Costs & issues starting an eCommerce business o...

Costs & issues starting an eCommerce business or online store

Why should you be starting to sell online and how to get started?

what are the costs and issues to sell online ecorner

There are many people right now thinking of selling online due to the current economic issues and opportunities created by the growth of online commerce. In 2016, Australian online retail sales will exceed $45 Billion and worldwide over US$1 Trillion. Australian eCommerce is growing at a rate in excess of 20% year over year, and mobile commerce more than 40% annually. There are over 2.5 million small to medium sized businesses in Australia and New Zealand but less than 12% have an online store. The web influences more than 80% of all retail sales, and that percentage is growing annually, so failure to have a web presence with your product catalogue means it is harder to be successful and grow sales.

When you are considering starting to sell online you also have to look at what your competitors are doing online. You should never copy what your competitors are doing but you can use it as a guide and then even improve on what they offer.

So getting started means doing some research so that you are best informed and ready to move forward.

You can get more information about how to start and online business - click here.

 

 

Create your own free online store trial and check out the issues




 

eCommerce strategy and plan

 

Having a plan can help save you from making mistakes and getting off target from your original objectives. A plan does not have to be long and complex. Consider the key issues:

 

eCommerce strategy and plan

  • Mission - what is your businesses going to do
  • Strategy - how will you go about making the business a success
  • Technology - choose the technology to support the business
  • Stakeholders - identify the partners that will help move the business forward
  • Engagement - get moving then review and improve as you go

 

eCommerce strategy and planning - core considerations

 

Take some time to put a plan together. Here are some planning points to consider. Remember that the business plan does not have to be complex and it is a continual process. That means that the plan will change and improve with age and experience.

  • Make sure you know your market - who is going to buy your product?
  • Multi-channels to market (i.e. online store, eBay, Facebook shop) - proven to improve results up to 400%
  • Integrate the shopping experience
  • How you will deal with
    • Content - where will you get content and images
    • Pricing & inventory - what are the competitive issue
    • Logistics - storage, packing, shipping and returns
    • Service & support - how to service your customers
    • Payment & refund/returns - handling of payments and what methods to accept
    • Security & Payment Card Industry Data Security Standard (PCI DSS) Compliance
  • Easy-to-use purchase process
  • Consider localisation requirements - currencies & languages
  • Consider customer relationship management and personalisation
  • Make sure that you select a scalable platform or solution
  • Make sure you have support in place (staff, partners or suppliers)
  • Marketing campaigns and requirements (including search engine marketing)
  • Integrate to external systems, suppliers or logisitics providers
  • Prepare a social media plan
  • Prepare a mobile commerce plan
  • Prepare a content management plan

 

What are the options available to start an online store and what do they really cost?


What are the real costs associated with starting an online business or adding an online shop to an existing business? This is a question we are hearing often and the answer is not always clear as there are many different views and opinions in the market place.

There are a number of options to sell online, here is some useful information about the options available.

 

Marketplaces - eBay, Amazon and others

 

Using an existing service like eBay or Amazon you will pay fees to list your products and also a “Final Value Fee” which is a percentage of the sale price. If you are selling your old books or stuff eBay is a great solution. Many businesses also sell on eBay as Power Sellers, however costs can get high and there are limitations on what you can do.

However, these marketplaces can be good places to get found by customers and build brand awareness. As such, marketplaces like eBay or Amazon can form a critical part of successful mulit-channel online retail business.

 

Open source eCommerce software and self hosted software

 

Historically, it was quite common to buy or download some open source online shop software, have a developer build a store and find somewhere to host it yourself.

There are pro’s and con’s but it is NOT FREE although the software maybe free and the hosting cheap there are other cost implications.

The initial build cost will be higher with open source due to the customisation needed and the longer term costs of maintenance and management can be very high (often as much as 50% on the initial cost annually).

