9 Things You Need to Know When Starting an E-commerce Business: Expert Advice from Arthur Bradley

Whether you are running an e-commerce business or you are thinking of starting one, looking for useful information and best practices online can be daunting. There are some great books and articles out there, and a whole niche of conferences you can attend to either whet your appetite or tune up your knowledge, but if you are looking for some quick tips, there is almost too much choice. With the help of Arthur Bradley, an e-commerce entrepreneur FE International recently worked with, we have pulled together a list of key considerations for e-commerce entrepreneurs at any level. Bradley is also an author and NASA Engineer and has extensive experience in the e-commerce space.

What to Know When Starting an E-Commerce Business

1. Research Your Niche

The decision that is most likely to make or break your e-commerce store is the niche of products you choose to sell. While it may be tempting to try and sell as broad a range of products as possible, you are most likely to find success in a niche that you already have some knowledge of and one that has the right level of buyer interest and lack of competition to be profitable. Arthur Bradley’s most recent entrepreneurial success revolved around disaster preparation, which is something he had a strong interest in and could supplement with regular content creation. While his choice of niche came about fairly organically, initially as a way of selling his books online, a budding e-commerce entrepreneur would do well to define precisely what it is they are looking to sell and what competitors they would have for those products.

One of the simplest ways to assess the competition for a niche is to do a quick Google search. If you search for “organic pet food” or “quad bike accessories”, do you see a lot of relevant results come up in the results? Of these results, how does their content look? Do you think you can produce better content on these topics? Are their products priced competitively? Do they have a good range of products in their niche? All these questions should give you a better idea of whether you can be competitive enough to turn a profit.

It is worth bearing in mind that focusing on a specific niche will have many residual benefits for your business including the lowering of advertising costs, a more loyal customer base, being able to capitalize on new trends and commanding a higher-priced inventory.

2. Consider Your Website Development Expertise (If Needed, Hire Someone to Assist)

One of the things that Arthur had wished he had known more about when getting his e-commerce business up and running was the web development side of running an online store. While no e-commerce entrepreneur has to be a web development whiz, knowing the basics of web development and how e-commerce stores function can help you coordinate with any developers you hire. While the prospect of building an e-commerce site might seem daunting to many, this side of running an e-commerce business is only getting easier. There are many pre-built website options these days, and there are many ways to integrate e-commerce platforms like Shopify onto your website, as well as simple payment solutions designed to integrate easily with all kinds of websites.

While many e-commerce entrepreneurs will purely run their businesses off sites like Amazon and may choose to forgo running their own independent website, you will have to choose what is best for your niche and what is most likely to bring in and convert the most customers. For Arthur’s business, having a website was essential as it allowed him to host far more content, which was essential for the marketing of his products. As he explained, “I had to kiss a lot of frogs along the way because I’m not a website expert. I fumbled through lots of website problems, including being infected by viruses and having to have the sites cleaned, just whole host of problems. Having a website person that you really can trust from the beginning can be very helpful.”

3. Create a Marketing Strategy

While the marketing side of running an e-commerce business may be simplified if you are selling products on a major platform like Amazon or Shopify, you should always plan on having to put a serious effort towards driving people towards your online store. If you run your own e-commerce website, organic traffic could be one of the key drivers of sales for your business, but you can’t purely rely on content production to drive sales. Most successful e-commerce entrepreneurs have a grasp on how paid advertising (often on a pay-per-click model) can drive further sales for their business. You would do well to experiment with paid advertising. Aside from this, there are many other avenues of promotion you can explore for your e-commerce business including:

Arthur expanded the reach of his e-commerce store by producing regular YouTube videos. “I have some videos that have been viewed by half a million people. It gets your name out there and a lot of my videos are just testing something out, and then I have a call to action saying that can go and buy it on my website.”

Assessing your potential marketing budget and choosing some of the above marketing channels to prepare and experiment with as soon as you launch your store can help you hit the ground running. It is okay if you discover that some of these channels do not work for your store. Social media, for example, is not always the best place to sell certain products, but by having a dedicated plan for experimentation and doing some careful research, you can discover which of these channels will bring in regular customers.

4. Learn About the Tax Intricacies Related to Running an E-Commerce Business

Tax is a tricky subject for most businesses and for e-commerce businesses it’s no different. In the US there are different federal, state and local taxes one might have to pay, and due to the nature of online businesses and the potential multi-national sales you may be making, you need to have a good understanding of your monthly tax obligations. Arthur recalled his attempts to handle his tax affairs himself, and how he regretted not working with an accountant sooner. For an example of some of the difficulties surrounding tax obligations for e-commerce businesses, please take a look at our article on the South Dakota vs. Wayfair US Supreme Court Case. It goes to show that this side of e-commerce is regularly evolving, so it’s best not to assume you are on top of it and instead do your research.

