How to Start an Online Retail Store?

Whether you own an existing traditional retail store or want to start from scratch, selling online is a must for success in today's world. In our article, you will find detailed instructions on how to open your online retail store and make it successful.

Store business model

If you have a physical point of sale. 2020 has shown that even the average small corner store is better off having an online storefront to keep its business safe from the «The impending retail apocalypse». An online storefront will help you survive the quarantine, and, moreover, this is the only way to attract the younger generation of shoppers who are used to shopping online.

Furthermore, such an online retail store does not have to be something high-budget or special. It is enough for it to perform 3 functions:

1. Demonstrate what you can buy in the store. To do this, you can create a website or organize trade through social networks or marketplaces.
2. Take orders from clients. The easiest way to organize this is using a regular phone, but it is better to create or connect an appropriate online service. For example, this can be done with Shopify.
3. Send orders to clients. Delivery can be in-house (sometimes it’s enough a person on a bike), or it can be integration with a third-party platform like Ubereats, Postmates or Caviar.

If you are starting an online business from scratch. In this case, you need to determine what and how you will sell to your customers. We will tell you about the choice of a niche below in the text. Now let's describe possible forms of retail organization:

• You take orders from customers and forward them to suppliers and / or manufacturers who, in turn, ship products from their warehouses to your customers. With this approach, you only need a website and a good marketing strategy.
• Own production. In retail, this business model implies that you do absolutely everything: production, storage, marketing, sales, transportation, communication with the client, etc. Sometimes it's easy, like selling cakes and cupcakes, sometimes it's hard, like Walmart.
• Traditional shop. You buy products, store them in your warehouses, advertise and sell them through an online retail store. Usually, stores with physical points of sale operate according to this scheme, for which the Internet is another channel of communication with customers.
• Multi-vendor marketplace like Etsy, eBay and Amazon that provide a platform where anyone can post an ad to sell something. Such sites earn not on the margin from the purchase and sale, but on commissions, advertising, listing fees and premium services.

Niche and target audience

Finding a niche for store. Even if you already have an offline store, analyzing your existing niche and finding a new one can help your business increase revenue and expand into new markets. As a rule, it’s done as follows:

• Look for tips in professional publications. For example, in The Strategist, which is made by New York Magazine. They write about interesting products and business ideas that can be used in 2021 to find a niche.
• Study user behavior on the Internet. For this, they use Google Keyword Planner, Mergewords, WordStream or another web service to analyze key search queries. In addition, it will also be useful to see how the search statistics for individual product categories on the Internet have changed in recent years, which can be done using Google Trends.
• Study the popularity of products and their specificity. For this they use marketing research, surveys and statistics. Such data can be found on Statista. Data on prices, sales levels, and the number of stores already selling a specific item can be found using SaleHoo Market Research Labs, Sell The Trend, Spocket, Dropship Spy and Jungle Scout.
• Look at what sells well on marketplaces. This data is easy to find by examining the listing of Amazon Best Sellers and its analogues AliExpress and Alibaba.

Target audience analysis. It is necessary to distinguish among all Internet users those people who need the products of your online store, and then target ads to them. This is a more effective and cheaper marketing strategy than showing ads to everyone.

The audience is analyzed through market research. For example, here is an  analysis of pet owner purchases in the USА. This page contains information about  which products they buy. You can also find information about food products, clothing, cosmetics and other popular retail categories there.

Online store suppliers

The next step in our guide on how to open your online retail store is finding suppliers. The easiest option is to search on Amazon. At the end of 2019, the retail giant published a list of its nearly 1,500 suppliers, listing the names and addresses of the companies in  one document. Supplier listings can also be found on Alibaba and AliExpress.

In addition, supplier listings are available on SaleHoo, Worldwide Brands or Wholesale Central, Oberlo and Doba. These are online platforms for bulk purchasing, where you can not only find a supplier, but also place an order. As a rule, they are paid or require transactions through their system, which increases the price by 1-10%.

Online storefront for trading

Marketplaces. Usually, aspiring entrepreneurs with a small list of products sell them on sites such as Amazon, eBay, LetGo, Craigslist and OLX. It is much easier, faster and cheaper to create your own online store website. At the same time, this way you can immediately get access to the client base of the largest trading platforms in the region without advertising, SEO and SMM.

The weak point of this approach is the inability to stand out among other sellers in any way other than with a lower price. And even this does not guarantee that the products will be in demand, since start-up entrepreneurs have a zero reputation, which is why most buyers ignore them. In addition, such sites usually have a listing fee or commission for each sale.

Personal online store. When people want to create a website for an online retail store with a unique design and / or the ability to work well with a large flow of buyers, the site is usually developed from scratch. To do this, an outsourcing development company is hired, which takes over the organizational and technical components of the development process.

Estimated cost of developing an online store website from scratch:

• small online stores with 1 000 product items ≈ $5 000;
• store with 1 000 product items and unique design ≈ $15 000;
• shop with all necessary integrations ≈ $30-50 000.

If a unique design and high bandwidth are not a priority, then an online store is created on the basis of e-Commerce platforms - cloud solutions, when connected to which you can almost immediately get a store ready to work. You choose a design template, do a little customization and fill out the store listing with products. Everything else is usually connected and working. The cost of such a service is from 50 to 5 000 dollars / month, depending on the service and type of subscription.

Here is a list of the most popular e-Commerce platforms:

Marketing strategy

After launching an online store, you will need to attract customers and inform them about all the products you offer. There are several ways to do this:

• Business listings - free. Add your online store to Google Listings My Business, Yelp, Zomato, TripAdvisor, OpenTable, Expedia, Yellow Pages, Yahoo! Local as well as Apple Maps, Bing Maps Google Maps.
• Paid advertising - $ 50-5000 per month. Use Google Ads and similar solutions on Facebook and Twitter to promote the store and its products to your target audience using contextual advertising.
• Content Marketing - $ 500-5000 per month. Creating niche-relevant content to build reputation and brand awareness. Such content can be educational and entertaining texts, videos, photos and GIFs.
• Social networks (SMM) - $ 500-5000 per month. Creation of posts in social networks to promote the store and products, including with the help of influencers.
• E-mail- newsletters - $ 0-1000 per month. Development of the design of several email templates for specific target audiences, content creation, response testing and collection / purchase of databases of email addresses of potential customers.
• Search Engine Optimization (SEO) - $ 600-5000 per month. Analysis of niche-relevant search queries, creation of an SEO core, content optimization and link building.

Legal structure

The last thing to consider when starting your online retail store is the form of business organization. Usually, novice businessmen choose a sole proprietorship to reduce taxes and simplify fiscal reporting. But this is not always correct, since this form does not protect the money and property of a businessman in the event of bankruptcy.

It would be more correct to establish a limited liability company that protects the personal assets of the entrepreneur (house, car, deposits) in the event of lawsuits or business bankruptcy.

How to Start an Online Retail Store? key takeaways:

1. Store business model
2. Niche and target audience
3. Online store suppliers
4. Online storefront for trading
5. Marketing strategy
6. Legal structure