What You Need to Know Before You Begin
Before you get started investing time and money into an online business, you want to be sure that selling online is right for you.
So let’s look at the pros and cons of selling online so you can weigh them up and make an informed decision.
The Pros of Selling Online
While working from home in your pajamas is definitely a plus, there are plenty of other amazing reasons to work from home while building your own eCommerce business:
- You can work from home, make your own hours, and choose how far you want to take it. The possibilities are endless. Want to make a few extra bucks to save? Want to create an online eCommerce empire? The choice is yours! There’s no glass ceiling, which means no boss to suck up to. It’s pure freedom.
- It’s something you’re probably already familiar with! If you’ve bought or sold something online, you basically understand how it works. Which, ultimately, makes selling online an easier skill to grasp than many other home business options.
- You can follow your own interests. Are you passionate about fly fishing? Cake decorating? Refurbishing antique dolls? When you start selling online, you can often turn your hobbies and passions into a profitable business.
- It’s not as difficult or risky as starting a “traditional” business. You don’t have to invest a lot of money when you’re first getting started (not to mention, you won’t have to worry about buying or leasing a physical property). It has a very low barrier to entry, which means practically anyone can give it a go! What’s stopping you?
- You don’t have to worry about storing inventory if you don’t want to! (Hint: It’s called dropshipping, and I’ll get to that later!)
- It’s fun! At least, we think it is. By the end of this guide, we’re sure you will, too!
The Cons of Selling Online
Like anything in life, selling online comes with a few downsides. It’s important you’re aware of these before you begin, so you set yourself realistic expectations.
- It takes time. It may take you a month or two to start seeing consistent results. The chances of you accumulating over $100 worth of sales on your first day is, well, highly unlikely.
- There’s a learning curve. If you’ve sold a few things online before, you’re already one step ahead of your competitors! However, you’ll need to step up your game to sell online professionally.
- You wear all the hats. As a business owner, you’re an incredible team of one (at least starting out). You’ll take on the roles of accountant, marketer, web designer, as well as everything else. This also means that you shoulder all the responsibility. If something goes wrong, you can’t blame anyone but yourself.
- It’s not all passive income. You’ll hopefully be dealing with regular sales, regular shipments, and regular customer inquiries, which means that your business will require you to do real work and invest time and effort. That is, until you can afford to hire staff! Even then, you’ll want to remain involved in everything that happens.
Choosing an eCommerce Business Model
There are several different business models to consider before you start selling online, each with their own set of pros and cons.
You will want to think carefully about which business model is best for you. They all require different levels of financial investment and will determine how you structure your business.
The simplicity of dropshipping does come at a cost. You usually pay a higher price to your supplier compared with buying in bulk, and you’ll usually incur a dropshipping fee.
Shipping also tends to take longer as most dropship suppliers are based in China. But dropshipping is extremely popular and many people have built successful eCommerce businesses using it. Dropshipping is best for people looking to dip their toe into selling online, those who don’t have a lot of capital to buy in bulk, and people who want to keep their workload to a minimum.
Dropshipping is the darling of the eCommerce world. Why? Because the barrier to entry is so low. You don’t need to make any financial investment to get started. Meaning, you won’t pay a cent until you make a sale.
That means you don’t need to place any large orders or store excess stock. You just need to decide what you want to sell, find a supplier that provides dropshipping services, list your products on your preferred online marketplace, and start selling.
Basically, your supplier does most of the heavy lifting and your main job is to make sales. Simple, right?
Here’s how dropshipping works:
- A customer purchases a product from your online store (at retail price)
- You place an order for that product with your supplier (at wholesale price)
- Your supplier packages and ships the product directly to your customer
Sourcing from wholesalers
Sourcing products from wholesalers is a more traditional retail business model. It’s used by brick and mortar stores and eCommerce stores alike. Once you’ve decided on what product/s you’re going to sell, you find a reliable wholesaler and buy the product/s in bulk. Getting the best price usually requires some negotiation.
Buying in bulk requires that you have significant cash to spend up front. The upside is that you’ll usually get your products at a cheaper price than you would with dropshipping. That means higher profit margins for you every time you make a sale.