You need to be responsible for everything yourself. That means managing and maintaining the software; finding, managing and maintaining the hosting; and finding and maintaining the relationships with developers and designers. Unless you have a technical background and some web skills it is not recommended, as this approach needs time to learn technical skills that might otherwise be used to manage and develop your business.

 

Hosted eCommerce solutions

 

Use a fully hosted eCommerce solution such as eCorner. There are many to choose from and a quick Google search on “hosted ecommerce” will find many companies that offer a package. My tip is that if you are based in Australia or New Zealand make sure that the hosted solution is here and not in the USA or Europe. That way support, service and maintenance will be based on your own time zone. We commonly hear about companies having to be on the phone late at night to get technical support, or websites getting pulled down at peak shopping times for maintenance because its an off-peak time in the US.

The hosted solutions in general are based on some proprietary software but the setup and maintenance is much easier, as the hosting supplier is responsible for maintenance. These systems are in general also upgraded in features and functions free in the hosting environment and with a maintenance agreement if on a dedicated server.

The major benefits of a fully hosted solution (Cloud or 'SaaS' - Software as a Service) is that you have a known fixed monthly cost that includes software, hosting, maintenance, upgrades and support. These systems are also often built to be more user friendly for people with less technical skills.

 

Issues to look for with hosted eCommerce packages

 

  • Limitations in packages - e.g. number of products - every package will have some limitations so you will need a package that fits your business requirements
  • Transaction fees - some suppliers charge a fee in addition to monthly package fees based on your revenue or turnover each month
  • Annual revenue limitations - some providers apply revenue caps and then will force an upgrade or charge more if you exceed the cap
  • Setup fee - some providers will charge an initial fee to set up the online store
  • Storage allowance - this is about how much data, images etc you can store online. Check to see if there are excess storage charges.
  • Bandwidth allowance - this means the amount of data that can be transferred monthly to and from your online store. Check if there wil be excess data charges.
  • Location of hosting - the country where you are hosted can have implications on performance, support, maintenance and search engine optimisation
  • Support fees - if you need technical help is it free or will they charge. How do you get support i.e. phone, email, live chat, FAQs etc.

 

General online business costs

 

When starting an online business selling products or services there are some costs which you can expect before you make your first sale. Your online store is a sales channel and acts like a sales person for your business. Selling online can be very cost effective as there are less human resource and infrastructure costs compared to a traditional "bricks and mortar" business. But do not be fooled selling online is not free and your results will be directly dependant on your investment, quality of service and products.

There are costs which will not be covered in detail in this document such as:

  • Human resources
  • Cost of products
  • Warehousing
  • Logistics
  • Traditional marketing
  • Business taxes
  • Accountant and financial institution fees
  • Rent and utilities

All these traditional costs still exist and don't magically vanish if you sell online. If you aren't comfortable with these concepts, it's often good to seek some advice from an accountant before starting your online business.

 

Following are example costs that you can expect as an small to medium sized business

 

HOT TIP: - You costs will generally be based on the size of your inventory, what your business does and your overall requirements like features, design, multi-channels, social and mobile.

 

The following table provides some guidance for a first years budget to setup the website side of an online business. The shop size generally reflects the number of products (SKUs) that are for sale on the store. This determines the data base size and give a reasonable guide to complexity. Although you can get very busy shops with lots of visitors and sales but with only a few different products available. For the purpose of providing some cost guidance we have created four store types from small to larger and complex.

NOTE: Costs are based on eCorner supplied products and services and are for indicative purposes only based on our experiences with our customers.

