isn’t just about the individual businesses you’re selling against. It’s also about your industry as a whole, so make sure you’re reading trade publications and blogs. This gives you a better understanding of what is working for other businesses, gaps in the market, and changes in consumer sentiment.

Who is your target market?

Your target market is the group of consumers whom you think will buy your products. This group is what all your branding and marketing should be based on, so it’s important that you have a clear idea of who that audience is.

If you’re already in business, you should be able to look at your analytics to determine who your best customers are. You might also email your customers to determine which ones would be interested in shopping from your online store — then create your target market using insights from that survey.

Nailing down a target market may seem more difficult if you’re just starting out, but that’s another place where your competitive analysis can be helpful. Analyze your competitors and create a hypothesis of who their target market is. You can look at messaging on their site, where they sell, how they speak, etc. to determine this. Then create your target market based on that.

What laws and regulations should you be aware of?

We always recommend that you consult with an experienced legal and financial advisor when you’re making major decisions like starting a business or branching out from brick-and-mortar retail to eCommerce. There are a number of things to think about on this front. Here are just a few:

  • Licenses and permits
  • Insurance
  • Sales tax
  • PCI compliance
  • Zoning laws
  • Trademarks, patents, and copyrights
  • Restrictions on shipping
What functionality does an eCommerce platform need to have for your online store to be successful?

There are two things to consider when you are thinking about the functionality of your online store: the front end and the back end.

The front end of your online store is what customers see when they shop. So think about everything you need customers to see: photos of products, customer reviews, customer photos, mobile payments, etc. Make a list of what you want your site to look like and how you want it to function, and then make sure the eCommerce platforms you are looking at support that. (Take a look at the best eCommerce sites of 2018 for inspiration.)

The back end of your online store is what you deal with as a business owner. This includes your sales and analytics, payment processing, and inventory and stock levels. If you have a brick-and-mortar store, for example, you may want an eCommerce platform that integrates with your existing POS or inventory management system. Again, make note of what you need your eCommerce platform to do and what you need it to integrate with.

If you’ve thought about these questions, you should have a good idea of what your business needs to be successful. Your next step is to determine which eCommerce platform is best suited for your business. Read our guide to see which options are available through Square and how to determine which platform is right for you.

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