Once you’ve ordered the product/s, it’s up to you to arrange storage, to list them for sale online, and to organize shipping. Alternatively, you can use a third-party fulfillment service like Amazon FBA or Shipbob (there are many options to choose from) to handle the packaging and shipping for you. However, this comes at an added cost that eats into your profit margins.
You can see how sourcing from wholesalers can be more labor-intensive than dropshipping, but the financial benefits can make the extra work worth it.
Sourcing from manufacturers
Sourcing a product from the manufacturer is a similar process to sourcing from a wholesaler. The main difference is that you can work with a manufacturer to create your own product, or a private label product.
The initial investment is higher as you’re creating something new, but if you want to build a brand and sell a unique product, then sourcing from a manufacturer is the business model for you.
There are a lot more hoops to jump through in terms of product development, design, testing, packaging, and legal obligations, but if you’re ready to set in for the long haul and build a business that you can differentiate from the majority of online sellers, sourcing direct from manufacturers is a good option.
Making and selling your own products
If you’re creative, artistic, or have a unique skill, then by all means, you can make your own products and sell them online. Whether you crochet beanies, build wooden chopping boards, or engineer new technologies in your bedroom, there’s bound to be a market for your creations. Think of it as turning your hobby into a business.
You can even start selling your own products as a side-hustle, while you’re still working. If you are successful, you may be able to turn it into your full-time job.
The main thing with selling your own products is that all of the responsibility is on your shoulders. You can only sell as much as you make, so you have to invest your own time into production.
The main benefit is that, aside from the cost of materials and your time, you don’t have to make a significant investment up front. You also don’t have to rely on suppliers. It’s all on you.
Step 1. Choosing What to Sell
You’ve probably thought about this step already.
In fact, most people start by thinking of products they can sell online and go from there. What starts as a daydream at the office often flourishes into a successful business, so be careful what you wish for!
Choosing what to sell is arguably the most important decision you will make as it will determine the demand for your product, price and profitability, market competition, sales, and marketing. It’s also one of the hardest decisions you will make.
Of the billions of products out there, how do you know which one to sell?
For the full run-down on choosing a product to sell, see our “What to sell?” article. But in general, you’re looking for a product that meets these requirements:
- You can make a profit on it. This one is pretty obvious. Don’t forget to factor in things like shipping, packaging, and marketplace fees!
- There’s reasonable demand for it. One of the common mistakes new sellers make is diving into selling a particular product without checking demand. Don’t be that person stuck with a garage full of things you can’t sell!
- The competition is not too intense. Competition can really drive down your profits, particularly when there isn’t enough demand to meet it. When a bunch of sellers are competing for a small pool of buyers… things can get ugly.
What Can You Sell Online?
The answer to that is: Almost anything. However, if you want to be successful at selling online, you should follow the strategies of top sellers and choose products that meet the criteria below.
Products related to your interests
The first thing you should do to get ideas for what to sell is to brainstorm your hobbies – the things you’re interested in. The reason why this can be a good idea is that you’re more likely to be invested in selling products you’re interested in. You’ll also have a certain level of expertise that can help inform your business decisions.
Once you’ve identified your hobbies, try and think laterally and outside the box to generate product ideas that aren’t so obvious. The more specific your niche is, the better.
Products that you discover online
Try to become intimately familiar with products that are selling well on the most popular online marketplaces, including Amazon, eBay, Aliexpress, and Alibaba. Obviously you don’t want to sell products that are already doing well in highly competitive markets, but often those hot products can give you ideas for similar, complementary, and less competitive options.
What Products are Selling Best Online?
This is the million dollar question. But the answer is not simple. As you will know from your own market research, there’s a wide range of products that are selling well online.
The thing is, that once a product becomes a “best seller”, it’s probably too late to start selling it as the market quickly becomes saturated. You need to learn to anticipate trends, or identify ways to sell items that are similar or complementary to best-selling products.
However, according to our own data and research, products in these five niches are always selling well. You’ll just need a bit of creativity (and a dash of intuition) to discover the next best-selling product.
