How much does it cost to start an online store?

Published on by

How much does it cost to start an online store?

How much does it cost to start an online store?

While we are still in the influence of COVID19 more people have turned to online stores for everyday purchases. Retailers and wholesalers have both seen a significant drop in face to face business and a dramatic rise on online commerce. There are many people right now thinking of selling online due to the current covid-19 pandemic and the resulting impact on busines. Small to medium sized businessed may have limitations in opening and operation hours for their stores and offices. But online sales operate 24 hours a day and 7 days a week all year around. eCorner is trying to help small business with our eCorner Now Platform which is the easiest way to start an online store.


How Much Does it Cost to Start Selling Online?

 

Start by creating a 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 you can just jot down the ideas as they develop. But the key is to HAVE A PLAN. Consider the key issues:

Getting your plan started

Business planTake 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.

  • What are you going to sell?

    I know this sounds like a silly question but it is important. The better you understand the products that you want to sell the more chance you have of being successful. Dropping Shipping (or selling someone else's products and having them deliver it) is a fad but it is also potentially dangerous. Few Drop Shipping ventures succeed. In Australia you, as the merchant, are responsible for the products that you sell. If your drop ship supplier fails to deliver it is the merchants responsibility.
     
  • Make sure you know your market - who is going to buy your product?

    Understanding where you will find the best customers is important. You have to direct your marketing and promotions to the right people to turn them into buyers. So research the market, looks what other businesses selling similar products do and how they promote and market the business.
     
  • Multi-channels to market which to use?

    What we mean by this is selling products through other systems like an online store, eBay, Amazon, Facebook shop, Google Shopping etc - this has been proven to improve results up to 400%. Plan where you will focus your effort. Channels like eBay can be more expensive as you pay fees based on revenue. But they also market the products as part of a larger platform. This can help when you are getting started. Having your own online store in the longer term will be more profitable and still allow you to sell on other channels.
     
  • How you will deal with basic issues?
     
    • Where do you source your products
    • 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
       
  • Consider where you want to sell

    You online business can sell locally, nationally and internationally. You need to be aware of the issues such as payment and shipping once you start to sell to customers outside of Australia.
     
  • Consider customer relationship management and personalisation

    Get to know you customers and they will return and spend more money on your products. Social media such as Facebook and Instagram are great for building networks and followers. But you need to allocate time to services that network with daily updated and information.
     
  • Marketing is essential for success

    The key to successfully selling online is to develop a maintainable marketing plan. There are many ways to market your products and online store but it is not free. You will get offers from Search Engine Optimisation (SEO) companies to build you organic search ranking. Often it is just simpler to pay for a marketing plan and budget for a fixed amount.
     
  • Integrate to external systems, suppliers or logisitics providers

    There are now many online systems to help you manage your business like Xero for accounting, Unleashed for inventory, Vend for point of sale etc. Most online shop platforms have these kinds of integrations (connecting to other systems) built in. It is not essential as you get started but of the business grows then managing the back office process can be time consuming. Of all the systems that you should consider accounting is probably the most important and our tip us go with Xero for your online business.

How can you start to sell online

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.

Amazon marketplace has continued to grow in Australia and has lead sweeping changes to the Australian retail landscape.To compete your business needs to have an online presence and be able to reach across multiple channels.

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.

Your Own Online Store

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.

You can get your business online with eCorner Now

Online Shop 30 day Free Trial

Start Your Shop Now
 

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 plans and services and are for indicative cost purposes.

Annual Recurring Costs Hobby / startup Small business Growing retail Enterprise
Estimated no. of products 10 2,000 10,000 unlimited
Domain (per domain 2 years) $99.00 $99.00 $99.00 $99.00
Business email $99.00 $99.00 $150.00 $150.00
SSL Certificate (per certificate 2 years) Free $185.00 $185.00 $185.00
Total Initial Annual Costs $198.00 $383.00 $434.00 $434.00
Mthly Recurring Costs        
Website - Online Store $19.95 $49.00 $99.00 $550.00
Search Engine Optimisation basics (SEO) included Included Included Included
Payment integration (excludes transaction costs) Included Included Included Included
Shipping Integration (excludes shipping cost) Included Included Included Included
Total Mthly Recurring Costs $19.95 $49.00 $99.00 $550.00
One Time Costs (Optional)        
Website Design (free theme included) Free $400.00 $1,500.00 $3,000.00
Customisation (estimate) not required not required not required $5,000.00
Add products & content (can be based on DIY) DIY $200.00 $1,000.00 $3,000.00
Total One Time Cost $198.00 $600.00 $2,500.00 $11,000.00
1st Years Budget Estimate (from) $440.00 $1,431.00 $4,122.00 $18,034.00

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 very small 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 at $2000.00 or more plus a monthly recurring cost that covers software, hosting and maintenance. 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. 

What do you need to get started

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 Search Console 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, Instagram, Pinterest, Twitter, Linkedin and YouTube. Social media has become essential for successful online businesses and 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.

 

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 $90 per year for business email boxes like Microsoft 365.

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 $99 / year and you may have to pay a fee to your web developer to add it to your website.

Google and other search engines are now using security and all of website HTTPS as a factor in the search ranking for websites. So an SSL Certificate is now a mandatory requirement if you want to succeed online.

Online store packages

There is a large range of online store providers and prices range from less than $20 per month up to $100's 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 you compare solutions and platforms?

Every 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
  • Pay in Australian dollars
  • Check the currency that your billing will be in
  • Limits for annual revenue or sales
  • Availability to use a private SSL certificate
  • Limitations in storage or data transfer
  • Total cost of ownership

Website design

Most hosted online shops come with built in free themes (or designs) which you can modify. 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), Stripe, eWAY, Mastercard Payments, Payment Express, SecurePay, Worldpay and more. 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.

New Types of Payments - Buy Now Pay Later

New types of payments providers have been successful which allow customers to "buy now and pay later" they offer instant finance to your customers. Like many traditional payment providers they also settle merchant accounts normally within 24 hours direct to your bank account. Included in the buy now pay later services are Afterpay, ZipPay (ZipMoney) and Openpay. These services make it easy for your customers to buy your products and pay them off over time. Often there is a interest free period and the length of that offer may determine the transaction fee that the merchant pays.

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.

Most online stores in Australia will use Australia Post for shipping but there are other services that can give your business an advantage such as Shippit which offer a range of shipping options.

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.

There are some simple but very good online systems that can help with SEO such as DiiB. You can start a free account and DiiB will monitor your progress. But don't forget the importance in social media to get followers and customers.

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.

 


Only registered users may post comments.
Sign in and post comment Register now