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Grow Your Business Technology

E-Commerce Websites: How to Start an Online Business

E-Commerce websites require shopping cart sofware and often, merchant services accouts. / Credit: e-Commerce image via Shutterstock

With more consumers shopping online than ever before, businesses that want to boost their bottom lines must get in on the action.

Whether it's running an online-only store, or adding online shopping to an already established brick-and-mortar business, Web sales are necessary. Those who don't find a way to sell their goods via the Internet will quickly see their customers take their money elsewhere.

Research from Invesp revealed that e-commerce sales are growing by nearly 20 percent a year. Overall, nearly 200 million people shop online in the United States alone, projected to spend $260 billion in 2014.

Shoppers cite numerous reasons for their online shopping preference, including that it saves them time, makes comparing prices easy, doesn't require fighting through crowded stores and provides a larger variety of items to purchase.

Editor's Note: Need help setting up an E-commerce Website for your business? Fill in the following form for a quote.

Businesses have two main options for selling goods online: run their own e-commerce websites or sell their goods via an already established online marketplace.

To run their own e-commerce sites, businesses will need several critical services and pieces of software. Among the most important are a Web hosting service, shopping cart software and credit card processor.

If getting all that lined seems too challenging, small businesses can take the simpler route of setting up a store in one of the many online marketplaces, such as Amazon.com, Ebay or Etsy.

To help small businesses get their wares on the Web, Business News Daily has created a complete guide on all of the ins and outs of selling goods and services online.

Pros of e-commerce

Selling goods and services online comes with a wide variety of benefits. Most significantly, it opens businesses up to a much larger customer base than they can access with a brick-and-mortar location alone. With an e-commerce site, businesses aren't limited to selling their merchandise to those in and around their local communities. Shoppers all around the globe can access the sites, significantly boosting the potential for profit.

In another plus, e-commerce businesses always stay open. While most brick-and-mortar locations may operate eight to 10 hours a day, e-commerce businesses run around the clock. Being able to makes sales and money at all hours of the day is a big advantage.

Running an online business can also reduce costs. Specifically, online-only businesses don't have to pay rent on a physical location and don't have to pay employees. Since they don't require the same amount of manpower to run, these businesses enjoy huge cost savings.

[How to Start a Business: Step by Step]

Inventory costs also fall for online stores. E-commerce businesses don't face the same demands as brick-and-mortar ventures, which must stay fully stocked at all times. Online stores, by contrast, can keep inventory low using drop-shipping methods, in which products are shipped to consumers straight from the manufacturer.

E-commerce operations are also readily scalable, meaning it is easy to start off small and expand as needed. That can be much tougher with brick-and-mortar businesses, since growing often means finding a new, larger location to house the businesses, which comes with added expense. 

Cons of e-commerce

E-commerce comes with some drawbacks, too. Online stores often lose out on the ability to interact with their customers in person. Brick-and-mortar businesses can build their customer bases by creating personal relationships with buyers. E-commerce businesses don't have that option, which makes it even more critical that they ensure smooth business transactions.

E-commerce ventures also face cutthroat competition. For every one online business, at least another 10 businesses on the Web sell the same thing. Hundreds of thousands of e-commerce sites operate worldwide, meaning online businesses must work even harder than brick-and-mortar businesses to stand out from the crowd.

Finally, e-commerce businesses must deal with technical issues that brick-and-mortar locations never face. E-commerce businesses are run completely online, so if something goes wrong with the website, credit card processor or any of the other aspect of the operation, the business has to shut down to be fixed. While some of these problems may be out of the business owner's hands, they still can end in the same result: lost money and lost customers.

What's needed for an e-commerce business

While opening an e-commerce business can be relatively easy, you need a number of things to get started. Here is a rundown of everything an entrepreneur must have to open an e-commerce business:

  • Product to sell: Most importantly, small business owners need something they can sell. The good news is that with the Internet, this can be basically anything. Big or small, expensive or cheap, any item can be sold online. Also, since the business is run online, e-commerce owners have the option of selling "soft" goods: those that can be downloaded straight to a customer's computer, like new computer software.
  • Domain name: Before a small business can start building an e-commerce website, it needs a domain name. This is the online address at which shoppers can find the business's website. Most online business domain names end in either ".com" or ".net". The domain name selected should match, to some extent, the business's name.
  • Web hosting service: You'll need a Web hosting service to publish the website online for shoppers to see. These services store the data files that make up websites, and then upload those files to the Web for viewing by those who visit the site through its official domain name.
  • Website: The website will serves as a business's online home. The website, which can be created with the help of either Web hosting services or e-commerce software, must feature the products the business wants to sell, and must offer a way to sell those items directly to consumers. The website's design should encourage shoppers to stay and make purchases. It should also include links to the business' social media pages, ways to subscribe to electronic newsletters and deals, and offer places to learn about other news going on in the company.

