The cost of creating your first online shop?

A lot of web design agency’s and hosting companies offer quick and cheap solutions to opening your own online shop, making it sound like an idiot-proof way of selling online. It’s even compared to opening a high-street shop but without all the high overheads. In reality, setting up an online shop is probably more difficult than opening a high-street shop and it has tons of hidden costs.

That doesn’t mean that you shouldn’t build your own e-commerce site, but it might be a good idea to learn what it’s really like, what you need to know and what costs are involved. In doing so, you’ll increase the chance of your online boutique being a success.

If you’re dabbling with the idea of setting up your own online shop then this is the first article you want to read. 

The cost of creating your first online shop?

1. Learning about online shopping systems

Websites are commonly built on top of a Content Management System (CMS) which is basically an operating system with tons of pre-installed features on it so you can build a great new website quicker and cheaper, keeping in mind best practice and the latest features.

Online shops have their very own set of CMS’s with specific features that transform a website into a shop, almost replicating the idea of a high-street retailer but in a digital landscape. These are used specifically for the creation of e-commerce websites but e-commerce websites come in many guises.

You may want to create a full-blown online retail store selling clothing, or you may already have a website selling services and want to add products for sale as well. Alternatively, you may not be selling products at all. You could be selling subscriptions, content or downloads.

Depending on your scenerio you’ll need to pick the right shopping system for the type of online shop you will be.

Shopping systems round up into four categories:

  • A CMS with a shopping cart plugin (Joomla/Virtuemart, WordPress/Woocommerce)
  • Pure shopping system (Megento/Opencart)
  • Pay monthly option (Shopify, Adobe BC, Magento)
  • Buy now button (PayPal)

A CMS with an e-commerce plugin?

A CMS with a shopping system plugin could be minimal in features or a full-on shopping system giving you all you need to operate as an online retailer making it a viable choice for any e-commerce operation with the flexibility to design your shop exactly how you want it.

A good recommendation would be WordPress & Woocommerce Plugin and depending on what your selling, Easy Digital Download would also be a good plugin if it fits your needs.

These CMS e-commerce solutions are a more bespoke solution giving you greater freedom to customise the look and functionality of your online store. They usually come at a one-off price in addition to monthly payments to technically maintain but the online shop is completely owned by you.

As a more bespoke shopping solution, it does require a bigger responsibility from you the shop owner to ensure that everything is technically maintained and updated to work.

Pros:

  • You retain ownership of the online shop
  • It’s a highly customisable solution
  • CMS’s with shopping plugins have good community support
  • There are lots of designers and developers willing to build a shop for you using these systems

Cons:

  • It’s an independent solution so you’ll need help to build your online shop
  • You’ll need help to technically manage it
  • There are more technical details to deal with

The pure shopping system

If you want an online retail website then the likes of a pure shopping system such as Megento or Opencart are a good idea, giving you every feature you’d need to handle a retail operation.

These are specialist e-commerce systems which may require more costly specialist support and possibly a higher setup cost.

Pros:

  • Designed to be an online shop
  • Can be used to start selling straight away

Cons:

  • Support varies from platform to platform
  • There a little more specialised in terms of shopping systems so finding a developer to help may be hard or costly
  • You may not own the end product
  • Less options to customise

The pay monthly SAAS online shop

SAAS solutions are nice, neat and quick e-commerce website builders giving you everything you need to set up your online shop but they also have a drawback of being restricted in design and functionality; your shop has to contend within the service providers rules and it may show some limits when it comes to developing an online store that caters for your own needs.

The second drawback is that with a SAAS solution, your online shop is not completely yours, you only own the right to operate it, not own it.

If you’re willing to let go of ownership then pay monthly sites like shopify are a great option. It’s a pure shopping system built and hosted on their own servers. Professional, quick and with low overheads, they’re an ideal solution to get your online shop started quickly.

Pros:

  • A quick start to selling online
  • Start selling straight away
  • Designed to be an online shop
  • Less management and maintenance needed.

Cons:

  • You won’t necessarily own the online shop
  • Customisation of the shop may be limited
  • You may still need help to customise the shop

The buy now button

Have no budget! The buy now button is your best option, integrative into any website. Opening an account with a Payment service provider (PSP) will allow you to create a buy now button and use it on your site. There’s no shopping cart just an instance to “buy now” and take payment. Ideal if you’re selling one or very few products and don’t need any functionality apart from a sale.

The quick and obvious choice is paypal.

2. Payment service providers (PSP’s) and payment gateways

I’m surprised that many people want to open an online shop but don’t research how to take payments. A Payment service provider and a payment gateway will be an essential element for your shop, allowing you to process online payments.

Paypal, Worldpay, NoChex, Sagepay, Payflow are all payment service providers, online banks that put your transactions through for your online shop.

You’ll have to create an account with them, verify yourself and your business alongside integrating them with your bank and website.

