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Success Saturday: Putting Together an eCommerce Site

On the last Success Saturday, Bobby asked how I did my site, which was one of the ones I (shamelessly) offered as an example.

He suggested I do a blog post on it. Well, okay…

Business Licensing

Business licensing is something that varies country to country and, within the United States, from state to state and even county to county. Before starting your business, you’ll want to talk to an accounting professional, your county auditor or other business professional or government representative that can advise you with correct information specific to your locale.

This is also an important part because, with many wholesale merchants, you are going to need a business license number in order to establish that you’re an actually business and not an ordinary consumer looking to save some money.

Choosing a Type of Business

The first thing you have to do is choose the type of eCommerce business you want to be in. Are you just looking for something relatively easy and profitable? Are you looking for something hands-on, or something that will run itself while you vacation around the world? All these are factors that will go into deciding a type of business.

For example, if you are the hands-on type, and you want to be able to handle and inspect the products you send out, you’re going to want to be a direct seller of goods. That means you’re going to stock the products in-house (either literally in your house or you’ll need to rent a storage space or even office space for your products and business).

If you want something with a little less work and inventory, then you’ll want to look into dropshipping or affiliate programs, where you don’t stock anything.

You could also do a combination of the above. You could stock popular products, have less popular products dropshipped to your customers by a dropshipper and sign up for affiliate programs for products that are complimentary to your own.

In my case, I do a combination. Most products I carry in stock. There are other products that I order as needed from a wholesaler (though I don’t have them dropship; they just send direct to me). And, then I have affiliate programs for other related products. (You won’t see all this on the site you see above, but I do that with other sites and this is how it will be when I finish my major overhaul of my eCommerce site.)

Choosing a Niche

Again, this is something I’m not going to explain in detail in this post. The most common advice is to find something that matches your interests, though some people just look for something that’s highly profitable. Be sure to choose something you’re willing to stick with. Is it a niche you feel comfortable staying in if you don’t get rich overnight? In all likelihood, it’s going to take time to build your traffic and sales to the point where you’re making (hopefully!) money, but if you don’t see yourself sticking it out in the niche for at least 3 to 6 months, you’ve chosen the wrong market to be in! Now, I’m not saying that you’ll be successful in 3 to 6 months; only that it generally takes that long before you start seeing any type of results.

Finding Products

Once you’ve chosen your niche, you need to find products that you can sell.

Affiliates – If you’ve decided to be an affiliate, then you need to find some online merchants with affiliate programs you can join. Here’s how:

  • Surf the Web: One way is to visit various merchants’ sites and see if they have an affiliate link on their home page. If they don’t, you can always eMail them and ask if they have an affiliate program. Some merchants may have affiliate programs but not advertise that they do!
  • Join an Affiliate Network: You can join an affiliate network and browse their business members to see if any of them carry products that fit in your niche. Here are some of the bigger ones:

    Be aware that some networks or individual merchants within a network may have minimum traffic requirements for your web site. In those cases, you’ll have to either concentrate on building traffic early on or use merchants without traffic requirements.

Reseller – If you’ve decided to be a reseller, then you will need to buy products wholesale. Alternatively (or additionally) you can work with merchants who will dropship to your customers.

Consider, too, that there are different levels of wholesalers. Some manufacturers will produce a product and sell it direct to resellers at wholesale prices. Other manufacturers will only sell products to distributors who then resell the products to retailers. Still other manufacturers will sell to anyone who meets their minimum purchase requirements.

For some manufacturers, you may have minimum orders of under $100. Others will require minimums in thousands of dollars. Alternatively, some manufacturers may sell in minimum quantities (rather than dollar value).

Likewise some distributors will have order minimums as well.

All these minimums are things to keep in mind when choosing products. In some cases, the minimums may be more than you want to start out stocking, especially if you don’t know how they might sell. And, bear in mind too that, when you go to reorder, you’re going to have to meet the minimums again. (Some merchants may have a higher initial minimum and lower subsequent minimums to make things a little easier.)

So, if some products move faster than others, are they selling fast enough that you can justify a reorder of just those items? Something might sell out because it was a passing fad, and if you order more, you risk being stuck with a number of them.

These are areas where experience can be a big benefit. You might want to start out using merchants who dropship and then only start stocking products yourself when you have a better idea of what sells and what doesn’t.

Another option, of course, is to try to unload your slow-moving merchandise on eBay to at least (hopefully!) recoup your costs so you can stock faster moving products.

So, how do you find those products?

