5 Reasons to Own an Ecommerce Store
May 28th, 2008 by MarkAlthough I’ve now been able to make money online with several different approaches, my first legitimate attempt was with ecommerce. Since I’ve been posting at Court’s Internet Marketing School, I’ve had quite a few comments and questions about how I feel about ecommerce and whether I’d recommend it. Here are five pros of ecommerce to consider:
1. It’s Tangible
For people who have never attempted to make money online before, an ecommerce business can be easier to conceptualize and imagine. Although the world at large is becoming more and more internet savvy, the vast majority of people are still going to get a little cross-eyed when you throw out terms like ‘ad-supported’, ‘user-generated’, monetization, etc. But almost anybody understands “they come to your web store, buy a product, and you make money.”
When a visitor makes a purchase, you’ve succeeded (made money). When the visitor clicks away without buying anything, you’ve failed (didn’t make money). I think it’s easier to conceptualize “How can I make more sales and therefore more money?” than “How can I get more RSS subscribers…and how do RSS subscribers help me make money anyway?”
2. The Product Already Exists
It’s hard enough for most beginners to believe they can get traffic to their websites, let alone convert it into dollars. If they also have to think of, design, and produce a product they’re just going to be too overwhelmed and give up before they ever really get started. One of the best parts of ecommerce is being able to say “Somebody is making these so there must be a market. I just need to get involved in that market.” As opposed to “I wonder if anybody wants or needs the product I’m spending all this time and money developing.”
3. Easy Expansion
Because you don’t have to worry about developing and producing the product, it’s easier to believe you could start ten ecommerce stores. It’s just a matter of creating a site and getting traffic to it, which you should have mastered with your first store. And theoretically your entire ecommerce business gets easier to run as it gets bigger because with more orders comes enough money to hire a person to fill the orders for you, and at that point your business can be mostly on cruise control.
4. It Provides an Opportunity to Learn Solid Marketing Principles
An ecommerce store with a good mix of related products is a great learning environment for upselling, cross-selling, bundling products, discounts and sales, and so on.
5. Minimal Content Requirements
I doubt any of you would argue that content creation is just about the toughest part of maintaining most internet businesses. One of the very best things about ecommerce is the products are the content. As the site owner your content creation usually consists of writing two or three sentence product descriptions.
The shopping cart software we use on our ecommerce store lets us use Excel to mass produce and upload those descriptions, so the work is relatively easy, even when you have thousands of products on your site like we do. This aspect of ecommere does make SEO a little more difficult, but it can be overcome. Once your site is set up, you can leave it there for months or years without changing it.
How about you? Any insight the appeal of owning an ecommerce store?
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May 28th, 2008 at 8:28 am
I considered an Ecommerce store for my first online venture, but the initial investment is a lot more intensive than with a blog (unless you can find an excellent drop shipper, but that comes with it’s own potential problems). Still, I think Ecommerce is a great option if you have the capital to get it off the ground, and the ability to market it well enough to generate enough traffic and convert it to sales.
Customer Service is another added benefit, as well as a challenge. You will need to provide pristine service if you want repeat customers and referrals, but many people love this aspect of the business.
May 28th, 2008 at 8:35 pm
Although we do have a good dropshipper and didn’t have to start off buying a lot of inventory, the ecommerce site is definitely more expensive to set up. Shopping cart software and design for an ecommerce site is a lot more costly than wordpress with a free theme.
We’ve had very very few repeat customers. The nature of our product and our traffic is such that most people just come once and either buy or don’t, but we rarely see people coming back for more.
May 28th, 2008 at 8:28 am
Great points there Mark!
Am I right or is it just me? Do you have some insights on this?
Owning a ecommerce site does appeal to me. But when I think of ecommerce, I have this image in my head of high start up costs and a warehouse full of products
Thanks,
May 28th, 2008 at 10:04 am
Are you planning on a series of posts on e-commerce stores?
Court, could you link to your e-commerce store.
