Getting Started in eCommerce
I’ve recently begun taking my entrepreneurial tendencies more seriously and have setup my first online retail store. I’m still in the learning stages so I consistently do a lot of research into things like shopping cart software, finding niche markets, and tracking down wholesalers and drop shippers. Here are some basic notes on these and other subjects related to getting started in online retail.
Identifying Niche Markets
There’s a lot of information out there on the web as well as some great books on market research and identifying niche markets. I’ve used a combination of books and general indicators on the web to identify niche markets. I’ve even put together a modest pop culture list of some of the areas of the web I regularly check out.
In general, I like to think of a niche as a real world problem that hasn’t been solved yet. Or a problem that’s been addressed by a few small companies but their solution leaves something to be desired. If the problem in question has been addressed by a larger company already be careful about trying to compete with them. Do your market research and determine if the market share is more or less equally shared among the competitors. If this is the case, you may have a shot at entering the market space and getting your own piece of the pie. If you go this route, be sure to identify a “buying factor” or something that would make your product unique among the existing products in the market.
Software Niches
If you’re a software developer like myself, another option is to troll some of your favorite forums and blogs. Sometimes people will complain about a key feature that’s missing from an existing popular product. You may be able to leverage this kind of information by providing a plug-in that fulfills the need. This is kind of a double-edged sword because the manufacturer may already be working on enhancements that may supersede your shiny new plug-in.
Another idea for developers is to leverage one or more open source software projects and build a new product. I’ve seen tons of small and large companies leveraging open source to create some great products and services.
If you already have a software idea in mind and you’re not sure how to execute it, the Business of Software forum is a great place to bounce ideas around or ask for general advice.
Shopping Cart Software and Services
When searching for a shopping cart solution I found that there are generally three paths you can take:
- Hire a programmer or web development company to build a custom shopping cart. This is probably the most expensive option but will generally result in a solution that fits your needs exactly instead of customizing an existing piece of software.
- Purchase off-the-shelf software for a one-time fee and either install it on your website yourself or hire a web developer to do it. Once the initial install of the software is complete, you may find that it’s missing a key piece of functionality. From here you can either hire someone to customize the software or find some other workaround.
- Use a hosted shopping cart service. An example of this type of service is Yahoo! Store where they provide everything you need to get your storefront up and running quickly. Most of these services charge you a one-time setup fee and a base monthly fee based on the number of items you sell or some other tiered structure. Beyond that, they provide lots of “nice-to-have” features at an added cost.
Some other hosted ecommerce solutions are:
When choosing one of these paths, I advise to stick with what you need. Nothing more and nothing less. If you’re not very technology savvy and are just starting out with this whole eCommerce thing, I would probably choose option three.
Although it may cost you more initially, this option will allow you to focus on your core business rather than educating yourself on technology and juggling hiring someone to do installs or customizations. Down the line when your online venture becomes a success, you can always switch to a more customized solution. By then, you have probably identified key areas of your business which can be streamlined.
Starting a Business
Before approaching wholesalers you should at the very least, have a state-issued Sales Tax Certificate. These are usually free or very cheap to acquire. Wholesalers and drop shippers generally ask for this certificate before considering selling to you.
Setting up a Merchant Account
Having a merchant account, generally means that you will be able to accept payment via credit card from your customers. In my case, I already had a business setup as a S-Corporation so I opened a business checking account for it. Once that’s done, you can open your merchant account and link it to the business checking.
There are several companies that offer merchant account services and at a minimum charge a monthly “gateway” fee and in most cases a transaction fee for each sale that you process. I advise anyone looking to open a merchant account to do your own research and pick a service that best fits your specific needs. When doing the research pay special attention to all of the fees involved.
If you’re planning on starting an online storefront with a shopping cart, be sure the shopping cart software supports the merchant account you choose. If you’re also looking to find a monthly service for your shopping cart (instead of setting one up yourself), ask if they offer a discount for opening a merchant account as well.
Finding Wholesalers and Drop Shippers
After spending countless hours using Google and other search engines to find wholesalers online, I found some great guides from other online entrepreneurs on eBay.com.
I also found a website called Worldwide Brands, which goes through the trouble of verifying wholesaler and drop shipping businesses before adding them to their directory. There’s a one time fee to access their wholesaler directory but seems worth the money if you’re serious about finding legit suppliers to do business with.