 

 

Annual Recurring Costs

Start up

Small store

Growing

Large store

Unlimited

  Estimated number of products 100 500 2,000 10,000 unlimited
  Domain (per domain 2 years) $99.00 $99.00 $99.00 $99.00 $99.00
  Business email  $60.00 $99.00 $150.00 $150.00 $150.00
  SSL Certificate (per certificate 2 years) Optional Optional $185.00 $185.00 $185.00
 

Total Annual Recurring Costs

$168.00

$198.00

$434.00

$434.00

$434.00

 

Monthly Recurring Costs

         
  Website $29.00 $77.00 $122.00 $220.00 $899.00
  Search Engine Optimisation basics (SEO) included Included Included Included Included
  Payment integration (excludes transaction costs) Included Included Included Included Included
  Shipping Integration (excludes shipping cost) Included Included Included Included Included
 

Total Monthly Recurring Costs

$29.00

$77.00

$122.00

$220.00

$899.00

 

One Time Costs (Optional)

     

 

 
  Design (estimate) (varies based on design complexity) $300.00 $600.00 $1,500.00 $3,000.00 $5,000.00
  Customisation (estimate) not requird not required not required not required $10,000.00
  Add products and content (can be based on DIY) not required not required $1,000.00 $3,000.00 $5,000.00
 

Total One Time Cost

$600.00

$600.00

$3,000.00

$6,000.00

$20,000.00

 

First Years Budget Estimate (from)

$1,174.00

$1,722.00

$4,398.00

$9,074.00

$31,222.00

 

Online business turnover and profits

 

So what can you expect to make from an online store?

This question is very hard to answer accurately. Most small businesses that operate online fail to properly track all the costs and expenses that they incur for their online store. The most obvious cost that is not considered is the business owner’s own time and effort.

The effort that you apply to the online store will be proportional to the success and profitability.

Like any business an online business needs to be run to make money.

If managed properly and operated to a plan then an online store can be a tremendously profitable business. The overhead that creates operational issues for bricks and mortar stores such as property rental and staff costs can be minimal for an online business. 

 

General eCommerce and eBusiness costs

 

When starting an online business selling products or services there are some costs which you can expect before you make your first sale.

If you are reasonably technically capable and don’t mind doing some work yourself then the budget can be less than $100 a month for the online store. If you have a professional designer and web developers create a design and add content then your budget will need to start around $2,000 + $100 / month. The more design and functional complexity the more cost and therefore budget required, but you can start small and add functionality later so the online store and your budget grows with your business.

Successful selling online requires as much business acumen and planning (maybe more) as any traditional business. Getting started is not hard but there are so many opinions on the technology that can be confusing to a non-technically minded person. There are also many technical terms and lots of jargon which often just confuse unnecessarily. 

 

There are a few things that you have to do/understand when starting an online store

 

business_model b2c or b2b

Following is a quick summary:

  • You need a domain name
  • You need a business email address
  • A website with a shopping cart like our cloud hosted online store package
  • You may need to have a design and some development for your website
  • We have Search Engine Optimisation (SEO) built in so no additional costs
  • Setup a Google Webmasters account
  • When your website is live you may need to do Search Engine Marketing (SEM) – such as pay per click (PPC) with Google Adwords
  • You may need an SSL Certificate (recommended if you accept credit cards)
  • You will need a payment gateway or payment provider and in some cases an online merchant bank account.
  • You will need a shipping company like Australia Post to deliver you products
  • Don't forget the traditional business costs, taxes, charges etc.
  • You will need some human resources - maybe that is just you. But if you have a full time job remember that the online business will not look after itself.
  • Web analytics to track visitors and business conversion data
  • Social media accounts - we recommend Facebook, Pinterest, Twitter, Linkedin and YouTube. Although not essential social media will help you get started, and drive traffic to your online store
  • You can also setup accounts at eBay, Shopping.com, Google Shopping and Getprice to sell or list your products via multiple channels.

 

Does it include everything you need

 

Unlike open source solutions when you use a hosted eCommerce store from eCorner everything is included. Open source refers to products that you can get and then host yourself or through a provider. The problem is you never know all the costs. Our solution is managed, maintained and upgraded regularly by eCorner. You hear a lot about how cheap open source software may be but be aware there are often hidden costs which are not made very clear. Read an independent view of Open source options from the eCommerce-Guide.com.

