How to Start an Online Store (Step-By-Step)

By Scott Max

Not experienced? We offer you advice from those who do.

In case you didn't suspect it yet, we'll tell you: an online shop is not set up for a month. You simply can't: do the market study, find a business model, find suppliers, ask them for an estimate, have them send it to you, renegotiate with them so that you can get your accounts right, get rid of those accounts, hire the technology supplier...

Come on, by proxy you can, but with few guarantees and risking that unemployment you are thinking of capitalising on.

Setting up an online shop is one of the most common possibilities. To do this, the experts advise: think about what product you could sell; see how you were going to make money; look for and find suppliers; test the products of these suppliers; select the products that are finally going to be sold; carry out market research... Let's get your imagination going and join you in this exciting process, let's get started!

And the product is...

The first step? See what product you are going to sell. Start thinking about what options you can think of for the shop. Some options:

1 -Guitar picks. Because you had seen the idea abroad looking for successful foreign business ideas...

2.-Cooking utensils. Because you love a French shop that sells, that, aprons: MadameChoup. They take the apron as a fashion element, with their own designs (no need to put in a drawing or print a photo).

3.-Clothing for cycling. Because they are in the catalogue of an American clothing company for women cyclists that you had your eye on.

4.-Touchpads for tablets. Because you had read an article in the blog of the digital edition of the American technology magazine Wired Gadget Lab that you consult frequently. It talked about a quality German touch pen.

5.-Safety straps for children. Because you had seen it in an episode of Modern Family on TV before your daughter started walking and you thought it was silly. And now that your daughter is walking, it seems like a better idea.

You got it!

You go around all these proposals and in the end you get to keep the stylus. The idea you like best is the one you read about in Wired and you read it now with new eyes.

You've always thought that there was life beyond Apple products and that products for iPad users are boring, but not for the rest of the tablets and brands.

The article in question referred to a German product: AluPen. So you look it up on the Internet and write to them at the sales address to tell them that you are interested in becoming a distributor. When you see it, it reminds you of the plastic makers you used to play with when you were a child. It is an original design of the brand and it is expensive: 24.95 euros, without VAT and without shipping costs. Well, now you have a place to start. Will they also make it in China...

The idea, on a napkin

"I'm going to sell touch pens. But, are the pens top quality or do I leave at a price and bring product from China with more margin?

This is the first thing you write down on a napkin. You are not clear about anything else - neither what product, nor who I am going to sell it to - so you start to think about it. Top quality pens? Pens from China? For executives? For graphic artists? For children? You are clear that a business is a good product at a good price with someone on the other side willing to pay for it and all through a channel that works. How do you get that good price? Where do you have to look?

What would an expert say?

Since you know you are going to manufacture, you have to find manufacturers. An expert would say: "The big problem that the entrepreneur has is with the distributor. He is the one who has the key to the business of an online shop. The margins in the electronics sector, for example, are crushed. They have always been very short. Between 4%-9%".

"If, in principle, these distributors mark a price line, it can be interesting. The conditions they propose are another matter. You have to go from dealer to dealer and ask them what conditions they set for you. You can get a 5% discount and a 40% discount for a large surface area...", he continues. "If, from the start, they tell you that you have to buy 100 units... that will already complicate things for a modest project", he gives as an example.

Three business models... which one do you bet on?

Okay, you want to sell touch pencils, but how? Just pencils? High-end? Going for a price? After doing the market research, on a napkin (because of the cliché) you write these three models, which when you start with the project are the only ones you can think of:

MODEL A.

It would be called www.tulapizdigital.com: it's a shop of touch pencils and spare parts of those pencils at a good price. You think about bringing product from China, take 6-7 models and try them out.

MODEL B.

You would open a shop that you would call something like www.bamboomanía.com. This is a branded-distribution shop model. In this case, the products of the Japanese company Wacom. You have looked for a quality product on the market and found that the reference is the Bamboo Stylus, and you have asked the sales contact to explain the conditions for their distributors. It may make sense to distribute this product and others of this same brand online. Your target: customers with high purchasing power and graphic artists.

MODEL C.

The latest model would be to sell accessories for tablets and mobile devices and focus it on a niche: children. The shop you would open would be something similar to www.babytablet.com, a shop of touch products for children: colour pens, pens for parents, leads for apps, cases and screen protectors. We will focus on the personalization of these products. The difficulty would be in making it known, but...

What would an expert say?

The expert would comment that "model A would not work as it is a single product, with little demand. It would not have enough customers to make it viable. Besides, it does not have, at heart, enough margin".