- Blocks and Lego Products
- Home Decor
- Pet Supplies
- Baby Supplies
- Coffee Accessories
Another strategy to consider is selling products that tap into consumer’s physiological needs. American psychologist Abraham Maslow created “Maslow’s Hierarchy of Needs” way back in 1943 and it’s still relied on by marketers and salespeople today. The hierarchy of needs are:
- Self-actualization: The desire to become the most one can be
- Esteem: Respect, self-esteem, status, recognition, strength, freedom
- Love and belonging: Friendship, intimacy, family, connection
- Safety: Personal security, employment, resources, health, property
- Physiological: air, water, food, shelter, sleep, clothing, reproduction
If you can identify products that fit into these deep-seated human desires, then you are almost guaranteed to have success selling them. You can see how luxury goods might fit into the ‘esteem’ need, home security items tap into our need for ‘safety’, and the latest and greatest pillow fills our ‘physiological’ need for sleep.
Step 2: Finding Suppliers
Once you’ve decided on a product to start selling online, you need to find a reliable supplier for that product.
Finding a supplier is probably the second most time-consuming part of selling online, and also comes with a raft of boobytraps to avoid – so be careful! A supplier is one of your most important business partners so you want to make sure you choose the right one.
Your business model will largely determine what type of supplier you work with. But let’s get down to the nitty gritty. How do you find a supplier you can trust?
There are several ways to look for suppliers:
Finding Dropship Suppliers
If you want to go at it alone, you can use search engines like Google and online marketplaces like Alibaba and AliExpress to find dropship suppliers. It takes a lot more time and you have to watch out for fraudulent businesses and scams. But if you’re willing to invest the effort, you can find good dropship suppliers this way. Start by searching “[your product] + dropshipper” and go from there. On websites like Alibaba, you can contact suppliers directly and ask if they provide dropshipping services.
Finding Wholesale Suppliers
Google is your friend when it comes to finding wholesale suppliers. However, you should be aware that often the best suppliers don’t have a lot of time and money to invest in marketing (and their websites can look really cheap), so they can be hard to find online. If you’re wanting to secure the best deal, you’ll have to do a bit of groundwork. One way around this is to work with local wholesale suppliers, or to visit trade shows and meet suppliers face-to-face, the old-fashioned way. A lot of the sellers on Alibaba, AliExpress, and other major online marketplaces will be wholesalers, so you can contact them and make enquiries.
You can find manufacturers much the same way as you find other suppliers – on Google, SaleHoo, and popular online retail sites. But if you’re getting them to manufacture your product, there are just a whole lot more boxes to add to your checklist. You need to be even more vigilant and ensure you do due diligence. Ideally, this means visiting the factory, meeting the manufacturer, and testing their products and service before committing to your first order. Finding a great manufacturer is essential to the success of your business.
Step 2.1: Contacting Suppliers
So you’ve found a few suppliers that you want to reach out to? Great! You’re making real progress. The next step is contacting them. This sounds as simple as flicking them a quick email. But you should know that the best suppliers get contacted by a lot of aspiring online sellers every day, so if you don’t make a good first impression, chances are they’ll just ignore you. And you don’t want that!
You need to know what suppliers want in a potential customer/business relationship, and you should also know what you want from the supplier. These are the top five things that a supplier is looking for when you contact them.
- A serious buyer mentality
- Clear, concise communication
- Good manners
- Long-term customers
- Low-risk relationships
The best way to achieve these objectives is by doing your research and not overloading the supplier with questions. To help with this, we’ve put together a list of 35 questions you should ask a potential supplier (just don’t ask all of them at once!).
We highly recommend that, whenever possible, you always opt for a telephone call. Email is OK, but it doesn’t give you that personal interaction which can help you determine the legitimacy, expertise, and professionalism of potential suppliers, which are all things you need to know when you’re giving someone a bunch of money.
Step 2.2: Negotiating with Suppliers
So you’ve contacted a suitable supplier and you’re ready to commit? Now’s the time to get down to business and negotiate your deal.