 

Domain names and eMail

 

To run a successful website you might need a domain name and business email addresses.

To set up a .com.au domain name you need a registered business with an ABN or ACN in Australia. You can expect to pay $99 for two years. Domains for .com will cost less but for Australia we recommend you get the .com.au domain. This shows your customers you are an Australian business, and can have an effect on search engine results. You can get cheap domain names but the service provider may not provide the DNS hosting which is necessary and will be an extra cost so check carefully. We have found with some of the really cheap overseas domain providers that the domain name is not transferrable for 12 months and is basically not usable. Check the Terms & Conditions before buying your domain. There are many good Australian providers, or you can get domains through eCorner.

Visitors who come to your website may want to send you messages and we highly recommend that you do not use a personal email address. This ensures your business email doesn't get lost amongst your personal email, and presents a more professional look to customers look to buy from you. Generally you may need a sales@ and an info@ email address at least. Expect to pay around $150 per year for 50 email boxes, the more you get the cheaper they get. 

 

SSL certificates

 

The SSL or Secured Socket Layer is about providing security and confidence in your online shop. It is highly recommended that you have your own SSL certificate if you expect to be really successful online. Many hosted solutions will come with shared SSL which means that it is secured. However when your visitors go to secured pages the URL (or your domain name) will change to that of the SSL Certificate owner who will be the payment provider or hosting company. This can cause concern from customers due to the change in domain name when they go to pay and lead to basket abandonment (potential buyers that add a product to your shopping cart but do not complete the sale). SSL certificates from companies like COMODO will start around $185 / year and you may have to pay a fee to your web developer to add it to your website.

 

Online store packages

 

There is a large range of online store providers and prices range from $29 per month up to $100 or $1,000's per month. So do not be afraid of shopping around and trialling the software of different solutions and suppliers.

eCorner provide a number of different levels of packages that vary in price and capability. Packages are scalable up to unlimited products online. The four most popular packages key difference is the number of products that are for sale on the website although the packages will vary in functionality. These are perfect for small to medium sized businesses. All of our online store packages include hosting and data as part of the package. That is not the same with all providers so you should always make sure of the total cost of hosting, data and website before committing to buy. Also, all of our payment partners comply with the Payment Card Industry Data Security Standards (PCI DSS) so all your transactions will be secure. You can find more information at our Packages & Prices page.

 

How do we compare to other solutions?

 

Compare Hosted Shopping Cart CostsEvery eCommerce solution that you review will have similarities and differences. So it is a good idea to compare solutions around the key elements that are necessary for a successful online business. Make sure that you understand the total cost of ownership, that is all the fees and charges that will be applied. If you are paying your provider in a foreign currency such as US$  then factor in the exchange rate and the fees for a foreign currency that will be charged for each monthly payment by your credit card provider.

What you should look for:

  • Location of hosting and support
  • Inclusion of additional transaction fees
  • Limits for annual revenue or sales
  • Availability to use a private SSL certificate
  • Limitations in storage or data transfer
  • Total cost of ownership

 

Graphic design

 

With a hosted eCommerce solution like eCorner you generally pay on a monthly plan and may not have any upfront cost if you "do-it-yourself". If you have something special in mind for a custom logo or banner then it might need to be designed by a professional graphics designer. In general, we would recommend that you get started with the free designs available from eCorner out of the box. These are very flexible and you can change colours, add logos and banners. We also offer a range of low cost, more advanced designs if the standard templates don't fulfil your requirements.

If you want a special or custom design then we can help by working with you to refine your requirements but take a look at what is available from eCorner for free first. A custom design can cost as little as $600 - $1,200 to produce and add to the online shop, but can get more expensive depending on complexity.

 

Custom functionality

 

The packages that eCorner provide come with just about everything you will ever need to run an eCommerce store. If you are starting a new eCommerce business we would recommend that you use as much of the out-of-the-box or standard functionality as possible and our stores have it all. Your online business will start to make money for you then you can look at expanding and adding new functionality if you then decide it is necessary.