"B falls for the same reasons. The problem with these two models is that it is a small universe"

The C, however, could work. Why? "There is a boom in tablet penetration in homes. And snobbery from parents is now being transferred to children. It would work well with a blog and social networking strategy," he says. Besides, whoever has a tablet has reasonable purchasing power.

Where is your supplier

Where do you start? Where do you find suppliers? Already knowing what you want to sell and with what business model, you start your market research on the Internet to see what kind of tablet sleeves and touch pens (stylus is the name used in the industry) are sold out there and what other accessories can be found by those humans who do not have a tablet with an apple engraved on it. Your starting point is the online shops of Pixmania, Amazon and Imaginarium. Offline you go with your wife (who, by the way, ends up wearing your experiment hat) and your daughter to ToysRUs, Imaginarium, El Corte Inglés, to see what they have.

Then you do a Google search to discover the other online sellers (on the first and second page of results) to see what you find. You also analyse the volume of searches on Google Trends - a free tool that allows you to analyse the popularity of searches. You type into the search engines: 'Tablet accessories'; 'Stylus'; 'Android stylus'; 'Touch pens'; 'Children's tablet'; 'iPad cover smart'; 'Tablet accessories'; 'Tablet sleeves'; 'Tablet customisation'; and 'iPad sleeves'. The expression that offers more searches, has 1,500 daily. Hmmm. Few seem to you.

Your next question is: Where are the suppliers? As you don't know where to start, you register on Alibaba.com, a platform for contact between sellers and distributors, and start looking for suppliers by product categories. It doesn't take long to find one that makes a touch pen that, if you credit the photo, is exactly the same as the German AluPen. For an order of 100 pens, you are asked for 0.30 cents (already converted to euros) per unit. Taking into account the transport and customs costs, in the end, bringing a Chinese pen costs you 2.92 euros per unit. You ask this supplier for a sample. Here you can see the duster. You ask them for one and they tell you to order 100. It seems to be the usual thing (you'll know later), but you insist that it's just one. Ordering one costs you 14 euros, and 100, 156 euros including transport costs. You order one.

Customs and certification

In the meantime, you might want to talk to an entrepreneur who is an expert in import-export with China, to discuss with him guarantees, times, how to do business with the Chinese, in the event that in the end they are my suppliers.

He updates you on the customs procedures and costs and explains that if you want to address a child audience, you need an independent certification to guarantee the products and monitor the manufacturing. And that makes the operation more expensive. And you are no longer interested. The product takes two weeks to arrive at the end. It's bigger than you expected and much heavier. You try to see how easy it is to remove the pieces and it's not difficult. Thus, the brave ones are not suitable for children. You call the expert and tell him. "Of course, it took three weeks because they didn't see you as serious. You should have asked them for 100". You think he responds to you not only as an expert in transactions with China, but as someone with an entrepreneurial spirit. You tell him that you told them you wanted to test the product and they got upset. "Normal", he says.

Customize

You then have the idea of customising the housings of the mobile devices. You remember ForCover, a company you read about a few years ago. They wanted to do the same thing and as there were no manufacturers, in the end they started to manufacture themselves. You continue your search for suppliers and you find the Cosmonaut model by Studio Neat, you write to them... and they reply!

I need someone who...

"I have an idea to sell tablet and mobile device touch screen pens online. I already have prices from both European and Chinese suppliers and am now looking for an online trading platform on which to set up my shop. I am looking for prices and services". You write this to an internet service provider to do a little bit of mystery shopping.

You are clear that technology is the least of your worries, in the sense that it is a service that is outsourced to an expert. Technology, as the experts you talk to will insist throughout the experiment, "cannot put up barriers for you, it has to be useful and not leave you hanging".

What exactly are you looking for?

-Design and programming: development of an online shop, technical maintenance of the online shop and web hosting.

-Marketing and communication: online marketing (SEO and SEM), social media and web analytics.

- Management: an ERP to manage orders, invoicing, accounting and logistics-transport.

Within two hours you get an answer from the Internet provider you have written to. You are called directly by a consultant, not a salesperson. He asks you exactly what type of product you want to sell, at what price and to what type of public you want to sell the product. You don't know if you convince him with what you tell him, but you think it's good that he asks that kind of question. At least you get the impression that he knows what this is about.

The first things he tells you after asking you what you want to sell sound good:

-It's a sector we know well. We don't have any shops with your same positioning, but we do have customers in the computer accessories market".

