The idea of starting your own business is something that appeals to a lot of people, but actually taking the plunge and giving up a regular salary to pursue it is another matter entirely. Fortunately, thanks to the internet, it’s now perfectly possible to start a small ecommerce business in your spare time without having to hand in your notice or invest your life savings in stock.
In fact, setting up an online shop has become so straightforward that you can realistically go from having an idea to selling your first product in a matter of days. Whether you’ll actually make any money is, of course, another question entirely.
Having worked in ecommerce and digital marketing for a considerable number of years, I’ve seen plenty of businesses succeed and fail online, and one thing I’ve learned is that building the website is usually the easy part. Finding something people want to buy, and getting them to buy it from you rather than somebody else, is where things become interesting.
What Are You Going to Sell?
Before worrying about websites, logos or business names, you need to decide what you’re actually going to sell. This might sound obvious, but it’s probably the most important decision you’ll make.
There are several different approaches you could take. You might buy products wholesale and resell them at a profit, manufacture something yourself, sell handmade products or even use a dropshipping supplier who dispatches orders directly to your customers.
Each approach has its advantages and disadvantages. Buying stock in bulk can offer better profit margins, but it also means tying up money in products that might never sell. Dropshipping removes much of that risk, although margins are often smaller and you’re relying on somebody else to fulfil orders correctly.
Personally, I’d be inclined to start with something you already know a little about. If you’re interested in a particular hobby, for example, you’ll probably have a better understanding of what enthusiasts are looking for than somebody who has simply identified a supposedly profitable product on YouTube.
You’ll also need to do some research into your potential competitors. If Amazon sells exactly the same product for less than you can buy it wholesale, you’re going to struggle.
Where Should You Sell Your Products?
Once you’ve decided what to sell, the next question is where to sell it.
The simplest option is probably an established marketplace such as eBay, Amazon or Etsy. These platforms already attract millions of potential customers, and you can start listing products without having to build or maintain your own website.
The downside is that you’ll generally pay commission on each sale, and you’ll have relatively little control over the overall customer experience.
Alternatively, you could set up your own ecommerce website using something like Shopify or WooCommerce. Both are perfectly capable of running a small online shop, although they work rather differently.
Shopify is a hosted service, meaning much of the technical side is taken care of for you in return for a monthly subscription. WooCommerce is a WordPress plugin that’s free to install, but you’ll need hosting and potentially some paid extensions.
If you’re just testing an idea, I’d probably start with a marketplace rather than spending weeks building a website. There’s little point investing heavily in an online shop before you’ve established whether anybody actually wants your products.
Work Out Your Profit Margins
This is where I think a lot of people get caught out, particularly when they’re first starting out.
Let’s say you find a supplier offering a product for £10, and you think you can sell it for £20. That sounds like a reasonable profit, doesn’t it?
Unfortunately, you’ve still got to account for delivery, packaging, payment processing fees, marketplace commissions and potentially advertising.
If those costs add up to £7, you’re left with just £3 profit on a £20 sale, before considering tax, returns or the time you’ve spent processing the order.
And if you’re spending £5 on Google Ads to generate each sale, you’re actually losing money.
Before buying any stock, I’d recommend putting together a simple spreadsheet showing exactly how much each sale will cost you, including the less obvious expenses. You might discover that your seemingly profitable business idea isn’t quite as attractive as you first thought.
How Will People Find You?
Assuming you’ve got a product and somewhere to sell it, you’ll need to think about marketing.
If you’re selling through Amazon or eBay, you’ll benefit from their existing customer base, although competition can be fierce. Good product photography, accurate descriptions and competitive pricing are essential.
If you’ve built your own website, you’ll have to attract visitors yourself. Search engine optimisation can be an excellent long-term strategy, but it generally takes time to produce results, particularly for a completely new website.
Paid advertising through Google or Facebook can generate traffic much more quickly, although you’ll need to be careful that your advertising costs don’t wipe out your profit margins.
Social media can also be useful, particularly if you’re selling unusual, handmade or visually appealing products. However, don’t assume that posting a few pictures on Instagram will automatically result in hundreds of orders.
I’d suggest concentrating on one or two marketing channels initially, rather than trying to do everything at once.
Don’t Forget the Boring Stuff
Unfortunately, running an ecommerce business involves more than simply buying products and posting parcels.
You’ll need to understand your obligations around consumer rights, returns and product safety, particularly if you’re selling to customers in the UK. Online customers generally have a legal right to cancel many purchases within 14 days of receiving their goods, although there are exceptions.
You’ll also need to keep records of your income and expenses. In the UK, there’s a £1,000 annual trading allowance, but importantly, that’s based on gross trading income rather than profit. If your trading income exceeds that amount, you’ll generally need to register for Self Assessment.
You can find more information on the HMRC website.
If your business really takes off, there’s also VAT to consider, with the compulsory registration threshold having increased to £90,000 in April this year.
Start Small and See What Happens
My advice would be to avoid spending too much money until you’ve proved that your idea works.
You don’t necessarily need an expensive website, professional branding or hundreds of products. Start with a handful of items, see whether you can sell them profitably and gradually reinvest what you earn.
One of the advantages of running an ecommerce business alongside a full-time job is that you’re not relying on it to pay the bills, which gives you the freedom to experiment without quite so much pressure.
Of course, you might eventually reach the point where your little side hustle is generating enough income to become your main source of employment.
Or you might end up with a spare bedroom full of unsold stock.
Either way, I’d suggest finding out which before you give up the day job.