7 Things to Consider before Starting an Online Store

Editor's Note: Take a look at our featured best practice, Online Payments Platform – 5 Year Financial Model (Excel workbook). Financial technology (better known as fintech) is used to describe new technology that seeks to improve and automate the delivery and use of financial services. ​​​At its core, fintech is utilized to help companies, business owners, and consumers better manage their financial [read more]

* * * *

Starting an online store can be a great way to make additional income or even start a successful business. An online storefront doesn’t require the amount of space it takes to house inventory, rent is generally cheaper than retail location costs, and it makes your business accessible from anywhere. Given that this type of business has many benefits, you should consider some factors before you start an online store.

1. What Type of Product Do You Want to Sell

The first step in starting an online store is to decide what you want to sell. You can either pick a single product or multiple products. If you plan on selling only one product, make sure it is something people are likely to purchase because if no one wants your product, no one will buy it. If you plan on selling multiple products, make sure they are related so people who are browsing for one item might see another and want to purchase it too.

2. How Much Inventory Will You Need

Inventory is the amount of physical stock that a retailer carries at any given time. Determining how much inventory you need will depend on what type of product you are selling. If you are selling clothes, for example, multiply the number of clothing items you want to sell by the average amount of time between reordering products. This will give you an idea of how many items to order initially. Do not get stuck with excess stock that ends up sitting on your shelves and collecting dust.

3. Do You Have the Funds for Starting an Online Store

When starting any business, the biggest expense will generally be purchasing inventory. While this can happen with a regular storefront too, you also have to consider other costs such as payroll, marketing materials, utilities, etc. Make sure you take all of these into consideration when determining how much money you will need to start up your online store.

4. Where Are Your Customers Located and How Can They Find Out about Your Products

Once you have decided what kind of product(s) you will be selling, make a list of all the places where people who might be interested in this product would visit. Think about what websites customers might view before they decide to make a purchase, and try to create a presence on these platforms.

5. Is There a Demand for This Product in Your Area or Is It Just Something That People Don’t Buy Where You Live

If you live in an area where no one seems interested in the kind of product you want to sell, this may not be the best idea if your goal is to make money. It will take a large marketing campaign and time before people know about your store, so you may have put all that effort into something that no one wants or needs.

6. What Is the Cost to Start an Online Store If I am Using a Website Builder like Shopify or Big Commerce

If you have never created a website before and don’t want to hire someone to do it for you, there are many online store creators available. These platforms allow you to easily add products, create a beautiful design, accept credit card payments, etc. They offer different features depending on how much you would like to pay.

7. Will the Economic Nexus Apply to My Online Store

As a business owner, you will have to pay quarterly taxes that are based on your total sales for the year. It is possible that large online retailers such as Amazon could be required to collect sales tax from their sellers which would mean added costs and paperwork so it’s best to do research on whether or not this will be required for your business.

For a summary of economic nexus laws by state click here.

Conclusion

Starting an online store may seem like a daunting task at first, but once you do your research and plan accordingly, it can be very rewarding. The most important thing is to make sure there is actually demand for your products in your area or else the whole process will only result in wasted time and money. With these tips in mind, you should be able to get your business up and running in no time.

Do You Want to Implement Business Best Practices?

You can download in-depth presentations on E-commerce and 100s of management topics from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.

For even more best practices available on Flevy, have a look at our top 100 lists:

• Top 100 in Strategy & Transformation
• Top 100 in Digital Transformation
• Top 100 in Operational Excellence
• Top 100 in Organization & Change
• Top 100 Management Consulting Frameworks

These best practices are of the same as those leveraged by top-tier management consulting firms, like McKinsey, BCG, Bain, and Accenture. Improve the growth and efficiency of your organization by utilizing these best practice frameworks, templates, and tools. Most were developed by seasoned executives and consultants with over 20+ years of experience.