[Buiding a Website: A Small Business Guide]

  • Shopping cart software: In order to sell items from an e-commerce website to customers, you need shopping cart software. These programs give shoppers the chance to search the business' inventory to see what's available, select items they want to purchase and eventually buy them. In addition to assisting with transactions, many shopping cart software options include additional features for controlling inventory, setting up shipping and calculating taxes. [For a side-by-side comparison of the best shopping cart software, visit our sister site, Top Ten Reviews.]
  • Merchant services provider: Since online businesses can't accept cash payments via the website, they need a merchant services provider to handle their credit and debit card needs. This service acts as a link among the business, customer and credit cardcompany. It processes the payments and actually takes the money from a credit card account and places it into the business's account, also known as a merchant account. Most merchant service providers offer this type of bank account, which acts as a holding location for the debit and credit card payments an e-commerce business collects. Once the funds have been approved, the merchant services provider transfers the money, minus a commission, to the business owner's bank account. Without a merchant services provider, a small business has no way of collecting money from customers. [For a side-by-side comparison of the best merchant service providers, visit our sister site Top Ten Reviews.]
  • Marketing:All successful e-commerce businesses have a strategy for attracting customers to their sites. Without a carefully thought-out plan, turning a profit becomes much more difficult. Various marketing options online businesses have at their disposal include search engine optimization (SEO), pay-per-click advertising, and email and social media campaigns.

E-commerce software

While online business owners do need a number of things to get up and running, the good news is that there is a one-stop shop for nearly all those needs. E-commerce software simplifies the process of opening an online store by walking owners through each step of the process, including registering a domain name, designing a website, uploading and managing inventory, connecting to a shopping cart and providing secure payment options for shoppers.

When choosing e-commerce software, small business owners should consider a number of factors. The software should incorporate all aspects of creating and maintaining an e-commerce website, such as hosting, website design and SEO integration. In addition, business owners should ensure the software offers a shopping cart capable of accepting a variety of payments, including credit cards, PayPal and eChecks. Finally, the software should provide top-notch security, such as fraud and secure socket layer protection, to give consumers peace of mind that their personal information won't end up in the wrong hands.

Most e-commerce software providers charge online businesses a monthly fee for their services. While most of the top software providers waive a setup fee, monthly costs can range from $15 to $300 a month depending on several factors, including how large the online store is and how many of the software's services the business owner needs.

Our sister site, Top Ten REVIEWS, has done extensive, in-depth reviews of numerous e-commerce software options. Their top three options are:

  • Volusion, which offers advanced security and back-room tools, and integrates with Amazon.com to help boost sales
  • Shopify, which features a searchable customer menu for targeted marketing campaigns and a lot of flexibility to grow with your business
  • Shopping Cart Elite, which can create a customized online store for businesses with a lot of useful shopping cart and administrative tools

Third-party sites

Small business owners who feel creating their own e-commerce site is too difficult have other options for selling goods online. In one increasingly popular method, many entrepreneurs go through a third-party provider, like eBay or Etsy. These large-scale online marketplaces provide each individual business with its own page within the third-party provider's site.

The benefit of  such sites is that business owners avoid having to set up an extensive e-commerce website and the hassle of dealing with accepting payments. The process is very simple. Within hours, any business owner can register in the marketplace, set up a page and start selling.

One big negative of such sites is the cost. Most online marketplaces charge a host of fees, including those to list items, generally 20 to 25 cents per item, plus a percentage of each sale, which can be anywhere from 3 to 10 percent of the total sale price. Additionally, shoppers have to search for the business within the huge marketplace. While a regular e-commerce site only has products listed for that business, visitors to sites like eBay or Amazon will see a wide variety of goods listed. Even though each business has its own Web page on these sites, other sellers can easily lure a shopper in another direction. This can make closing sales much more difficult.

Some of the more popular online marketplaces today include eBay, Etsy, Amazon, Yahoo Shopping, Overstock.com, eCrafter, Webstore.com and Bonanzle.

Editor's Note: Need help setting up an E-commerce Website for your business? Fill in the following form for a quote.

Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.