- "Keep in mind that it's not so much a price business, as a volume business. You are going to move in a margin of between 5% and 8%".

- "We want to guarantee the survival of the shop. I prefer to sell you something cheaper and that you have a return on investment in eight or nine months and in a year make the web evolve and you spend more".

- "You are going to have to enter the war of the comparators: Ciao, Mercamanía, Google Shopping...".

This last one is something you hadn't thought of. Is it true? Do you have to enter a war of comparators? Then that same consultant already enters the more commercial part, which doesn't sound so good to me.

He tells you that everything costs 1,600 euros, about 133 euros a month, without taking into account billing issues, which raise the price by 49 euros a month. You have read in his web that there is a registration fee of 249-590 euros (depending on the package you buy), but he has not commented anything and you don't know if it is included in the total price he asks you by phone. You don't know that until three days later you receive the budget. In the end, it's not 1,600 euros per year, but 1,744 euros plus 3,996 euros (adding up all the additional monthly expenses). Total: 5,710 euros.

Logistics and gateway

Then you look for the rest of the service providers: logistics and payment gateway. The first ones do not give you budgets, so you extract them from their websites, and for the payment gateway, since talking to banks without real fire does not make much sense, you bet on PayPal, whose cost is public and, in principle, is not negotiated.

What do the experts think?

The independent experts you consult tell you that a technology service provider charges between 1,500 - 2,000 euros to set up an online shop using a quality template (Prestashop style, a proven solution), with a minimum design, functional for a common project and to give you some training. This does not include business monitoring. And neither does maintenance.

It is a starting point. But is it right or wrong? I don't know, so you ask a web software development. "When it comes to assessing a budget, divide the total investment you have to make by 40 euros an hour [something expensive, I know] and you will have the number of hours it will take for your project. With the budget you have in your hands, it gives you 45 hours to carry out my project.

Although there are lower prices, you prefer to go for the average prices of the table and calculate shipping costs in the worst case scenario (low sales volume). Experts insist that you can negotiate with these suppliers.

And this, how do I sell it?

What market share are you going to keep? What market share do you estimate for the short, medium and long term? This is the initial question - formulated in two different ways - that many marketing experts ask you, before you even think about what your final strategy is going to be. Frankly, you find it difficult to answer for an online shop like the one you are proposing and with the money you have at your disposal.

If your product is sought by 1,500 people and you get 20% of that market, you would sell 300 pencils or 300 cases a day. But just because 1,500 people are looking for it doesn't mean you're going to have 300 sales... So, what's the point, really, of answering that question? The paper not only holds the figures, but anything you write.

Before I start thinking about marketing strategy, you're about to throw in the towel. You think the experiment has already worked when you're about to throw in the towel... and you move on. In your case, you're weakening in the face of the doubts that everyone was asking you about what you want to sell and to which audience.

"Children? Just tablets and accessories? How are you going to reach them? They won't be interested," everyone told you. You were on the verge of believing this until you remembered (it took me several days, after re-evaluating other business models and being on the verge of returning to the subject of belts) that the business was going to be supported by a marketing strategy based on the generation of quality content: recommending children's applications for these tablets and recommending products (even inviting readers to bring products, in the style: if you are interested in buying this product, write to us...).

A 'social' project

You have to bet on a very social project linked to the child, or else it won't work. It has to become a shop that parents want to share with their children through proposals. Today we propose you to download this application for Android that does this and that... and in between you put them the little star cover, the different pen...

When it comes to entrepreneurship, it is always said that if you don't have money, you need time. And vice versa. In this case, for the project I have proposed, you do not have much money for marketing, so you save the part of pure digital marketing, for the rest you will only invest time. In this case, I take advantage of your previous experience in advertising.

The idea you have, to be honest, is to make a GeekDad, the Wired magazine blog for parents -with kids- technology lovers, in Spanish. Not a Spanish translation, but a blog with its own content, no copying and pasting. And improving it, in the sense that those parents get involved in their children's technology and focusing on parents' and children's leisure time. The idea would be to generate traffic and participate in leisure time blogs for parents with children - not in the technology sector, which is already full and I can contribute little.

The rest? SEM, for which I subcontract to a provider, and the natural SEO it is capable of generating.

With prices, on tiptoe

In the end, you decide not to compete on price and put reasonable prices, not low prices. In reality they are high prices, but with the conditions set by the suppliers they have to be higher than I would like to keep the company.

