Starting an online business

[Preemo]

Hi all,

Over the past few weeks I've been researching ecommerce businesses and what kind of steps need to be taken to start one up. It's safe to say some areas of it are massively overcrowded - the likes of electronic accessories etc

I'm 18 years old and am currently work in the print industry, where I have worked for the past 2 years - so anything to do with that is completely out of the window to save any problems with my current employer. However, I am fairly good with computers, which made starting an ecommerce business catch my eye. Although the problem I have is I haven't decided on a niche.

My main points/questions are:

• With the competition in ecommerce businesses, is it really a good route to go down?
• I would be doing this around my full time job, meaning I couldn't offer things like phone support etc, and would have to rely on email/ticket based support only to provide good customer service.
  
• To save costs, I would happily set up the website myself using a popular shopping cart system and knocking up a design (I'm fairly OK at this)
• I would look to find a dropshipping company to partner with.

Is this enough though? Would it really work without a massive investment?

I'm just looking for advice on whether this is a good route for someone like me to go down

Thanks
Ryan

 

[J4m3s@Finanscapes]

Good question!

The answer is probably simpler than you expect: It depends on your niche. You'll need to figure out what you'll do differently to other business in that area. Why will customers come to you instead of them? As a small player the answer is probably not that you'll be cheaper than the competition (that's a tough road to pursue, even though it might seem like the easiest/ best way to compete).

Are you thinking of retailing a particular type of product(s)? I read a good book ages ago which might be of interest called "the 4 hour work week" by tim ferris. Probably available at the library or on amazon new & used for cheap. It gave me a mountain of food for thought before starting my business - even though I never directly followed his model. He recommends choosing a market that's close to your heart - hill walking, caravanning, skateboarding - whatever. You'll know the market well, know the places/ sites you go to when you want something (and how you found them) and you'll probably have a good idea what the shortcomings of some of the current retailers are.

You won't need a massive investment, but you will need to understand the market really well and be very level-headed about whether or not you're about to start a solid business. You've already identified one of your biggest challenges: The cost of setting up a website to sell "stuff" is low - that means loads of people do it. You need to spend a lot of time figuring out why you'll be different (and making sure people will pay you for that difference) before putting too much time and money into executing the idea.

 

[Preemo]

Hi James,

Thank you for your reply, it's really appreciated

My original idea was to start s sweet shop business. I was looking to launch this mainly through Facebook and also have an online store to give customers the option (and with the hope to move it all over there in time). The local sweet shop has closed down as he's moved away, so whilst there's the odd sweet seller around my area, there isn't anything really popular.

I know the margins would be quite low, especially at first, but what worried me the most is what I'd have to invest to get started. For example, there are thousands of sweets out there, so if someone was to order something out of the blue, I'd have to order it with the wholesaler (finding one is another problem!) which would incur delivery charges - which I'd somehow have to recuperate in the sale price.

I'd have a lot of ideas with this line of business which I feel would make me unique compared to the others out there. Also, working for a printing company would work in my favour as I could brand the jars myself. Small things like that would work well in my opinion.

I'm a little worried though, someone I spoke to raised the point about sweets obviously still being a kind of food so it may not be a business I could run from home. Then obviously it's a matter of finding a supplier, and overcoming the question of whether to hold stock or buy when orders come in.

Would be great to receive any feedback

 

[Tim Coulter]

There are several factors that influence whether a given product type is likely to be viable for sale online.

As James mentioned above, choosing the right niche is very important and it's usually better to choose a very narrow niche in which you can excel as a specialist, rather than appearing as a "me too" supplier in a broader market.

However, aside from the many (very important) marketing considerations, there are also some practical factors that make some products fundamentally unsuitable for sale online.

For example, distance selling perishable goods is risky, because there is a chance that they will not arrive in time to be consumed at their best. Although overnight delivery is readily available, the additional shipping cost often cuts too deeply into the margin on any sale.

On the subject of delivery costs, it's also important to understand that consumers are increasingly drawn to ecommerce sites that offer free delivery. In 2011, a study by the e-tailing group revealed that 73% of consumers regard free shipping as critical.

Whether or not you choose to charge for delivery or to absorb it into your margin, it is still a very important part of your cost equation. Heavy products with a low average order size are particularly challenging, because they typically result in an excessively high proportion of the overall order value being spent on delivery (which makes it harder for the seller to offer something that is price competitive with offline alternatives).