Do you use any particular wholesaler or do you use a dropshipper?
May 29th, 2008 at 8:04 am
BW I actually do not have an e-commerce store!
May 29th, 2008 at 8:56 am
I guess I should pay more attention to the author section of your posts. Apologies
Do you have a link for Mark’s e-commerce site or can Mark provide it?
May 28th, 2008 at 11:57 am
I have yet to start my own ecommerce store, but I do run a couple. In the niche they are in, it was pretty easy to see a 250% increase in sales in a year. There are a few niches out there like that. Just think of things people never really think of buying until they have to. It helps if “have to” has a time limit also.
May 28th, 2008 at 2:20 pm
I am currently involved with 3 ecommerce businesses (websites) of my own and can honestly say that it is a pain the ass for mediocre income, but is still worth giving a try - you may get lucky and make good money.
By far the biggest problem you run into, and the most time consuming aspect of the business is actually processing and fulfilling your orders, and the customer service that is involved with it.
Setting up the website with a good shopping cart and designing the layout, adding products, adding descriptions, etc is the fun part - processing orders sucks.
Also, unless you can find a product/niche where you can markup your prices so that you have at least a 50%+ profit margin, it is a lot of work for mediocre pay.
I still love it though and definitely think everybody should at least try it. It is just easy to get discouraged when it comes time to crunch your numbers and you realize you didn’t make that much.
Let’s say for instance for you manage to do $10,000 in sales the first month you put your website up (which is a pretty decent achievement, nothing extraordinary, but decent). If you just made the website than your traffic is almost definitely not coming from natural search referrals, so let’s assume you started with Google AdWords pay-per-click advertising to get the ball rolling. From my experience working with dozens of ecommerce websites as an account manager I can say that it is pretty difficult to keep your PPC ad spend below 10-15% of your gross sales - which means that just to get $10,000 in sales you have to pay Google $1,500 for click charges. Let’s also assume you were able to find a niche product that you can make a 35% profit margin on (which is the average profit margin of all the sites I’ve worked on, some more some less). This means that out of the $10,000 in sales you have to pay $6,500 for the products. So just between your advertising and the cost of the products you already lose $8,000 out of the $10,000 sales.
The amount of time required to process, ship, and provide customer service for $10,000 worth of sales is at minimum 20 hours a week (part-time) .Also remember to include general website maintenance and updates in your time, unless of course you pay someone to do that for you which further eats away at your remaining $2,000. Or if you pay someone to process your orders for you and provide customer service, that also comes out of that $2,000. So let’s say you find a competent person to do this job for you for $10/hr (not an easy feat) - at 20 hours per week that’s $200 a week, or ~$800/month. Now you’re down to $1,200. And then of course take out any other fees associated with running a business and factor in costly shipping mistakes or product returns (which always happen) and you’ll probably end up with half to 3/4 of that.
Not terrible at all, but you can see why you would need either one or two REALLY successful ecommerce sites or five to ten semi-successful sites to call this your full time job, and get paid enough.
I do this all day long every day at my day job as an ecommerce account manager but I managed to squeeze a few sites of my own in there in my (dwindling) free time.
Also, from an SEO and overall conversion standpoint I highly recommend using the Volusion shopping cart platform. Very user-friendly, EXTREMELY robust features, and can be highly optimized for the search engines. Volusion stores run around $100/mon if you offer 1,000 products or less.
The good thing about setting up long-term ecommerce businesses is that once some times goes by and you (hopefully) gain some natural rankings you can retain or increase your traffic while cutting down on your PPC charges - so that more of that money goes into your pocket instead of Google’s.
My name above is linked to my most recent ecommerce website launch, and it uses the Volusion shopping cart, if anyone is curious and wants to take a look.
May 28th, 2008 at 8:43 pm
Steve -
I was going to write a follow up post to this one in the next week or so called “5 Reasons NOT to Own an Ecommerce Site” just to provide an alternative perspective to what I wrote here. Luckily, you already wrote it for me.
