how to start a e-commerce business

Many people dream of being their own boss rather than slaving away at a job they hate. However, many of these people also put their dream on hold because of three reasons: lack of capital, complicated to set up and the risks involved.

What if I tell you some types of business are easy to set up and don’t require a hefty investment? And no, I’m not talking about multi-level marketing (MLM) or pyramid schemes here. These are legit businesses.

In this series of articles, I will be introducing five types of ventures that aren’t complicated or expensive to set up. Here’s the first.

E-commerce – the business opportunity that everyone is talking about.

Indeed, E-commerce is booming. With the right consumer factors, market conditions and the unfortunate prolonged proliferation of the COVID-19 pandemic, it’s like the perfect storm. Everyone, including your aunties and uncles, is buying essential and non-essential stuff online.

And the statistics support the claim too. According to Statistia, the percentage of consumers who made at least one purchase online in the previous 12 months in 2018 grew to 93% of internet users in the U.S., 97% in the UK, and 92% in China. That’s almost everyone! And Statistia anticipates a threefold lift in the e-commerce sales globally from US$1.3 trillion in 2014 to US$4.5 trillion in 2021.

We see a very similar trend in Singapore too. Revenue in the e-commerce market is projected to reach a staggering US$2.33 billion in 2020 and is expected to grow at an annual rate of 12.1%. This means that by 2024, the projected market volume for e-commerce in Singapore is US$3.68 billion. The research also indicates user penetration to be at 52.4% in 2020, and is expected to reach 64.3% by 2024.

It all sounds so exciting! So, is the e-commerce business for you? After all, it isn’t that difficult to set up a digital platform and start selling stuff. But before you say “yes”, you first need to understand what it takes to be successful in this very competitive arena.

What To Sell?

First thing first. What should you sell? Are the products you are thinking of selling unique? Do your products even need to be unique? Are you going for commoditised products (essential, high-demand or popular products) or are you planning to serve a smaller but specific group of customers with niche products? Do you have trustworthy suppliers?

Whatever products you pick, remember the first rule of selling online: sell what consumers want to buy instead of what you want to sell or have access to. This is marketing 101 – either satisfy your customer needs or help them solve their problems.

There are plenty of websites, online forums and courses that teach you how to identify trends and fast-selling products, so do spend some time understanding the works. You can also do keyword researches to see what people are looking for and what needs are yet to be satisfied by the market. If you have an idea of what to sell, visit your potential competitors and learn from them.

My take on this: Competition in the e-commerce game is fierce, and products come and go very quickly. You need to be constantly ahead of the trends to win.

What Is Drop-Shipping & Is It For You?

You’ve likely heard of drop-shipping and stories of how a friend of a friend of a friend became rich and successful quickly because he or she is selling shit loads of stuff online through drop-shipping.

So, is drop-shipping the right way to go?

For the uninitiated, drop-shipping allows you to sell products and pass the orders to a third-party supplier (known as a drop shipper) who then fulfils the order to the customer.

Here’s how it works. You upload products from the drop shipper’s catalogue (you can pick as many products as you want) on your website or your stores on online marketplaces like Qoo10, Lazada and Amazon. When a customer makes a purchase, you purchase the product from the drop shipper at a lower price (so you earn a margin). The drop shipper will then deliver the product to your customer.

With drop-shipping, you don’t need to maintain a large inventory (or any inventory at all), rent a storage/warehouse nor manufacture your own products. You can start your drop-shipping business quickly, at home, and with very little capital.

It sounds like a fantastic deal so far with almost no risk involved. If you think so, well, so do lots of other people. That’s why the industry has become very competitive and cutthroat.

To help you decide whether drop-shipping is right for you, I’ve listed the pros and cons below:

Pros of Drop-shipping

  • Easy and cheap to set up – all you need is a website, and if you’re selling on marketplaces like Qoo10 and Amazon, you don’t even need one. And yes, you can work from home in your pyjamas.
  • No inventory and warehousing overheads – you only purchase from your drop shipper whenever there’s a sale, so your cash flow will look gorgeous to your accountant.
  • Requires no logistics – since fulfilment and shipping are taken care of by your drop shipper, you don’t need to worry about packing, delivery, etc.
  • Product variety – because you don’t need to keep any stock, you can pick as many SKUs to sell as possible.

Cons of Drop-shipping

  • Intensely competitive – As mentioned earlier, many people have already jumped onto the drop-shipping bandwagon, so you can expect some very strong competition.
  • Low margin/profit – While the profit margin of each product varies, it is generally not high after factoring in your marketing cost. And due to the intense competition (other people are also selling exactly the same things as you’re selling), you may need to offer discounts to attract customers, thus lowering your margin further.
  • Lack of control over product quality and fulfilment – unless you make it a point to try every single product that you sell, you won’t know their quality or how reliable the shipping process is. Suppose something goes wrong along the way, your customer will come after you, not your drop shipper.  And if that happens frequently enough, your brand or reputation may be affected.

Who Are The Drop Shippers?

So, who are the drop shippers, and how can you find them? Here are three popular dropshipping resources to get you started:

AliExpress

One of the most popular dropshipping services worldwide, AliExpress is a wholesale and dropshipping platform that connects drop shippers to suppliers and products. You can find millions of incredibly low-priced products from over 40 categories, ranging from electronics to apparel.

Doba

A marketplace that brings manufacturers and suppliers together, you can find over 2 million products here and place your customers’ order within Doba as well. With Doba, you can search through products in your industry and consolidate them into custom lists. Their basic service plans start at $29 a month, although it has a 14-day free trial.

