Starting an eCommerce business: Things to expect in the first year

May 24, 2021

Things you need to know before starting an ecommerce business

Starting an eCommerce business is never a light decision to make. You’ve probably read a lot of articles out there touting best practices and talking about pitfalls to avoid. However, a lot of times, these articles talk about two areas. 

First, they cover the rise to success. These articles focus on how to take your already profitable eCommerce business to the next level. Or, secondly, they talk about the pitfalls to avoid along the way. While these articles are great and helpful, they don’t provide much insight for the people who are still at the beginning of starting an eCommerce business. 

What can you expect in your first year of starting an eCommerce business? What type of growth is normal? What sort of activities should you focus on? 

Face the reality before starting an eCommerce business

Let’s move beyond the hype and get into the nitty-gritty details of that first year of starting an eCommerce business. Having realistic expectations is the first step to your business growth and will save you from disappointment and self-doubt.

It’s going to be stressful

The truth? Your first year in business is going to be stressful. You have a lot to figure out, learn, and balance. You’re going to have a lot of moments where you doubt yourself. These feelings are completely normal and part of the first-year process.

Costs appear out of nowhere

As the business writer and valuation expert Sam Willis says, as you are starting an eCommerce business, you will be learning about costs and how they seem to appear out of nowhere. This includes costs from website to technology updates and IT equipment, inventory management, customer service, marketing costs, and shipping. All you can do is be prepared and find a way to accomplish your goals on a small budget.

Passive income takes time

While everyone dreams of earning while they’re asleep, that’s not the reality of your first year of business. According to one study that looked at several eCommerce businesses throughout their first three years of business, the average eCommerce business generated around $63,000 per month in revenue at the three-month mark. At the end of the first year, the average monthly revenue sat at approximately $127,000 per month. 

Now again, this is revenue, so this doesn’t account for costs. Additionally, there’s no indication of the niche or size of these shops. However, this is a good baseline and goal for you to aim to achieve.

Revenue and profit are two very different things

They’re two very different metrics that mean two very different things. If they’re reporting revenue, things might not be as amazing as they seem. If they’re reporting profit, they might be one of the rare few that caught lightning in a bottle. These get-rich-quick misconceptions harm eCommerce entrepreneur’s expectations because they’re pretty far off from reality.

Tips to stand out in the first year of starting an eCommerce business

There are several paths to growth and getting the most out of your first year when starting an eCommerce business. However, here are the things you must do to get through the first year and outstand the competitors.

Build a brand not a store

People respond to brands. Stores can wax and wane, but if you can create a brand identity, then your eCommerce store will pass the test of time. Identify your target demographic and create a brand that caters directly to them.

Attract true fans and followers

Your branding will help do this, but focus your energy on landing genuine fans, repeat customers, and brand promoters. While one-off sales are helpful, they aren’t going to sustain your store long-term. Instead, put your marketing efforts towards capturing customers who will shop from you for many years to come.

Narrow down the most effective marketing plan

When starting an eCommerce business start by testing and narrow down the most effective marketing plan. You need to test email, social media marketing, PPC, search engine optimization, and even influencer marketing. Keep analytics on all of it. Track your results and split test different marketing campaigns. Then, start eliminating those that don’t work, so by the end of year one, you’re only spending marketing money on funnels that pay off.

Establish a customer retention system

You need to put a lot of emphasis on customer support and pay special attention to customer retention. Statistics show that it costs at least five times more to get a new customer than it costs to keep one. Spend time in your first year studying customer retention and customer churn. Identify how you’re going to keep customers around for many years.

Automate everything you can

While it might sound counterintuitive to increase costs by investing in automation when starting an eCommerce business, it’s not. Outsource and automate any and every task that you can. The more bandwidth you can free up, the more time you’ll have to help your business grow.One way is by utilizing third party companies for last mile delivery, customer service and even website maintenance. By working with the right company and the right people, you can save a lot of time, money and you can simply focus on the critical role that you need to do for your company.

Get serious about the numbers

Understand all the numbers that make your eCommerce store run. In your first year, it’s overwhelming. You have revenue, profit, shipping, taxes, product prices, product costs, operational costs, and more. You need to have a deep comprehension of all of it. Don’t backburner this. You need to know these figures to maximize your returns. It’s incredibly important for growth, but it’s also essential for understanding how to value a business.

Conclusion

No sugar coating, your first year of starting an eCommerce business is going to be tough. You have a lot to balance and learn and it’s going to be stressful at times. However, if you go in with realistic expectations and take proactive action to maximize early growth, you’ll be achieving the internet entrepreneurial success you’ve been dreaming about in no time. 

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