How to start an online store
When you have decided you want to start an online store, there are many things you need to consider. On this page we will guide you through all steps: from registering a website and buying products to keeping inventory and promoting your online store.
- Know the rules
- Business structure
- Is your business cross-border proof?
- What software?
- How to get customers
Know the local rules
First, when you start an online store, make sure you know all of the rules that apply to you in the country you’re based in. For example, do you need to be registered at the local chamber of commerce if you want to start an online store? Can you be based in another country? If so, what extra rules apply then? How does it work with paying taxes? What tax rate do you need to use in your shop?
What’s the VAT threshold in your country?
When you start an online store located somewhere in the EU and you ship goods (and services) to other EU member states, your shop is subject to the Distance Selling Act. If the turnover (excluding VAT) of the delivery of goods doesn’t exceed a certain threshold, the Distance Selling Act won’t apply and thus the VAT will be levied according the EU country where your company is settled. But if the threshold is exceeded in a different country than where you’re settled, you need to pax taxes to that country.
In 2019, the threshold in Belgium for example was 35,000 euros, while in Germany it was 100,000 euros. Always check the most current VAT thresholds in the European Union if you are doing cross-border ecommerce.
The business structure
You also need to make a decision about the type of business you want to start. Will it be a sole proprietorship, a private limited company, a public company, a partnership or something else? Making the right decision can be a choice involving tax efficiency and liability.
For example, in the Netherlands a sole proprietor can claim various tax allowances, making a part of your profit tax-free. And the profit made by a private limited company is subject to corporation tax, which is a significantly lower rate than those of income tax.
But as a sole proprietor you are personally liable for your company debts, while if you operate your business as a private limited company the company assets and your private capital are separate.
Which top level domain will you use when you start an online store?
You will also need a website where you will sell your goods online. For the website name, you have to decide which name you are going to use and what top level domain (the abbreviation after the dot). Will it be a .com website, a .eu website or maybe some local ‘TLD’ like .fr (for France), .de (Germany) or .co.uk (the United Kingdom)?
Is your business name cross-border proof?
With regards to the name, try to find something that, one day, can also work in other countries, especially in countries where they speak a different language. If you start your online store for example in the Netherlands under a very typical Dutch name, later on it may be hard to get your foot in the door in another market in Europe. It’s the reason why Dutch shipping platform Jet Verzendt (translation: “Jet Ships”) changed its name into the more international-sounding brand KeenDelivery in 2017.
Try to find a business name that also works in other countries, in case you start an online store abroad.
What kind of ecommerce software will you use?
In order to start an online store, you need to use ecommerce software. There are different types of software: you could use open source software, closed source software (also called proprietary software), basic solutions which costs you about 30 euros per month or more advanced software which costs you hundreds of euros per month and gives you tons of options. Take some time to do your research and compare the different providers. What do you want from your software and can you easily grow or expand to other markets with this solution?
What kind of products will you sell?
The core of every online store is, of course, the products. The type of products you offer determines the way you do business. For example, if you sell items that are currently very hot, you might generate some serious revenue in a very short time, but what is the long term plan with your store? And if, on the other hand, you sell some very niche items that only attract collectors or diehard fans, it could mean that your items stay in your warehouse for a very long time. Can you afford this?
You must not only think about the type of products you sell, but also about where you want to buy these items. Do you know a local dealer? Are you in contact directly with the manufacturer? Do you need to import your items from China, or maybe another EU country? Then certain local rules may apply. Please, again, do your research. You can’t just import a shipload of items from China without needing to do some paperwork.
Where do you store your products?
If you’ve made a decision about the type of products you want to sell and you know where to buy them, you need a place to have these items stored. Most small online retailers start with buying goods at a wholesale price and then store them at home. When sales go well, they buy more and eventually start renting warehouse storage space.
But when things are really going to get off, you might start looking at other solutions. You can have another company store and fulfill the orders for you. This is called dropshipping. There are businesses that are just doing this: storing and fulfilling orders for others. But Amazon, for example, also offers such an e-fulfillment service. Again, do your research and try comparing several e-fulfillment service providers to see which one suits you best.
Another company can store and fulfill the orders.
How do send your orders?
When you know which products you want to sell, and you have found a place to store them, it’s time to ship them. You might know how to send a parcel, but what if the orders are coming in massively and you have to act fast, because customers are waiting. How do you ship tons of items to customers across the country, or maybe even abroad?
How do your customers pay you?
When you sell your items, your customers will need to pay for these products. But how will they do this? You need to offer several payment methods on your checkout page. You could offer just one payment method, but this isn’t customer friendly. Because every customer is different: some like to pay with PayPal, the other prefers to pay with their credit card. Some like to pay beforehand, while others only want to pay when the goods have arrived. Dutch ecommerce laws even oblige online retailers to offer at least one payment method that gives customers the opportunity to pay after receiving the goods.
How do you get customers?
Customers are very important, as they are the ones buying your products and thus giving you your revenue and, hopefully, your profits. But how do you get customers? Well, customers are visitors who pay. So, the first thing you need to do is attracting visitors to your online shop.
You can start by notifying your family, friends, relatives and colleagues about your ecommerce website, but you can also start by spreading the news through social media. This can both happen organically or with paid posts.
You can also try to get visitors by being visible in search engines like Google. Again, this can both happen organically, by search engine optimization (SEO), or with paid posts. This is called search engine advertising (SEA).
When you have visitors, the next step is to turn them into paying visitors. You need to convert visitors into customers. An important topic in the ecommerce is the conversion rate. It’s the number of visitors who do something you want (in this case: buy something) out of the total number of visitors. On average, an online shop has a conversion rate between 2 and 4 percent. This means that if 100 people visit their online shop, 2 to 4 of them leave the shop with having bought something.
On average, an online shop has a conversion rate between 2 and 4 percent.
You have an online store running… now what?
When you have set up your online store, you’ve bought your products, you’ve stored them, you’ve promoted your ecommerce website, you’ve attracted visitors and made them buy your products, you have a running online store! Congratulations. But now what?
Now, it’s important to keep it running. Don’t sit still. Don’t be blinded by the growing analytics or revenue. Keep investing. Keep adapting. Keep improving. Try to find the bottle necks in the customer journey. Where on your website do people leave your shop the most? How can you prevent this from happening? Try to find ways of promoting your shop even better. Try to pump up that very important conversion rate. And what does your online store do after a sales has taken place? How do you get that customer back to buy something again?