SaleHoo

If you’re thinking of serving the U.S, U.K or Australia market, SaleHoo has a wholesale supplier directory that connects drop shippers to suppliers. The good thing about it is that they screen their suppliers before adding them to the directory, and thus, they get high marks for customer service. SaleHoo membership costs $67 per year and has a 60-day money-back guarantee.

Final Word on Drop-shipping: It’s not a get-rich scheme for most people. It’s about finding the right niche and products. It would help if you were experienced in e-commerce and be constantly on the ball. Having said that, I think drop-shipping can be useful in supplementing the product offering you have online, or for novices to test the e-commerce water. Thus, the key here is picking a reputable drop shipper to do your test drive with.

Decide On Your Platform

Next, you need to decide on the platform to sell your merchandise. Here, I classify the platforms into three types: (1) e-commerce marketplaces, (2) e-commerce platforms and (3) your own DIY e-commerce store. Let’s compare them:

 E-commerce MarketplacesE-commerce PlatformsBuilt Your Own Store
What are they?An online marketplace is a type of e-commerce site where you can list your products and sell them to the customers. The four leading e-commerce marketplaces in Singapore are Qoo10, Lazada, Shopee and Amazon.  This means setting up your own e-commerce store on e-commerce platforms such as Shopify, WooCommerce, Wix, etc.You can also choose to build and run your own store entirely on your own with a CMS programme such as WordPress or Joomla.
What are the costs?There is generally a one-time registration fee. The platforms also charge a commission for every transaction. However, Shopee and Carousell are free to list and sell so far.  Since these are usually SaaS e-commerce platforms, it comes with a monthly subscription fee.You need to purchase your website’s domain name and web hosting services from service providers such as Bluehost, SiteGround, HostGator and WP Engine.
Pros– You can list and start selling your products really quickly.
– You are tapping on their high number of visitors browsing the sites daily.  
– You have more control of your website, such as look, content, etc.
– You also have flexibility in branding because the website is yours.  
– You have full control of your website, including its look, content, layout, etc.
– You also have full flexibility in branding because the website is completely owned and managed by you.
– There is no limit on the number of products you wish to sell.
– The overall cost of maintaining the site is lower compared to SaaS e-commerce platforms.  
Cons– Competition is sky-high. There are thousands of other sellers like you.
– There is a lack of flexibility in how you wish to sell your products because there are certain rules and templates to follow.
– Some marketplaces could cost you more due to the registration fee and commission.  
– You won’t get the reach and visibility of marketplaces. Unless you are aggressive in your marketing, you may be cutting out substantial local and international markets.
– If you are new to e-commerce, customers may hesitate to buy from your site because they don’t know how reliable you are.
– This is more complicated to start because you have to do everything on your own.
– There is a learning curve for CMS programmes as they may not be as intuitive as those of the e-commerce platforms.

Of course, the three options are not mutually exclusive. For example, you can always sell on online marketplaces and have your own website at the same time.

Payment Gateways

You mustn’t neglect your payment modes, especially if you are building your own e-commerce site. When you make payment difficult for your customers, it becomes a barrier to completing the transaction. High shopping cart abandonment can potentially harm your business and damage your brand.

While eNets (credit cards) and PayPal are still the standard options, don’t be afraid to explore new ones, such as GrabPay, SmoovPay and Stripe.

Final Word on Payment Gateways: Security is a huge consideration for customers making online purchases. Most buyers trust e-commerce websites that have a TrustSg mark, which is an acclaimed seal for credibility and security for an e-commerce site. It indicates that your online store is fully compliant with all codes and standards set by the Singaporean government.

Sell, Sell, Sell

“If you build it, they will come.” Right? Nope, it doesn’t work for e-commerce. You have to get them to come. Repeatedly. With lots of marketing and promotions, and endless searching of keyword information, tweaking of SEOs and SEMs, monitoring of traffic, calculating of pay per click and conversion rates, drafting of email marketing messages, and so on.

We won’t go into the details here because there is simply too much to cover (read our article DIY SEO Tips for Small Business Owner), but the message is this: your e-commerce business won’t fly unless you put in lots of effort into marketing. Many e-commerce entrepreneurs leverage social media platforms and other paid online marketing channels to advertise their services and products. Those are good, but remember, you’ll have lots of competition too.

We’ll end this section with a list of marketing options you can consider:

  • Drive traffic to your online store with PPC (pay-per-click) advertising;
  • Power your website with SEO so that it ranks high on search engines;
  • Use email marketing to keep your customers engaged with your brand; and
  • Make back-end sales and up sales to make sure your customers keep coming back for more.

Operational Infrastructure

Your job doesn’t end here. Once the orders start coming in, you’ll need to make sure you have the necessary infrastructure to follow through the order. These include:

1. Fulfilment (logistics and delivery) – How do you ensure that you always have sufficient stock? Where do you store your products? Are your packages packed securely? How do you deliver the products to your customers safely?

2. Customer Support – How do customers reach you if there’s a problem with the transaction or delivery? Do you offer returns and refund? If so, what’s the process?

3. Accounting – As a business, you need to track and reconcile sales invoices, expenses and bank transactions. And as your business takes off, you may need a sound inventory management system to ensure you don’t run out of stock.

All of the above are tough, and sometimes, dirty work that you’ll need to dig into. These back-end operations are just as important as your shop front, so don’t ignore them or take them lightly.

About the Writer:

Judy is a writer, founder of One Elephant and a part-time lecturer. She co-authored Are You Brand Dead?, one of the few books on branding in Asia that focuses on SMEs.