Furthermore, if what the pricing experts explain is true, it is always easier to start with high prices and then lower them, than to start with low prices and then raise them. Furthermore, I am very clear that I do not want to address clients who are only interested in price, because I will never retain them with my value proposal. In the case of products that you bring from the United States and that work with a minimum price, you keep that price and take advantage of it to put more margin into the personalised product, which is what you really make money with... provided, of course, that there is volume.

Note for sailors: you have only been able to calculate the price with the estimates you have been sent. You only got real quotes for the personalisation (it costs 10.89 euros per unit, including VAT and shipping costs), the COSMONAUTA pen (13.30 euros per unit), and an example of the case, GLIF (9.50 euros per unit). To calculate a hypothetical price of the tablets you had to do an exercise in economy fiction: you took the retail price of the supplier you are interested in, 199.99 euros, you applied an optimistic 10% margin to it and, even more optimistically, you thought you could negotiate with him to get the unit for 170.99 euros. Otherwise, you would not be able to keep up with the bills. The VAT paid at customs and the customs costs alone bring the unit to 214.55 euros, which is already a lot of money if you want to compete in the market. Fortunately, it is a quality product.

What name...? What logo?

After trying several names you bet on PequeTableta.com. I like the sound of it, but it's not until a month later that I realise how much it limits me.

Since it's all about saving costs, you designed the logo with your little hands. It's not the best thing in the world, you can put a lot of stickers on it, but when there's no money, the guerrilla strategies are so clever.

A few years ago you read a report about how to name a company and design a logo. You remember that one of the sources bet on linking the brand to a character. You thought that for the children's market - come on, for parents who consume these products for their children - a character would fit in well. Hence the drawing.

Doing the math

When I do the math, you try to be pessimistic, but how pessimistic do you have to be? For you, a conservative guy with a great aversion to risk? Selling zero potatoes. But, of course, in that scenario you don't set up a company or Richard Branson. So how much is selling little?

Now you think this whole experiment has a catch. It's not a question of how much it costs you to start up but of how much money you actually have, how much you are able to get and how far you are willing to invest in the business, how far you are willing to go. You think that this is the main difference between an entrepreneur and an amateur disguised as an entrepreneur who is trying to set up an online shop.

When you bet on bringing quality products, you are already talking about bringing in American orders. Bringing a minimum order of 600 units, for example, of the pen from the American supplier, costs you 7,979.24 euros, including customs (it costs you 8,400 euros plus 1,335.17 euros from 21% VAT, plus 286.11 euros from the 4.5% customs you estimate for this type of product). Come on, this is already more serious than bringing you 100 pens from China for 152 euros.

What do you think about it? Should I make a financial plan? Drawing up a cash flow plan helps you understand that you need to generate liquidity with another source of income that does not depend exclusively on the online shop.

After preparing your two-year cashflow plan, you realise that the most negative prospects are sad and discouraging, but that you have a chance. Something else is needed. You know that the calculations only take into account three products (the only ones for which I have real budgets and conditions), but it helps you get an idea of what the scenario is going to be.

Selling to schools

You realize that you will need an additional line of liquidity. You think about tackling tablet and mobile device customisation in elite schools. Like school and university rings in the United States, tablets in Spain: with the logo and the alma mater. Perhaps also for teachers.

You are starting to take stock of tablet and mobile device customisation in schools. You look for lists of elite schools in Madrid (somewhere you have to start). You look for public schools with better grades. I imagine that they will be the ones who are most proud. Your school, by the way, is in the top 10. Hmmm. It could be a good starting point. If someone you know is still there, they might even welcome you. You calculate a cheaper price, a four euro reduction in your margin in exchange for volume and the accounts improve.

Tuning up with turnover is, along with good market research, the most difficult part of a business plan. To try to get it right, you have to take into account a maximum: the turnover of your competitors - via the Trade Register and companies that sell company reports - and a minimum: the break-even point (how much you have to sell of each product to cover all your costs, fixed and variable). The first part, the maximum, you don't reach for time, so you just calculate the amounts you have to sell to cover costs. This analysis, halfway between the economic-financial analysis and the market study, also makes you see where the sector is going.

What is happening to your competitors? Are they going up? Are they going down? You are interested in seeing this not only to make turnover forecasts, but also to take the measure of the sector you want to enter.

What will my client see?

You read it. You even have examples, and yet when you do it yourself, it doesn't work. You make a sketch (just a sketch, you didn't want it to be the real homepage of your online shop) and then you discuss it with your Internet service provider. Although your online shop will be built on a template that you know where everything has to go for the sale to work, you want to make a rustic distribution of products and all the elements you want to have. When you already have everything, before asking your technology provider, you go to see an expert who is the one who puts the points on me: you haven't given a single one.