Payment Gateways are portals provided by Payments Service Providers, serving as a connection where your customers can make a transaction. You have the choice to make transactions live on your site in which case you can keep the whole sales process on brand but more web development may be required, or to take the customer to the PSP site which is a quicker and safer option but may lose your branding in the process.

Using a PSP will reveal an additional overhead as each PSP will charge you an on-going fee or percentage or both for the privilege of processing your payments.

Each one will charge differently so it’s key to research a solution that works for you and remember that your choice of PSP has to fit into your choice of shopping system.  If not, it may cost you more to build a solution that works with your PSP.

3. What to sell in your online shop?

The great thing about an online shop is that it doesn’t have to be an outstanding original idea to work. Almost anything can be sold over the net and it’s basically a case of supply and demand, but once you open your online shop you’ll find the hidden costs of e-commerce start to creep in.

The more products and product categories you have, the bigger your online shop will be and the more it will cost to build and manage.  Your marketing costs will also increase in order to promote all of your stock.

Whatever you decide to sell in your online store, check how easy it actually is to get a supplier. Sourcing products globally is now easy with the likes of wholesalers and manufacturers available at a click of a button but just because they’re based abroad, it doesn’t mean that they’re actually any cheaper.

Most wholesalers and manufacturers still sell in bulk. They may be cheap if you buy 1000 of a single product but anything less may not even be considered. If you find a supplier who can accommodate your buyer requests then don’t forget delivery costs which may cost as much as the stock itself, and VAT as it will get charged upon arrival to the UK.

This may well bring you and your budget back to your local area to find a local supplier which can be harder than finding an international one.

Local suppliers may not even exist and if they do, they may have a minimum order quantity (MOQ) as well.

After doing the above you may find that you’ve been stopped in your tracks before you’ve even begun because you need more investment to buy stock. It’s a good idea to set up your suppliers before opening your online shop.

This will reveal how much cash you have and need to set up your online store.

Sourcing, manufacturing or even selecting products to sell is the easy and fun part of opening an online shop. The most difficult thing is actually selling them online.  For this, you’ll want to look at

  • Affiliate sites
  • Marketing tactics
  • Competition

4. Affiliate sites for online sales

Just because you have an online shop, it doesn’t mean that anyone will visit it, but a great way to counteract that is to also sell your products on other sites that people do visit.  As well as building your online store, think about selling on the likes of Ebay and Amazon.

They have brand power and an established audience who are probably already looking for products like yours but just can’t find you. By selling on these platforms you have the ability to be in two places at once.

5. Marketing tactics for e-commerce sites

Marketing an online shop or online boutique is not like marketing a high-street shop.

A small high-street shop will use “footfall” to get people into the shop. “Footfall” means enticing passers–by or people in the vicinity to enter the shop.

  • They’ll use a shop sign to promote the brand and capitalise on footfall
  • They’ll use flyers or adverts in the local area to promote itself on a “shop or brand level” to create footfall.
  • They’ll then use the window display to promote itself on a “product level” to capture the footfall.

The premise of marketing an online boutique is the same however what startup online shops tend to forget is that they are in a digital space and the method of creating footfall is totally different.

  • Your logo design could be seen as your shop sign but unlike a high-street shop it’s not seen until you enter the shop.  That means it’s not there to entice shoppers in from far, it’s there to confirm trust, credibility and professionalism as an online shop brand, once the customer is already in the shop.  Your logo design should say:
    • We’re experts
    • We’re specialists
    • Your brand message
    • It’s safe to buy from us
  • Marketing your e-commerce site on a “shop or brand level” to create footfall is much harder because it’s a digital space with much more competition.  A high street may have three boutiques which create footfall by delivering flyers. The internet has a million boutiques were digital flyers are posted out in the millions daily.  This means that the way we shop and sell online is different:
    • Online shoppers are not that interested in shops, in general.
    • What they are interested in, is brands and products
    • They are interested in visiting several online shops to get the best and safest deal
    • Because of that, promoting your online shop on a brand or shop level could be a big waste of time, to begin with.
  • Your best, most cost-effective way of promoting your new online shop is through your window display on a product level. On a digital landscape, your shop window is your product placement in search engines and social media.

Getting to the top of Google for anything specific can be a long and costly process.  To do it you need to look at, learn and invest in Search Engine Optimisation (SEO). In laymen terms, it’s the practice of making your website likeable by search engines and it involves tons of research and implementation into your online shop.

Most people ask me how much does SEO cost and to be honest that’s like asking how long is a piece of string.  SEO is pretty much down to how much you want to spend on it.  Spend a little and you’ll get little results over a longer period of time.  Spend more and you’ll get better results, quicker.

You don’t need to invest a lot of money to start selling online but you might need to if you want to appear on Google.  Likewise, you don’t need to spend money to do SEO at all, you could do it yourself but it is a time-consuming process, particularly to begin with.

A good thing to do before you engage in any form of marketing including SEO for your online shop is to check out the competition.