Remember: your goal is to be able to source your products for less than what you’ll eventually sell them for. Every little discount you can get will count towards your profits — and it can really add up!
So, how do you get a better deal from your supplier? Simple! You can:
- Order in bulk. The more you order, the better the price you can negotiate. If you’re just starting out this might not be an option, but it’s something to consider for later, especially if this product seems to be working out well for you.
- Develop a relationship with your supplier. As you work with your supplier and show them you’re serious and consistent, most of them will help you out by offering discounts and other bonuses. If they don’t offer… try asking. If your business is valuable to them, they’ll try anything to keep you happy!
- Buy from the source (the manufacturer) if possible. If you can afford to order in bulk, buying directly from the manufacturer of the product (rather than a wholesaler) will get you the best prices. If you’re not in a position to buy in bulk, consider splitting the cost with other sellers.
Now that you’ve decided on what product you want to sell and who you’re going to buy it from, it’s time to make everything official and legal! Yes, that means taking the step to becoming a real online business.
Step 3: Setting Up Your Business
So you’ve got all the ingredients to launch your online business, now you just need to make everything official. Every country has different requirements when it comes to setting up a business, so it’s always a good idea to speak to an accountant or lawyer to get professional advice.
However, to make sure you’re getting started on the right foot, here are the four main things you need to consider when setting up your business.
Choosing a business name
Make sure it’s something you feel comfortable broadcasting via your social channels as well as in person. For example, don’t name your business “Miss Kay’s Underwear Store” even if you’re selling underwear. Who’s going to want to share (or even click on) a store’s social page if they think it’s a joke? Make sure your business name is on-brand. Even better, choose something original so that the .com domain name is still available.
Registering your business
Business regulations are different across countries and, in the United States, they vary from city to city and state to state. A simple Google search of your country and city will tell you whether you need to register your business in order to operate legally.
Applying for a Sales Tax ID (or reseller’s license)
If you are serious about starting an online retail business and sourcing products from wholesalers, in most US states, you’ll need a Sales Tax ID. A Sales Tax ID is a number you obtain from your state and/or local government that allows you to charge sales tax whenever a buyer in your state, county and/or city purchases an item from you, even if it’s an online purchase. Note: This is only relevant for businesses in the US, or with customers in the US.
Setting up payment options for your store
When you launch your online store, you want to be ready to start accepting money. That means you need to offer a range of payment options for your customers. These days, it’s common for online stores to cater for credit cards, Paypal, Stripe, Afterpay. You don’t need to be signed up to every payment option, but the more flexible you are, the more sales you will make.
Step 4. Choosing What Platforms to Sell On
Now that you know what you’re selling and your business is set up legally, it’s time to choose where you want to sell. There are a lot of options, but how do you know which is the best for you?
What Is The Best Platform to Sell Online For You?
I wish I could tell you that a specific online marketplace is the best one for you, but it really depends on what you’re selling and what you’re hoping to achieve with your business. Each platform has its own pros and cons, so it pays to do a bit of research into a few different platforms before deciding which one you will use to start selling online.
You should also consider starting your own online store using a platform like Shopify so you don’t have to compete in a crowded marketplace like Amazon or eBay.
What to Look For in an Online Store Solution?
- How many users does that platform have? The more users, the more potential customers for your business. That’s almost always a good thing!
- How many sellers does the platform have? The more sellers (particularly sellers in your niche), the more competition you’ll have. It’s a good idea to weigh up the number of sellers against the number of potential customers.
- What seller’s fees do you have to pay? Every fee eats into your profit margins. Do the calculations to see what the platform will cost you.
- What type of goods are you selling? Some platforms are more suited to specific types of products. For instance, Etsy has a reputation as being great for arts, crafts, and creative goods.
- How reliable is the platform? Are you confident the platform will exist 10 years from now? It’s hard to know, but if you build your business and customer base on a particular platform you want to be sure it’s going to stick around.
- How much flexibility does the platform allow you? Some online marketplaces have strict guidelines you have to follow. If you make a mistake, your account can be suspended. Whereas, with your own website, you have complete freedom. It’s up to you to decide what’s best for you.