  • Search Google and Other Search Engines: Some wholesale merchants promote themselves better than others. Depending on your niche, you may be able to find many of them in the search engines. Be aware, however, that even in this day and age, some manufacturers don’t even have websites! (Some may not even have eMail!) And, also be aware that there will be many resellers and distributors fighting over “wholesale” searches, who aren’t really wholesalers but just deep discounters.
  • Contact the Manufacturer Directly: If you can get a hold of the actual product(s) you want to sell or find it online, you can find out who manufactures that product and contact the manufacturer directly. Ask them if they sell wholesale or, if not, who their distributors are. Many manufacturers will be happy to provide you that information.
  • Subscribe or Join a Wholesale Directory: Some people frown on the idea of paying for a list or directory of manufacturers, wholesalers, distributors and dropshippers, but the fact of the matter is that a good directory can save you a lot of time searching through Google and other search engines. Of course, don’t spend the money if you simply cannot afford it and do be careful as there are a lot of low-quality directories out there that oversell and under-deliver. Look for something with a money-back guarantee so you can get a refund if the directory doesn’t prove worthwhile for your needs.

    Here are two that I recommend:

    • Worldwide Brands: I’ve been a member of this directory for a number of years. Lots of different merchants in different categories for you to choose from. Whenever I start researching a new eCommerce site, this is one of the places I go to see what types of products are available in that niche.
    • SaleHoo.com: I’m not a member of this one, but have been an affiliate for a couple years. They also have a large selection of merchants, and I’d join if I wasn’t already a member of Worldwide Brands. I’ve had a good number of referrals to this one, and no returns that I can recall.

Building Your Site

Here again you have many options. I’ll just cover a few.

  • Through a Third-Party: You can set up a store and host it with a larger company, such as:
  • Through a Webhost’s Tools on Your Own Website: You can add a shopping system to your own website, or integrate your current website with a shopping site that’s hosted separately:
  • Using Third-Party Software Solutions: There are countless solutions out there. Many come with a basic template system that you can modify if you wish while others are more hands-on and customizable. Here are just a few:
  • I went with a “roll your own” type solution, and basically wrote my shopping cart system myself rather than using the templated or built-in version.

Accepting Payments

Finally, you’ll need a way to accept payments. You can allow your customers to mail in a check or money order and, while that is good to have as an option, you’re going to lose a lot of sales if that is your only method of payment.

You’re going to want to be able to accept credit cards in some way. And, with the latest PCI Data Security Standards, doing that online can be difficult and expensive, especially if you’re just starting out. Be sure that your shopping cart solution is compatible with your credit card processor and make sure that it meets the PCI DSS requirements.

If you want to look into getting your own merchant account right at the start and handling credit card transactions directly, rather than through a third party, here are some of the more well-known payment gateway services. Some of them also have resellers, so you might also want to look for those resellers, who may be more familiar with different shopping cart solutions and better aid you in integrating your shopping cart with the payment processing system and making sure it meets PCI DSS requirements:

You should be aware that there are some hefty fines and penalties if you get caught processing credit cards and not meeting PCI DSS requirements. Last I remember, the penalties were as much as $25,000 or $50,000 plus you could lose your merchant account.

If you don’t want to start out with a merchant account and worrying about PCI DSS requirements, you can use a third party processing service. Two of the most well-known are PayPal and Google Checkout:

  • PayPal: PayPal offers Website Payments Standard and Website Payments Pro, which are both affordable options for accepting credit card payments on your eCommerce site. You can also accept PayPal and checks online. They also have a higher end option where they just do the backend processing and no one even knows you’re using PayPal, which is good if you have customers you think don’t trust PayPal. I think that you can either get a merchant account through PayPal or through whichever bank or service you use, and PayPal can function as the payment gateway in either case. It is, I believe, just like using any other payment gateway. In fact, PayPal bought VeriSign’s payment gateway system three years ago.
  • Google Checkout: Google also has their own checkout system to compete with PayPal.

You can choose one or the other, but using both would be a good option, as it would give your customers the option to use the one they feel most comfortable with or have an account with.

Note that it is not necessary for your customer to have a PayPal account or to set one up in order to checkout through PayPal.

If you choose one or the other as your sole payment processor, both also have their own shopping cart systems that you can integrate into your website. Or, if you’re using a third party software solution, such as those mentioned above, check to make sure they can work with PayPal and/or Google Checkout before installing and setting up your store! Many of them are, though some may require rolling up your sleeves and getting into the code to do it!

Conclusion

Those are the basics of setting up your own eCommerce store. It’s really not as complicated as it might look, though the level of complication is going to depend upon how you decide to go about doing it!

Don’t let fear stop you from doing something you want to do. Just take things one step at a time and follow through. The most important part is taking that first step. If you just keep putting it off, you’ll never find out if your idea would have paid off or not.

As always,
Believe. Act. Achieve!

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19 Comments »

Comment by Michelle Gartner
2008-07-05 23:40:27

Wow- Dan that was so cool of you to do a comprehensive post like that.
Since I am a partner in a web development company- I actually have some
rather strong opinions on some of the solutions you have offered. The thing is
sometimes you can’t talk a customer out of using a solution that they are sold on- even if it is a stupid solution.