6. The competition of your online shop

As much as we love the internet, it surely is a devious place.  You may be opening the likes of a clothes shop and could be thinking that your clothes shop is unique and therefore people will come to your online clothes shop.  The truth is that they won’t, primarily because of your competition.  As a clothes retailer, you’re competing with giants like ASOS, TopShop, Debenhams, Zara, River Island and Amazon.  They dominate the top spaces of Google and unless you have a few million in the bank, there’s no competing as a retailer.

But that doesn’t mean you can’t compete.  There are thousands of online shops, each trading successfully. Some are smaller than the big brands with a niche offering like Jacamo who specialise in big men clothing.  They dominate an area of fashion all on their own.  Likewise, there are thousands of smaller online shops who dominate their area by focusing on one category of products or through a unique business model.

eg.
If I type in “jeans” into google, the first result shows ASOS (everyone knows ASOS)
If I type in “Gothic Jeans”, the first result shoes AttitudeClothing (I’ve never heard of this brand before)

The search rankings below Attitude Clothing also showed a whole list of other competitive fashion retailers who I had never heard of.  These are all existing online shops, who may be smaller then ASOS but right now, they’re probably bigger and more popular then your online shop is so they are your real competition, not big name brands like ASOS.

Finally we can dig deeper and do a specific search:

eg. gothic jeans size 10 with skull

This reveals online shops such as rosegal, katesclothing and ebay.

Whats the point?

The above examples show you where you stand in the marketplace and how invisible you might be as a new online shop so its imperative to do competitor research to figure out what you’re up against but also how you can change your business model to compete.

Big companies like ASOS can dominate for generic keywords such as jeans.
Smaller brands can dominate for niche keywords such as Gothic Jeans like Attitude Clothing do.

As a startup online shop, you’ll be competing with brands that might not be huge but are big enough online (such as Jacamo ) or you’ll be competing with smaller brands who dominate a niche (like Attitude Clothing).  We’ve not mentioned the million other shops who are also competing on a product level and not a brand level.

When starting an online shop try and be niche for a better chance of success.  Sell one product, or one category of products instead of many.

7.A niche online shop

The benefits of opening a niche online shop is that you can dominate a particular marketplace and make marketing easier for your business.  SEO should become easier and the costs of marketing will be less/cheaper.  As well as competing on a product level you can compete as a brand because as a brand you’re not trying to squeeze into the marketplace and compete. You’ll be creating your own space in the market as a unique retailer.

This is where branding can play a vital part, helping your online shop to target and communicate with the right customers to build a relationship with them as the “goto brand” for something particular.

8. Get support for your online shop

If you’re not professionally tech savvy, marketing savvy or design savvy then you will need help to set up your shop regardless of which system you decide to use.  Even the systems which are marketed as a quick, easy and cheap way to start selling online have tons of features, lingo and technical requirements that you’ll need to handle in order to get your shop open and functioning.

You will need help when:

  • You want to link up your domain to your site
  • You want to change colours on the site
  • You want to change the graphics
  • You want to market the site
  • You realise something has gone wrong

Even menial tasks like uploading product photos need to be done in a particular way.  Do it wrong and the site will slow down, put off users and put off search engines.

The bottom line is get the help that you need to set up your online shop.

To prepare yourself more, check out 14 mistakes that startup online shops make.

Conclusion

Setting up an online shop is fuelled with hidden costs so here’s a checklist so you know what you may need to spend on when starting up an online shop:

  1. Products
  2. Product delivery
  3. VAT (taxes)
  4. Branding
  5. Web design & Development
  6. PSP Fees and setup charges
  7. PSP integration
  8. Product photography & editing
  9. Populating site
  10. Delivery Packaging for products (envelops/bags/boxes)
  11. Delivery Equipment (Scales)
  12. Delivery costs (stamps/franking/courier contract)
  13. Marketing offline (Print Design, Advert placement)
  14. Marketing online (SEO, Social Media, newsletters, subscriptions, links)
  15. Email distributer
  16. Email design
  17. Mailing lists
  18. Hosting
  19. Domain names
  20. Something else (because there will be something else).

An online shop is never a lifetime solution or a one-off cost. Like an physical shop, an online shop needs constant maintenance and updates to keep it running smoothly and don’t forget graphic and digital design.

Online shops require constantly changing graphics from product photos to sales banners and design tweaks. When opening an online shop most people forget about this area of work but really want and need it.

When opening an online shop it’s a good idea to get friendly with your designer/developer as you’ll need them on an on-going basis.



bricks

  • A very interesting and informative article. I didn’t realise that so many payment options existed for online shopping. People have definitely overcome the fear of providing their bank card details online. The next hurdle is with B2B payments, not previously set-up, for the payment of corporate business journals, magazines, and consultancy fees. These payments still normally require a few signatures or authorisations before payment is approved. The current method is for the employee to personally pay for the services. The cost of the consultancy, training course, magazine subscription, or journal fee is then reclaimed through the company expenses procedure.

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