Although my site has not required quite the time commitment as far as order fulfillment that you describe, it has still been more work than we would have liked.
Thanks for such a thorough comment and providing great insight to the conversation. I’ve enjoyed the ecommerce site, and I do think it can be a great teaching tool, but I do think there are lower maintenance ways to make money in the long run.
May 28th, 2008 at 10:10 pm
I am glad you took the time to respond. Your reply gives a well rounded view of ecommerce sites. There are lots of ways to make money online, anyone considering a business should weigh the pros and the cons before jumping in.
Rhonda
May 29th, 2008 at 11:01 pm
Sorry, I really don’t know anything about ecommerce but I don’t understand how it works with the products… Do you buy a bunch of candies (I saw your website), store that somewhere and then ship it if somebody buy it ? Or do you place an order to the “candy store”, go there, take the big box of candies and then ship it ? Or do you just ask the candy shop to ship it to you client’s address ?
I just want to know how complicated it would be for me to start an ecommerce website
June 3rd, 2008 at 9:39 am
Hey muggles, with this particular store we have a unique arrangement. Our candy supplier is located within a reasonable distance of us so we get a daily delivery of the goods we need to ship out. We then package the items ourselves and have UPS pickup the shipments. Most arrangements do not work this, it’s usually a case of you buying the items you want to sell in bulk and stocking them yourself, shipping out orders as they come in and ordering more stock when you need to. Another common way to run an ecommerce business is by dropshipping your orders. This way you don’t have to stock any items yourself, your supplier stocks the items you sell and when you get an order you fax or email the order to them and they ship it to your customer for you. Most often it makes more sense to start your ecommerce business out by dropshipping, and then depending on how fast you grow you can start to stock items yourself to make a higher profit (you generally pay less per-item when you buy inventory and stock it yourself - the profit margins with dropshipping are usually slim)
June 6th, 2008 at 10:09 pm
Thank you for your answer, it’s appreciated !
May 28th, 2008 at 4:24 pm
I have 100 Bans sites lined up and it takes me about an 1/2 hour to set up each one.
May 29th, 2008 at 12:05 pm
[…] Court Puts on His Big-Boy Pants […]
May 29th, 2008 at 12:11 pm
This post is featured in today in FullTiltBlogging.com’s Daily Blog Summary, a summary of the top 50 Make Money Online blogs. Get caught up in just 5 minutes a day.
Great Post.
May 29th, 2008 at 12:30 pm
Doh, sorry Mark, I couldn’t help myself
but I’m glad some people found my input useful
Thanks!
May 29th, 2008 at 12:31 pm
I would think the there must be some sort of middle ground, doing some of Court’s keyword sniping sites and monetizing them with products. I just started a few sites using the BayRSS plugin for wordpress. It makes it really easy to build a “store” for whatever keyword I’m working on. It sounds like an e-commerce store is a lot of work, and ebay will add new products for me all the time.
May 30th, 2008 at 9:06 am
For those of you that are looking for a retail technology, I would like to suggest Brick N Click for eBay. This technology allows retailers to sell products on three different eBay based sales channels; ProStores WebStore, eBay Store, eBay Express and eBay Auction. That way it is easier to sell of stock, as well as overstock quickly. If anyone is interested in learning more please feel free to take their webinar http://www.mtiretail.com/Form_req_webinar.cfm
June 1st, 2008 at 3:34 pm
I would think about ecommerce if there were an inexpensive (read free) WordPress plugin that would allow PayPal use for multiple products. It would also have to be easy to set up. I admit I have not really been looking hard so it may be out there.
Ecommerce has always seemed a bit more expensive and complicated to start than most of the other ways to make money online I have looked at.
June 3rd, 2008 at 7:49 am
Steve,
Stop complaining about making peanuts and losing sleep and come work for me.
-Dana B
July 25th, 2008 at 5:52 am
This is a nice posting . I really like this post .
April 5th, 2009 at 5:08 am
Were did you get your blog design?