I tend to steer clients away from the 3rd party canned stores like eBay’s Pro Stores or the Yahoo Stores. If you break down the monthly subscription fees and get an open source solution and buy your own hosting, etc you will save a LOT of money.

If you have your business bank handle your credit card processing, sometimes they have a better deal for you especially if you have been a customer for sometime. There are so many variables and different percentages charged even in one e-commerce business that you may have to mash the numbers about to find out who is the best deal. Too they (your bank) are sticklers for making sure you are compliant in my experience and they will look over your ssl certificates and the technical aspects before actually processing any payments. I think they are just as liable if you aren’t compliant but I could be wrong.

Even though I am an accounting professional- I just wing it half the time. It generally works out in the wash, I have found in my experience that the IRS is really helpful and professional, but the state of WI (where I collect sales tax for them) – well let’s just say they are unhelpful blood suckers- who live to bleed business tax entities… I will probably get a call from my local tax agent on Monday- as she is a really unsympathetic pencil pushing mobster.

Comment by dcr
2008-07-05 23:55:43

I tend to steer clients away from the 3rd party canned stores like eBay’s Pro Stores or the Yahoo Stores. If you break down the monthly subscription fees and get an open source solution and buy your own hosting, etc you will save a LOT of money.

Yeah, I should probably have done a bit more in that section. The third party stores are good for people that want to get up and running without a lot of additional hassle. Some people just don’t want to fool around with their own hosting and setting all that up. They just want to enter products and get up and running. The tradeoff is that it is likely going to cost them more for that convenience.

If you have your business bank handle your credit card processing, sometimes they have a better deal for you especially if you have been a customer for sometime.

You know, I think I was thinking about that at one point, but it never made it to my fingers. ;-) Your local bank can be a good starting point. On the other hand, some local banks are still completely clueless about stuff like that. But, it is a good idea to ask them.

Comment by Michelle Gartner
2008-07-06 10:42:11

” On the other hand, some local banks are still completely clueless about stuff like that. But, it is a good idea to ask them.”

You can usually tell which local banks facilitate technology and which are clueless by two things.

1) How is their website and internet banking?

2) Does a hound dog and Barney Fife still greet you at the door when you go to make a withdrawal?

Number 1 is actually a really good inidcator.

 
 
Comment by dcr
2008-07-05 23:57:48

And, yes, sometimes it is difficult to talk someone out of something they are sold on. But, worse than that are the ones that decide to go with another web developer–and use the solution you recommended!

 
 
Comment by Awake In Rochester
2008-07-06 01:22:40

WOW! I’m still trying to master a blog, so this is above my head. But I appreciate the amount of information, and time that you put into it.

 
Comment by Bobby Revell
2008-07-07 06:28:21

Thanks Dan, this is a great post! I think most e-commerce sites out there don’t do everything correctly, especially with their shopping carts. Of the ones mentioned, what is the average cost of getting a service from say…authorize.net?

I’ve had it in my head that starting an e-commerce site would cost hardly anything to start. Looking at the information here, it looks expensive. I’ve been putting off checking into local prices for an LLC license, but will check into it this week. I feel like I know enough about website design, seo and writing content to succeed, but am weak in other areas, like business licensing. Most money sites don’t get into this area at all, they seem to be all the same old drivel…copying John Chow or Darren Rowse.

I don’t really want to spend a lot of money for an accountant, but want to know the best ways to set up an LLC. I read the IRS page, but it doesn’t really explain what I need to know. Anyway, thanks so much for writing this, it’s given me much to consider.

I’m working on plans for a few new sites, and I’ll send my plans to you to see what you think. This post is definitely stumbled :smile:

Comment by dcr
2008-07-07 09:03:24

On tax issues, it’s always best to contact someone local. Your county auditor or equivalent or your local chamber of commerce can help you with issues relating to a business license. The fees vary by state and possibly even by county. As for the IRS, it’s best to talk to an accountant or a professional tax preparer regarding issues that are going to be relevant to your situation. In most cases, it’s going to be pretty basic. Just keep track of your income and expenses and make sure your tax preparer knows you’re running a business. And, depending upon how much income you make, you may have to file your taxes more frequently than annually. Also, don’t forget about sales taxes. Again, that is something you should talk to your county auditor or equivalent or your local chamber of commerce about.

Business licensing varies so much, and states are prone to change things, and that’s just for U.S. business owners! It’s no wonder most money sites don’t cover it. It really is best to speak to someone local about that, and sometimes your county or state websites may cover it as well.

