So you want to open your own online retail store. You have visions of web orders rolling in while you take business calls and ship products all in your pajamas. What may sound like a quick and easy idea may prove to be a long road of fruitless searches and monetary loss.
Too many people have the same ideas, and they may either be more experienced, have a better handle on the web, or simply sell the right product at the right time. With the explosion of e-commerce sites, it isn’t easy to carve out your own identity on the web. I have provided several tips and pointers that I have learned in creating my own site: The Stork Store. I hope you can learn from my many mistakes and feel more educated about the steps needed to become a successful online business.
Tips for starting a small business online:
Research the competition:
Before you spend any money on the new business idea, research your online competition to ensure this is a profitable venture. Every company has a different business philosophy. Some companies play to the wealthy and upscale by offering higher prices, a more sophisticated website, and special perks for spending at their site. Other companies offer
Meager prices on their products in an attempt to undercut their competitors. They are willing to accept lower profit margins if it means an increased sales volume. Make sure that you can find a niche within your product market, and it will still be profitable. You want to find a middle ground that will allow you to make money and attract customers. There are a few products that I refuse to sell on the web strictly because my competitors are offering the
products at wholesale prices. Their trick is to charge a higher shipping rate to make up for the monetary loss. Find out about their return policies and if you can match their ability to accept returns. Do a keyword search on three of the top items you want to sell and see if your product can compete price-wise with the search results. Make sure that the internet is not
flooded with your product because it will be harder to rank among the search engines. It is easier to sell a product that is targeted at a smaller audience than the general public. For example, you may do better selling ceramic pink frogs than selling dog leashes. Fewer people are in the market for a ceramic frog, and you may be able to move higher on Yahoo or Google My Update Studio.
Next, register your business and receive a tax id number. Tax identification numbers allow you to purchase a product from a manufacturer (without paying tax) and sell it to a consumer. This is known as a “reseller.” The tax id number is federally regulated and used to help the government monitor your business.
This number is also required if you have any employees. If you are a sole proprietor or a person who is personally liable for all obligations, you can use your social security number. This may sound like an easier venture; however, if your business is sued, they have the ability to access your personal assets. Don’t forget that banks and credit card companies will also require a tax id number to open a business account.
Once you have decided that your idea may float, you need to locate the product vendors. Use the internet, catalogs, and yellow pages to locate their phone numbers and websites. Not all vendors will sell to an online store, so you need to spend time talking to each company. First, find out if the vendor offers a wholesale program and at what type of discount.
It is common for a company to charge you 50% of the consumer’s cost. If the product sells in the store for $100, you should be able to purchase it for $50. Smaller companies or artists may offer a smaller discount such as 30%-45%, so make sure those products will still be profitable for you to sell. Some companies will recommend that you stay within a certain price point not to undercut the competition or grossly profit from a sale.
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