In the age of e-commerce, to not have a foot in the door of online business is a mistake.
While selling anything online can produce profits, if you’re selling your own product, you keep more of the pie for yourself.
Let’s look at how e-commerce businesses are created, and which type makes the most sense.
Starter Business Models
On the profit potential scale, it starts with a website that publishes advertising, moves onto selling products for an affiliate commission, and then to selling products directly or through a third party.
Advertising typically pays the least because the ad is promoting someone else’s product. Only a handful of the ad clicks generate a sale. It might require 100 visitors to see an advert before anyone clicks on it and the revenue from a single ad click is only pennies.
With affiliate marketing, the rewards are greater because you’re lower down the sales funnel, yet the product isn’t yours. The rewards are reduced. You cannot follow up with the buyer, get upsells or repeat orders either. This puts you at a major disadvantage when wanting to ensure the viability of online sales long-term.
E-commerce Business Models
E-commerce falls into a few categories. The main ones are Amazon FBA, Shopify and your own branded website.
Amazon FBA (fulfillment by Amazon) is the next step up. Here you’re getting your own physical product produced, it’s stored in an Amazon warehouse, and they list the product for you. The company provides a host of useful tools to get first-time sellers comfortable working within their FBA system. It allows you to start an e-commerce store with inventory but no warehouse facility or office. This substantially reduces the capital necessary to get started.
Shopify provides tools for sellers too. Their service can be used as a platform on your site. However, there are limitations. When using a standalone site, it’s necessary to drive traffic to your site to get sales. This requires that you learn how to generate traffic by ranking the website in the search engines or paying for online advertising to drive traffic to your sales offers. You also have to store, pick, pack, and dispatch the goods too.
Having your own branded site doesn’t require Shopify. You can create an e-commerce store outside of their system. Doing so ensures that should their platform fail, it won’t take down your site or ruin any integration for accounts, payment processing, etc.
Setting Up and Getting Ready
You’ll need to get set up properly and be ready to do business.
- First, you’ll need a name for your business.
- Second, get the business registered. Consult with an attorney to get advice about what type of business (like an S-Corp, LLC, etc.) is most appropriate for you.
- Third, don’t forget to apply for the necessary permits and licenses. There may be business licenses required to operate in your state and local sales tax might be due to the state too. Also, verify Amazon accepts sellers from your state (they don’t in all states).
- Fourth, decide what niche or product category you wish to go into. Where are the best opportunities? You’ll do better with a product line all in the same category.
- Fifth, locate a producer for your product. It could be manufactured in the USA or other countries including China. Anticipate considerable lead time between the initial mock-up designs, final design, early production models and the finalized one. It’s not a process that happens within just a few weeks.
- Sixth, create branding for your business name and logo. Also, come up with fonts and colors that will be suitable for the niche. Get a website created to promote your product to visitors, even if you’ll refer them to Amazon to make the actual sale.
The Advantage of Starting with Amazon FBA
Getting right into e-commerce sidesteps the lower returning parts of online business. You design and own the product. The control this affords your business is significant. Building a brand takes time, but it’s made easier when you sell through Amazon because they are the #1 e-commerce platform/site for online sales.
While you can drive traffic to your product page on Amazon, they also bring their traffic too. When Amazon see products that are selling well, they start actively promoting them. Later, legitimate customer reviews help improve how much attention your product receives too.
Learn E-commerce with Training Wheels
Selling through Amazon is like using training wheels.
They have an established system for new sellers to follow. Everything is explained clearly to avoid confusion. Sellers learn how to list their product. Amazon does much of that heavy lifting for newbie sellers which is partly why it’s a popular way to get started.
Get Refunds from Amazon for Inventory Mistakes and Mishaps
One of the things that Amazon doesn’t do as well as you may do yourself is managing inventory. Sometimes things get mislaid, broken or damaged. Unless they’re contacted, it’s not always clear how much of your FBA stock stored in their warehouses is still viable.
To get compensated by Amazon for any stock that’s been damaged, it’s necessary to submit a reimbursement claim. This is a complicated process. Many sellers never get around to doing it or find it too hard and just give up. Over time, this can be very costly. However, the service AMZ Refund can help streamline the process for you which is great for sellers. It’s a great way to increase your bottom-line.
Diving into e-commerce is a big commitment, but it has a fairly large payoff too. When you set things up correctly and take your e-commerce business seriously, you can sell on a platform like Amazon initially but become more independent by selling products on your own site once your brand is more established.