Estimating the Costs to Start an eCommerce Business

Wondering What it Costs to Get Your ECommerce Business Up and Running?

Ecommerce is all around us. From industry giants like Amazon to smaller boutiques, eCommerce businesses are now a part of our everyday lives. For brick and mortar businesses, having an online presence is becoming increasingly important to compete in today’s competitive markets. With new businesses popping up every day and eCommerce sales in the hundreds of billions each year, it can be tempting to join the trend, whether you’re starting from scratch or already have a physical store. This guide will help you to get an idea of what some of your options are and to estimate the costs associated with starting up your own eCommerce business.

Marketplaces Like Amazon and eBay

Existing services like Amazon and eBay are a very popular way to start an eCommerce business, no matter what type of product you sell. These services are popular because they are well established and have massive customer bases. They also take care of a lot of the legwork for you, letting you build your business upon an existing platform. Getting your marketplace found is often easier on these services than doing it alone, so this can be great for those who are just beginning to open a business. Starting an eCommerce business on one of these platforms can range from just a few hundred dollars to thousands of dollars, depending on what you are selling, the size of your business, and your marketing strategy. Keep in mind that these platforms will charge a fee for listing your products, and take a percentage cut of each sale.

Here’s a great example of the various eCommerce platforms that integrate with Amazon, Ebay, or even sites like Jet.com:

Open Source and Self-Hosted Software

Open source and self-hosted online shops can allow for more customization than already established marketplaces like Amazon and eBay. One drawback to this option is that having a developer create your online marketplace can cost thousands of dollars. Your initial cost will be much higher because of the customization required, and maintenance and management costs can also add up. Or, you can pay a professional rest assured you don’t have to maintain and manage your software, find, manage, and maintain the hosting, and hire and train a staff. Instead, simply find and maintain relationships with your developers and designers! Not to mention, the DIY option isn’t usually recommended unless you have a technical background and know how to build up your site yourself. Your online store could run you just around a few hundred dollars or so if you are tech savvy enough to run the site, but could cost you thousands if it’s not properly maintained. You also need to consider the amount of time you want to dedicate to running the technical aspects of your business, versus actually making sales and building your business. While no one is going to be taking a cut of each sale for this option, the costs of paying a web developer, and the time required if you do it yourself, are just too high to make it feasible in a lot of cases.

Forbes.com has some thorough suggestions for who to hire, the pros and cons, and the results of each.

One big benefit [of hiring a web development company] is the higher … relative quality of work since you can presume the company has vetted all their employees and works according to industry best practices. In short, the work tends to be a lot more professional. A related benefit then is that of management – while you should expect to keep regular tabs on their work, the web dev company will usually provide their own product or project manager who will ensure that the contract stays on schedule so you don’t have to spend as much of your time doing it. This frees your time for strategy and operations.

Fully Hosted eCommerce Solutions

Using a solution that is fully hosted can take a lot of the headache away from building your own platform. Setup and maintenance of the site is usually much easier when choosing this route, and the supplier is responsible for maintenance. A major benefit of this option is that your month costs will be fixed, and include your software, hosting, maintenance, upgrades, and support. These systems are also advantageous because you don’t need to have strong technical skills to use them. Costs can start at just a few hundred dollars a month, and increase exponentially with extensive customization or as your business grows.

Other Various Costs of Running an ECommerce Business

Selling your products online can be cost effective because there aren’t as many things to pay for in regards to infrastructure, insurance, and labor costs. However, it isn’t free. You need to take into account warehousing costs, logistics, human resources, the cost of your products, marketing, business taxes, accounting fees, and more. These costs generally will fluctuate based on the size of your inventory. For a small store selling only 100 products or so, you can probably start your business for around $1,000 and expect to at least pay that amount each month. As your business grows, your monthly costs can easily reach thousands of dollars each month, or for larger businesses, over $20,000 just to start. A good idea is to inquire with other eCommerce businesses to see how they manage their expenses or even reach out to professional digital agencies to get a sense of the monthly costs.

Do Your Research

In the end, the cost of starting an eCommerce business really just depends on what it is you are trying to do and what you are looking to get out of your business. To really get a true idea of the costs, you’ll want to sit down and think about all the initial costs and monthly costs it will take to effectively run your business. This will depend on the type of product you sell and how much inventory you move, your vendors, warehousing costs, your own technical know-how, and much more. Before sinking any of your money into a new business, make sure to study up as much as you can. Read small business how-to books and check out eCommerce blogs to get an idea of your particular industry and what running a business really entails. It isn’t always easy, but running an eCommerce business can be very lucrative, or can just be a great way to make a little passive income on the side.