Web development can cost over $150 per hour and costs vary by provider. We recommend that you ask for a full proposal with specification and a work order the identifies the work and time for each task for your approval so you know what you will get and have an agreed scope of work and set fee before any development commences. Also, you should always look at the Terms & Conditions and ensure that there is a warranty period for any errors or bugs in the custom development. Expect to pay some part upfront but you should always hold some part of the payment back to ensure completion as you expected and agreed. Check if the development company has product and professional indemnity insurance as a mistake may cost you a lot of money online.

 

Payment gateways

 

If you want to accept credit cards online we recommend that you use a Payment Service Provider and process the credit cards via a Payment Gateway. There are strict regulations around the use and storage of credit card information which are regulated by the Payment Card Industry via their Data Security Standards you can find more information at their website www.pcisecuritystandards.org or through your bank.

All eCorner store packages are PCI DSS compliant and a range of Payment Gateways have to be integrated into your website out of the box. eCorner integrates a number of leading Payment Gateways including PayPal (Standard, Express and Payflow Pro), eWAY, Dialect Solutions, Payment Express, SecurePay and Worldpay. These are made available as part of the package from eCorner. You will need to setup an account with the Payment Service Provider (and maybe also and online merchant account with your bank) to take online payments. Setup costs vary dramatically from nothing at PayPal up to $500 for some providers. Some Payment Providers will also charge an annual fee between $200 - $500. You will pay transaction fees for each payment that you accept again these vary greatly but expect from 1.1% + 30 cents up to 4.5% or more depending on the Payment Service Provider.

PayPal which is now common on most online stores will charge 2.6% + 30c per transaction for Australian payments and 3.5% + 30c for international payments.

So check this out carefully. Your bank will also charge you some fees to setup your Online Merchant Account these do not vary greatly from bank to bank but shop around and ask questions. eCorner does not charge any separate transactions fees.

 

Shipping and logistics - delivering the goods

 

Your online store will need to be able to get the products to your customers, and there are a range of ways that shipping can be handled in your store.

eCorner provide a wide variety of shipping methods built in which you can setup on your website. These handle just about any possibility. We also provide integration to Australia Post for calculating shipping cost in the shopping basket. The actual shipping cost to send your packages is not part of the eCommerce package and you need to make sure that you calculate and add any shipping cost correctly.

As a tip - free shipping is a great incentive for buyers, however we would recommend that your pricing absorb the shipping cost when possible if you chose to offer free shipping. You can also tie the offer of free shipping to the value in the shopping basket to incentivise larger purchases.

 

Marketing your online store and getting found online

 

Most online sales start with a search. Your customers will find your through Google, Bing or another search engine. They will be searching for a product or service and your website will appear as a result.

Online search results come in two forms, paid and organic results. When you search on Google the results at the very top and on the right will often be paid results or online ads. The businesses that own those ads are paying Google Adwords on a cost-per-click or cost-per-conversion (CPC) basis. So everytime someone clicks on an ad Google will charge that business based on the cost of the keyword. That cost is calculated similar to an auction. You and your competitors need to bid on the same keywords, with the most highest offers being listed first.

Organic results are when your website appears in search that is not related to a paid ad. This occurs when your website page has the best match to the keyword or phrase that was entered by the person searching.

Search Engine Optimisation (SEO) and Search Engine Marketing (SEM) can cost a lot of money. Luckily if you have decided on eCorner you will find that the websites have SEO capabilities built in. You really just need to follow the guidelines and advice in our FAQs and your website will be search engine friendly.

Search Engine Marketing is a cost you need to consider carefully. We have seen good web businesses fail because they spent too much on Cost Per Click programs which were not targeted. Again we have some good advice in our FAQs. But the bottom line is that you need your website to be found to be successful so marketing is an essential task.

 

Updated - March 2016