5. Study SEO Best Practices (Or Partner With Someone Knowledgeable in This Area)

SEO is a large topic, and it scares off many people looking to start online businesses, but the basics are easy enough to grasp. SEO is the process of improving the quality and quantity of website traffic to a website or a web page from search engines. This is achieved in a variety of ways including:

  • Improved user experience on your site
  • Getting more backlinks from other relevant websites
  • The amount of useful content that is available on your site
  • The keywords that are featured within the content
  • The competitiveness of the niche you are in
  • The amount of time people spend on your site (and your site’s “bounce rate”)
  • The readability of your content
  • The proper configuration of robot.txt files on your site and sitemaps
  • and more…

SEO will be less relevant if you are purely running an Amazon or Shopify store, but the craft of getting your store to rank within those sites’ searches overlaps with SEO best practices. The important thing to remember about SEO is that most of the old practices of link building and keyword stuffing are now more likely to get you penalized by search engines than help your search rankings. The best way to get quality traffic is to focus on careful web design and quality content (and marketing for that content). It is useful having someone to consult about SEO best practices, who can make suggestions for what keywords you should target in your content, and how to improve your content and site structure. But remember to fully research any outside agencies you use as many can be expensive and of low quality.

6. Focus On Customer Service

“I tried desperately not to have unhappy customers,” Arthur said about his own customer service strategy. “One unhappy customer can cause you lots of problems. So, if they either got products they thought didn’t work, or they got anything that they were unhappy about, I would just tell them, ‘I’m sorry it didn’t work out and here’s the $200 that you paid.’ It doesn’t always make people happy because they may think you swindled them anyway, but at least they stop thinking ‘I’m going to get this guy’.” In his experience, these people often came back and bought from him again later.

While having a solid returns policy can help your business out of potential bad reviews, you also need to ensure that you can reply to messages in a timely manner and ship products out the day after purchase at the latest. Timeliness is the lifeblood of day-to-day e-commerce activities, so you need to make plans for how you will manage your time and stay connected to your inbox. This will feed into how many hours you plan on putting into your e-commerce business on a daily basis and your plans for shipping and logistics. Some of these tasks can be outsourced if your business grows too large for you to manage on your own, but you can expect to be handling many emails and logistical issues yourself from the get-go. Try to make a commitment to timeliness (the amount of time it takes you to respond to emails and to send out packages) and gently improve it over time. Customers shouldn’t have to wait 12 hours for a reply to an email.

7. Differentiate Yourself from the Competition

One of the advantages of Arthur’s e-commerce business is it revolved around a very unique range of literature and products related to disaster preparation. Due to Arthur’s background, he could even utilize specialized knowledge to create highly specialized and unique products that none of his competitors had, including an electronic device that can protect vehicles from electromagnetic pulse attacks. This competitive advantage can make all the difference to the success of an e-commerce store.

It is worth spending some time thinking about what unique products might sell well in your niche. This won’t be possible in all niches, but with some creativity, you can make product development an important arm of your overall business strategy.

8. Identify Reliable Supply Chain Partners and Develop a Plan for Ordering Products in Appropriate Quantities

Supply chain issues, particularly post-pandemic, can cause problems for a wide variety of e-commerce businesses. Being able to offer freebies to compensate for delays is a start, but the best way to avoid these issues is to assess the reliability of your strategic suppliers. Things to look out for include whether the supplier is planning a long-term relationship, whether they share your vision and strategy, whether they are open to regular business reviews and whether they appear open and transparent in their communications. Good relationships with your suppliers can make all the difference when you are under duress to meet heavy demand. Helping your suppliers understand the possible fluctuation in the size of your regular orders will also help to alleviate problems down the road.

9. Have a Plan for an Eventual Exit

Thinking about how you will ultimately exit your business may seem like jumping the gun when you are starting out but having an understanding of how your business is likely to be valued, and the process behind a business sale can save you a lot of trouble down the line. There are many standard practices that can ease the process of an eventual exit. You can put these in place as soon as you set up your e-commerce business, including making sure to have the proper tracking of your finances. A clear financial history is one of the first things a potential buyer will be looking for in a business prospectus, so using accounting software to keep track of everything is recommended.

Many people starting e-commerce businesses will begin the project as a side-hustle and will also fail to track their web traffic appropriately. It is advisable to treat new e-commerce ventures as professionally as possible from the beginning as this will help to increase your ultimate business valuation. An example of another practice that will positively affect your business’ valuation is how much “powder in the keg” is left for any new owner. It is tempting to try to use up as many marketing and new product initiatives as possible before you look to sell your business in an attempt to grow revenues but having something left over for a new owner can be an attractive selling point. Making sure you have a plan for what a new owner can work on to build up the business in the short and medium-term will facilitate the buying process. Also, the preparation of SOPs and offering your services as a consultant for a defined period after the sale will be appreciated by a new owner.

These are just a few examples of how an e-commerce business’s valuation can be improved through simple initiatives. Other examples include whether there are formal agreements in place with your suppliers, the protection of any intellectual property and whether the supply chain can handle more volume. If you want to learn more about how to take an e-commerce business to market, how it might be valued and steps you can take to prepare your business for an exit, it is best to speak to an experienced M&A advisor. If you are interested in a free valuation for your e-commerce business, you can contact FE international through our form.

If you want to know more about any of the information above, then please reach out via our contact page.