For your suggestion of a sweet shop, I think it might be viable if you are offering something exclusive and expensive (such as a high-end chocolate product range) but then you would be competing with established retailers, like Thorntons and Leonidas. For lower range confectionery, I would definitely advise modeling your delivery costs before jumping in.

In fact, whatever product range you choose, examining all the various logistical issues in advance might save you some pain down the line.

 

[fisicx]

I was looking to launch this mainly through Facebook and also have an online store to give customers the option (and with the hope to move it all over there in time).

That right there is where it will all go wrong. People don't buy sweet through facebook. They use google, ebay, amazon and the hundreds of other online stores. It's a great idea but one that is going to take you a long time to build up. Work on a 5 yerar plan with expectations of making a profit in three years.

 

[Preemo]

Thank you for your honest feedback - there are definitely a lot of factors I'll have to take in to account.

Maybe it's one of my spur of the moment ideas!

 

[SolutionLab]

I'll have to disagree. People would buy sweets off facebook, just not for themselves.

Also, you can sell directly on facebook as well, using Ribbon dot co. Try it out in that environment, with your friends and see if it catches on. It's easy to set-up and gives you a good opportunity to test out stuff.

On building an actual e-commerce website, don't go into it just now. To avoid legal issues and a lot of headaches, it should be done professionals and not only will it take you a lot of time to manage it but there will be a lot of non-development stuff you'll need to consider, like insurance (you're selling foodstuff afterall), security, SEO and so forth. So don't jump into it. See if it works on social networks, make some money if it does and then if you're still into it hire a web design company with proper credentials to make you a store. But test first.

 

[ben@hewoco]

There's been loads of discussion about whether sweets are the right choice for an e-commerce site and I don't really have much to add on that. I love sweets but tend to buy and gorge myself on them when the mood takes me, I've never bought them online.

On e-commerce infrastructure, check out Tictail dot com - it's a Finnish (I think!) start-up team that offer free online shops. It's a really robust system and is so, so simple to get going - I used it for a coffee concept I was working on and I can't recommend it enough.

 

[CPSMedia Carl]

You could go over to flippa.com and look into the sorts of sites that are selling with revenue from dropshipping, might give you a few ideas

 

[tedwood]

Ryan, I'm going to be brutally honest with you but you need to be providing value beyond just selling a product to the general market. What else can you bring in that's going to benefit them purchasing from you over the competition. As well as that besides having strong web design skills, I highly recommend you brush up your skills in SEO and PPC. It will go a long way to cementing your position in the market and gaining traction.

 

[localex]

There is one company i know of that does this. It's called aquarterof and you can search for it. Never used them but they have been around for a few years.

I think the two key issues you have is (i) whether these are impulse purchases and (ii) the cost of postage/packaging - the two are linked. An impulse purchase would likely be for a small quantity and postage would probably be very high as a % of total cost.

I think the two things you need to do if you want to be successful are (i) try and get hold of nostalgic sweets (Woppas anyone!) or stuff that's hard to get hold of and/or (ii) sell it to the gifts market.

As an example, I would be very happy to receive a box of Woppas for my birthday that came in a well presented package. The sender would probably not be too concerned about the P&P costs since it is a gift and you would be able to charge premium price for it.

 

[jdluckhurst]

I think it might be viable if you are offering something exclusive and expensive

The higher margin sweets would be a much sounder idea. I know of no one that would order a load of 1p sweets like you used to get at the post office (or was that just me?!). High end chocolates could work - or more expensive novelty presents like a big sweet shop style tub of rhubarb and custard, maybe even customisable labels to make them more attractive?

My tuppence is that without doing the numbers my first instinct would be that without initial start up capital and marketing, it is going to be a pretty tough industry and niche to start in. If you really wanted to, I would advise on starting the website, getting it live, doing some SEO on the side and seeing where it went. You don't need to do much until you start getting orders which will be 6-9 months down the line.

 

[makeyourbusinessbetter]

Hi Ryan

If you've not yet read 'Starting and Running an Online Business for Dummies', please do. Not only does it have lots of useful information on ecommerce, it also has excellent advice on starting and running a business in general.

Have a good year.

Gordon