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What It Takes To Start An Ecommerce Business

May 10, 2008
In today's economy, more people are looking to supplement their income by starting a side business, or making a complete move to self-employment. An e-business often appears to be a quick and easy fix - and sometimes it can be - but it's important to know what it takes to get started. The benefit of an online business is that the startup costs are generally lower than a brick-and-mortar store. If you choose to drop-ship items, you may not have any costs for rent, insurance on your inventory, or interest charges for purchasing stock in advance using credit instead of cash. But even companies who stock items have lower costs - rent is cheaper on warehouse space than it is on retail space, fixtures and signage are often unnecessary, and you may not need to hire staff until your business begins to grow.

But what aspects of your business should you consider in advance?

The first consideration is your image and your product offerings. Research and select a unique, memorable name for your company, one that reflects the products you plan to offer. Next, decide on a domain name, and register it - your host can help. You may choose to register .com, .net, and .org domain names to avoid desaturation of your brand in the future. Depending on your budget and your goals, you may also wish to register the name of your company as a trademark with the United States Patent and Trademark Office.

Sourcing is the next hurdle. This term refers to finding and working with vendors who wholesale the products you are interested in selling. Consider whether you wish to drop-ship your inventory - where the vendor stocks the items and ships them directly to your customers - or if you want to stock your own items. You may also choose to do a combination of the two approaches. Vendors may require that you provide them with a resale certificate, so make sure you are registered with your state government to collect sales tax prior to beginning your work with vendors.

Next, research your web site hosting needs. Many hosts offer plans that include shopping carts, such as Miva Merchant, as part of the monthly fee. You should look for a host that has a good reputation among other businesses who use the same shopping cart software, and one that offers phone support (24/7 if possible). Purchase an SSL certificate - the software required to encrypt sensitive information such as your customers' credit card details - through your host before you launch your website.

The next consideration is a financial one. Most likely, you need to accept credit cards, and to do so you'll have to obtain a merchant account. Shop around for the best rate you can find, or ask your host or other business owners for a referral. Make sure the merchant account you choose supports a payment gateway that is compatible with your shopping cart. The gateway and the merchant account work together to charge customers' credit cards and then electronically deposit the funds into your checking account.

Sometimes the trickiest part of setting up an ecommerce website is working with shipping charges and sales tax calculation. For shipping calculations, a little trial-and-error may be required. Keep a close eye on your initial orders, and make sure your average shipping costs are about the same as the average charges to your customers. You may also wish to increase your shipping charges to make a little profit on them, or decrease them to encourage more shoppers to complete their orders.

Sales tax may be easy or difficult, depending on where your business is located. You should speak with the state taxing authorities for any states in which you have nexus, which is loosely defined as a state where you have a physical business presence. Find out what your requirements are, and work with your shopping cart to make sure that the right customers are being taxed the correct amount. Learn how to complete your sales tax return, and make sure that you keep accurate and detailed records to help you maintain sales tax compliance.

Order fulfillment is the last step. When a customer places an order on your website, you then need to ship his order to him. Make sure you have facilities in place for communicating an order to your drop-shipper, or that you have the software and supplies necessary to package the products, generate a label, and print postage (unless you plan to take your orders to the local post office or carrier store). Provide customers with an easy-to-understand return policy (on your website and in your packages, if possible) and a way to contact you if they have questions or problems.

Reviewing each of these aspects of your business, prior to launching the company, should be part of your overall plan to help your company achieve the success you desire.
About the Author
NetBlazon offers Miva Merchant consulting to small and medium businesses with a new or established ecommerce presence.
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