eCommerce, also known as electronic commerce, internet commerce, and online commerce, is a business model which involves transactions taking place on the internet. In 2020, retail eCommerce sales worldwide amounted to 4.28 trillion US dollars and e-retail revenues are projected to grow to 5.4 trillion US dollars in 2022. Online shopping is one of the most popular online activities worldwide, but there are costs associated with going online. In this article, we’ll take a look at what you consider before making any decisions and the eCommerce Business costs.
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The Cost of Running an Ecommerce Business
Many different variables contribute to the overall cost of building an online store. It depends on your eCommerce business model. If you plan to sell products on social networks and groups alone, you will not have any costs to build a website. But, if you opt to operate via an existing marketplace, you will face various eCommerce business costs. For example, if you are serious about creating an online business platform, you need to set up an eCommerce website. Here are items that you will have to pay for building a website.
Licenses
Firstly, to start running your eCommerce business you have to obtain relevant licenses and permits. These will differ significantly by the country, region, or state in which you live. Most American states require you to have a business license, for instance. Other countries, such as New Zealand, have no such requirements, and you can easily set up an eCommerce business.
The US SBA website offers more detailed information on federal and permits required in the USA. the fees depend on your business activity and the agency issuing the license or permit.
Domain Name
Next, the essential fee you have to pay for the eCommerce business cost is the domain name. It’s the name of the website/URL. You’ll need a domain name for your website if you want to start an eCommerce business on your sale
You can purchase a domain through GoDaddy or Namecheap, or you can buy it directly through the main eCommerce platforms, like Shopify.
Let’s try to get a .com domain name while many other domains, because it’s become more common, people will default to the .com version of any website when they type it into a browser.
Hosting
One of the essential eCommerce business costs you should pay to host your website on the hosting provider’s server is hosting. Without it, your website won’t be connected to the internet and can’t be visited.
Theme and Design
The part of developing an eCommerce store is creating a unique user experience with an impressive theme and design that reflects your brand and keeps customers coming back.
Some themes are free of charge that you can choose from, you can take a look at some free themes on Shopify. While other themes may range in price $34 – $350 each. Shopify Theme Store or BigCommerce Theme Store both have a variety of free and paid themes to use.
App & Extension
Similar to Themes, your store needs to have all the apps and extensions that base on your business demand to advance it.
With Shopify Store, the merchants can access hundreds of free and paid apps and those costs depend on the app itself.
Or, if you create your online store on BigCommerce, you can select add-ons for free or premium options. The out-of-the-box functionality of BigCommerce can save merchants roughly $5,800 – $ 30,000+ per year.
Magento add-ons tend to require custom development. It offers thousands of extensions in its marketplace that range in price from $0 – $15,000.
How much does it cost to operate a business?
Now, your online store has everything that is necessary to be ready to sell the products. It’s time to start thinking about the reality of how to operate a business. Your store might be small, but the effort it takes to expand your customer base. To know what are the costs you should consider to drive your online store, keep watching…
Inventory
The first important consideration when running a business is the cost of your inventory. Whether you’re making the products yourself or ordering them in from suppliers, you’ll need to find vendors that offer a high-quality product at reasonable prices. Normally, it takes you 25% of your budget. If you choose the Dropshipping model, you don’t need to pay your wholesaler until a customer purchases inventory from your store.
Warehouse
And, if you’re tending to sell large items or large quantities of small items, you may need to hire warehouse space to store your stock. Depending on your location, this could cost you $4 to $7 per square foot per month. You might even consider renting out a storage unit for your warehouse needs if the storage company is happy with your frequent access.
Shipping
When it comes to getting your products into your customer’s hands, you have to think about shipping. If so, you’ll need to factor shipping into your startup costs, including packing materials and postage. Depending on what you’re sending, these costs can reach thousands of dollars.
Payment Processing
As a new eCommerce business, you need to select a payment method that’s fast, secure, and easy to use, so your customer will stick around to purchase items from your site. This way you’ll allow safe transfers to land in your bank. The eCommerce platforms like Shopify or BigCommerce offer several payment options, such as Paypal, Amazon Payment, Payu, etc. Based on a per option, it can take you from 1% to 3% per transaction fee.
SEO & Marketing
When you’re starting a venture from scratch, marketing can end up costing way more than expected. The search engines use algorithms to rank your website. There are numerous ways you can advertise your new eCommerce store, but make sure that the method you pick comes across as authentic and not too sale. The average marketing budget is about 7-12% of their total revenue, but some prefer to spend a fixed amount.
Website Maintenance
Other, if you’ve invested in a full-scale business, website maintenance costs are a necessary factor. You need to put in some effort and occasional expenses to keep your website chugging along smoothly. Otherwise, just like their real-life counterparts, they will deteriorate over time. Today, businesses invest $35 to $5000 per month or $400 to $60,000 per year on website maintenance.
Staff
When you want to operate at a reasonable scale, you need to build a team to help you. If you are selling goods, you may choose to employ staff to pack and ship orders, although you may be able to do this yourself at the beginning. Based on your needs or your business volume, you might pay in the range of up to $100,000.
Final words
By now you can see, you should understand the cost of running an eCommerce business isn’t crazy expensive. There are many different aspects of an online store, you can pick and choose exactly what you need and only pay for those items.
As you can tell, it’s hard to give you that perfect number. But at least you now have a rough idea of the cost of running an eCommerce business. Make the calculations now and decide if it’s worth the investment for yours.