No surprises for your clients

You are only right about two things: one, that you apply - and assume - VAT on all prices and make it clear to the customer. As a user, you get quite angry when you start adding VAT to an online purchase. And I'm also right to call this policy 'total transparency' in shipping costs. You won't be able to put any margin at all on your shipments. The customer will pay for them - you won't have to pay for them - but it will only cost them what the service really costs. You don't want to make money out of it.

You may not have the best price, but logistics - real shipping costs - can be a competitive advantage

How do I improve my online shop logo?

You make a common mistake: the big logo walks or doesn't walk. You don't realize that your brand is not known and that the graphic design should be the last of your worries, being the first ones the navigability of the web page and the positioning. Putting the big logo takes away opportunities to introduce content that Google is interested in.

You have completely wasted your menu in terms of usability and positioning, and an expert suggests the following reflections:

- Why do you want to position yourself? Because it is not clear. It has to be in your company's slogan. You cannot lose this opportunity for your SEO". Convert your tablet...' does not work to position me and only confuses the Google search engine".

- "The login/registration is missing".

- "What are your expressions to define you in your shop? In your home page, the density of expressions must be around 10%".

- "You have to define the product card".

- You have to put the name of the product and you need to explain what the product consists of".

-You have to define the categories better.

- There are missing tabs, which help with SEO".

-You have to put content from your social networks, you can't force your user to click and lose him. Give them content".

- The menus are not clear.

- "Identify your brands in the menus".

The expert insists that, above all, you fail in that Google needs text and you, in this approach, do not give it. He points out that you are not clear about your definition of an online shop, nor about the products, nor which is tutarget. It suggests that you work on a list of expressions by which you want to position yourself. You point these out:

  • Accessories for tablets
  • Touchpads
  • Stylus
  • Touchpads for
  • Android
  • Touch Pens
  • Tablet for children
  • iPad cover smart
  • Tablet accessories
  • Tablet Covers
  • Tablet customization
  • iPad Cases

Then you insist on the importance of also including SEO description in the browser tab. "You think: "Online shop for children's tablet accessories".

Will it work?

The expert continues:

- "Run away from the rotator. Better bet on a fixed banner, a static image with a message you can change".

- "If you bet on a delivery time and a shipping price for products, it has to be much clearer and should be more focused on the premium area of your shop's home page!

- "The login (my cart) has to be clearer. You need information from your consumers," he explains. I tell him that I don't want to ask for a lot of data from consumers, and he counterarguments that the only difference between a registration questionnaire and a payment gateway questionnaire is that you have to ask for the email. For the interior product pages, I tell him that I have an idea of taking the products from the home page and putting them as they are, only in large print. [Yes, now that I'm writing it, I'm embarrassed...].

- "Take this opportunity to put all the info in the premium area and the price, shipping costs and the possibility of buying must appear".

- "Support the file with a good product description and photos".

Conclusions of your market research

If you've got this far, you'll realize that all this effort to draw up a business plan and set up an online shop doesn't mean that the project will turn out well... or badly.

There is a previous work before opening an online shop and a different work, when you already hire the supplier, you approve the design of the shop, you get the orders, you start generating traffic and you open the shop. When you open the shop is when the real work begins.

Among the things that should be clear to you are these:

1.-If you don't have the money you need to start up, don't start up. 

If you didn't have those 31,288 hypothetical euros in your pocket, you wouldn't get into a similar business, nor would you ask for money to set it up. Another thing is that if you had that amount... Only later would you ask for money.

2.-Even if the online investment is less 

than the investments previously required to start up, e-commerce still represents an economic risk. It is true that before the Internet sales channel existed, it was unthinkable - let's see, with nuances - to start a business - not to provide services - for less than 50,000 euros. A business for 35,000 euros The character of Antonio Alcantara would call us crazy. However, it is just as risky. It's still a lot of money. Just because you are playing for less money does not mean that there is no money at stake. Are you willing to throw away your capitalization of unemployment?

3.-If you have to change the business model 

because you realise that it's getting you nowhere or that it's going to run out, change it. Don't hold on to an idea. It's what the gurus call 'pivoting' and the rest of us, common sense.

4.-And if the business is not viable

, don't try to get it going. In the end, the project you've designed would stay in a shop to generate a supplementary income to a salary, but it wouldn't give me a salary to live on.

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