You can start an eCommerce site on the cheap. If you can build a site, you only have your hosting and domain name costs to start with, plus whatever you might decide to carry in inventory (unless you only sell electronic products or use a dropshipper). You could integrate the site with PayPal or Google Checkout for your shopping cart and payment processing. If you go with the entry level packages, I think your only fees will be a percentage of the sale. So, you can start out inexpensively and add-on or make changes as your site (and income) grows.

 
 
Comment by Bobby Revell
2008-07-07 11:49:30

If I get an EIN number, and start an LLC, any site or business will fall under the same company name? I’m assuming that once I establish an LLC, I can place as many individual sites under that singular umbrella. Are you an LLC? I have been told by several people that I don’t need to go that route unless I’m already making several thousand dollars per month, as it would be waste of time and money.

Right now, any money I make blogging is considered personal income and I do not have a business license. I think most bloggers do the same thing. It can be a little confusing, especially when you’re just starting out.

Comment by dcr
2008-07-07 15:13:40

There are special requirements for even LLCs that you need to follow, and that adds a level of complexity to running your business as one. I’ve also head the advice that it’s not cost-effective to go that route unless you are making a decent amount of money.

You can operate all your websites under a single business name. Or you can set up a company for each one. If you go the single business name route, you could operate under an umbrella of “Bobby Revell Ventures” or something like that.

In some states, you can also operate under a fictitious business name, so you could be Bobby Revell Ventures doing business as Revellian.com, if you wanted. You would have to file Revellian.com as a business name. Again, that’s something to check with someone local about.

 
 
Comment by Terence Chang
2008-07-07 14:25:33

Dan:

First of all, great job on putting together all the information. I think you miss out the open source shopping cart Zen-Cart.com, which I used to operate my online stores without any cost.

I was almost sign up WorldWideBrand. I just realized that you are paying for the services, which collect the information that can be found for FREE on the Internet. Please avoid SaleHoo, unless you want to handle dramatic amount of customer services for return.

To answer some of the questions in the comment. This is what I did to operate my online stores.
1. I got my EIN and started a S-Corporation. There are some tax advantages of S-Corp over LLC. Please read IRS web site about the difference on tax.

2. I have few online stores under one S-Corp. Doesn’t matter how much money you are making, please do yourself a favor not to use your own SSN for business. Get an EIN.

3. There are more tax saving advantage when running a small business as LLC or S-Corp.

3. I use Zen-Cart and ANHosting for my online stores. My total cost of my online store has been paid off by itself. The real cost is $70/year for SSL + $85 annual hosting fee.

4. I use PayPal for all my stores. Authorize.net is way too expensive for new e-commerce web sites. I can switch to Authorize.net with few click of mouse in the future.

5. 90% of my products are through dropshipping.

Here is my conclusion about running e-commerce stores myself.

1. Starting a small online business is the easiest part. They are just paper works.
2. Niche, Niche, Niche – A right niche will make you more money faster
3. Find a good suppliers – Don’t put eggs on one basket.
4. Traffic and conversion rate – Without a good marketing strategies, the best product won’t make a penny sale.
5. Customer services make differences.

Comment by dcr
2008-07-07 15:15:33

What issues did you have with SaleHoo? Was it the site itself, or the vendors on the site? As I understand it, you would be ordering directly from the wholesale vendors, and SaleHoo only offers you a directory of vendors.

 
 
Comment by Terence Chang
2008-07-07 14:41:10

To answer Bobby’s question about LLC.

Here is one good read.
http://www.powerhomebiz.com/vol136/structure.htm

S-Corp requires a lot more paper works, but it does has some good advantage over LLC. I felt that I am running a real business with s-corp.

Comment by dcr
2008-07-07 15:18:31

Great link. Thanks for submitting it!

 
 
Comment by Bobby Revell
2008-07-07 19:29:53

Alright! Thanks Dan and thanks Terence! I believe I finally have the information I need to get started. I already have hosting and SSL, so now I’m looking into my EIN and so forth. I think that placing all your sites under a real business names with proper licensing looks so much more professional and the perception of your site is improved. Overall, I am actually excited about all this and have been reading a lot about LLC’s and s-corps. I think I’m now on the right track :smile:

 
2008-07-08 00:01:19

[...] such a way that it makes no logical sense but is stuffed with keywords. Take this excerpt from my Putting Together an eCommerce Site post: If you want to look into getting your own merchant account right at the start and handling [...]

 
2008-07-09 00:07:35

[...] thanks to everyone who has contributed their thoughts and additions to my “Putting Together an eCommerce Site” post. I want to put together something a little more comprehensive so I welcome any feedback [...]

 
2008-07-27 14:52:41

[...] “to set up e-commerce site, LLC or corp” – Finally, something normal! Too bad I’m not in the top 30 pages of Google for this. Someone must have been really desperate for this information! [...]

 
 
Comment by Dani
2012-01-04 23:45:23

Dan,
What about Amazon?

 
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