Join Patrick Rauland for an in-depth discussion in this video Choosing a business model, part of WordPress: Ecommerce.
- [Instructor] In the last couple of years, E-commerce has become a very exciting space. Older E-commerce platforms were really complex, really expensive, or both. The software has finally become affordable enough for anyone to open up their own store. Nowadays, you can set up and E-commerce store in a number of hours and sell just about anything. Because there are so many ways you can build and market your store, it's worth thinking about your business model before you start thinking about the specific software. Someone who works at a full time job and sells an e-book on the side, has very different needs from someone who has a $10,000 budget, works 40 hours a week on their project, and wants to process hundreds of orders a day.
There aren't any right answers when it comes to E-commerce. Everyone is in a different situation. And needs to make the best decision for themselves. The standard E-commerce model that we all think about is selling physical goods. If you're interested in selling physical goods, the next step is to think about how you're going to acquire products, where you're going to store them, and how you're going to fulfill the orders. All these will vary depending on the business model that you choose. One option is to create the goods yourself. If you have a skill you can create all sorts of products from scratch.
Creating the goods yourself is a cheap way to get started but is time intensive. Many store owners want to grow their business and it can be hard to scale a business that relies on your time to create the products. Reselling involves buying a large amount of products from manufacturer or wholesaler and then selling those products. You make money by selling with a mark up. These businesses can be hard to get started, because you need capital to make your initial order. On the plus side, they are much easier to scale because it doesn't require your time. You can simply reinvest your capital.
A popular option that has been getting a lot of attention in the online space is dropshipping. Dropshipping is where you take orders on your site and then send the information to the manufacturer or wholesaler and they send the products directly to the customer. This option doesn't require a huge investment, and it usually requires very little interaction with the customer. If you can find a dropshipper for products you want to carry this is an excellent place for a business owner to start. The downside of dropshipping is you will definitely have to do marketing to separate your store from the competition to sell the product.
Another option is to manufacture products. You can contact a manufacturer and work with them to create products which you'll sell directly to the customer. Some businesses start out making products by hand and will move to manufacturing. This can take quite a bit of time, effort, and money to set up. You should make sure that your products will sell before ordering a big run. Oftentimes manufacturers will have minimums. You might find a factory to do a small run of 1000 units but it's much more common to find factories with 10,000 unit minimum order quantity, so make sure you validate your product idea before ordering a large run.
Due to large order minimums and some set up fees, manufacturing requires a large up front investment. These costs are part of the reason why you see crowdfunding campaigns on sites like Kickstarter and Indiegogo. So far, we've really only touched on physical products. But that's obviously not the only thing that you can sell. You can also sell virtual products that don't take up any space. These could be books, software or a membership to a website. Virtual products can take awhile to create, but once they're ready to sell they can be sold over and over again with very little upkeep.
Once you decide on how you want to make money online, you can then look at who you're going to sell to.
- Getting paid
- Calculating shipping
- Collecting taxes, including value-added tax (VAT)
- Using WordPress or third-party platforms for ecommerce
- Defining your audience
- Organizing your products
- Marketing your WordPress site
- Testing and optimizing your site