You might know what ecommerce is but would you know how to run an ecommerce business? The online sites you frequently shop at – Amazon, Etsy, Lazada, eBay, and Shopee – are successful ecommerce businesses. But they didn’t become profitable overnight.
Like other startups, they went through their share of hardships. They wouldn’t have overcome these challenges if they didn’t have a roadmap to chart their path to success – an ecommerce business plan.
If you were inspired by these online retail giants to start an ecommerce business, the first thing you need to do is to visualize your plans. We created this article to help you lay out your business ideas on paper or Google Docs and create an effective business plan for your ecommerce business.
What Is An Ecommerce Business Plan?
An ecommerce business plan is a document that outlines, organizes, and summarizes your purpose, targets, objectives, courses of action, risk factors, exit strategies, and analysis of the industry.
Why is an ecommerce business plan essential?
- Provides the blueprint for your venture.
- Becomes a ready resource for solutions whenever you have questions or are faced with unforeseen situations.
- It’s a requirement by banks and other financial institutions if you’re applying for a business loan.
- If you’re trying to get external funding, potential investors and partners will request a copy and explanation of your business plan.
Before making a final decision to start an ecommerce business, you must prepare a comprehensive and objective business plan. By doing so, you’ll find out if the venture is viable and if the risks are manageable and worth taking.
If the business plan can convince you that an ecommerce business is a worthwhile venture, invest in a mobile responsive and optimized ecommerce website.
The ecommerce website is your store on the Internet. Its URL is your online business address. Make sure it’s done right by having it designed by a Shopify developer in the Philippines.
How To Write An Ecommerce Business Plan In 7 Steps
Many entrepreneurs make the mistake of not preparing a business plan before pushing through with the venture.
Some think it’s unnecessary because the business idea is a “sure win” or “risk-free”. If you’re of this mindset, you might end up losing more than the shirt off your back. There’s no such thing as a “sure win” or “risk-free” business.
Some believe otherwise but aren’t sure how to go about making a business plan. If you’re of this mindset, we’ve got you covered. In this section, we’ll show you that writing an ecommerce business plan isn’t hard and can be done in only 7 steps.
Let’s get started!
1. Understanding the Ecommerce Market
Even an experienced sailor studies the ocean before he sets out to sail. While presenting a sea of opportunities, the Internet can be a dangerous place for business if you’re not familiar with the market you’re exploring.
Overview of the Ecommerce Industry
Conducting research on the ecommerce industry is important to find out if there’s room for growth or new players. Industry research seeks to identify the businesses that sell products or services that are similar to yours.
What areas are covered by an ecommerce industry study?
- Key/major players in the industry
- Growth prospects
- Trends and current developments
- Strategies of main competitors
Include the latest numbers, figures, and statistics on the industry. Compare and contrast statistics from the previous years and calculate the growth rate to know if there are profit opportunities.
Market Research and Analysis
In contrast to an industry study, market research focuses on the potential customers or end-users of your products and services. With an ecommerce business, your products might cater to multiple markets.
For example, if you’re selling shoes online, your product mix might include items that appeal to specific demographics:
- Crosstrainers – Regular gym-goers
- Athleisure – Casual users
- Running shoes – Frequent runners
- Walking shoes – Older people
- Basketball shoes – Basketball players, hip-hop fashionistas
For each market, you must create a specific Buyer/Audience profile that summarizes their key demographics, unique spending behaviors, and online activities.
Identifying Target Audience and Competition
Identifying your target audience is a crucial component of market research. Knowing who you are selling your products to sets the direction of your marketing campaign.
How do you identify your target audience?
- Conduct surveys in person, via social media, and through email channels.
- Post frequently on social media and monitor the levels of engagement.
- Visit the social media pages and the websites of your competitors. Go over their posts, assess the engagement levels, and create profiles of the people who are frequently engaging with the posts.
Another wonderful resource for customer data is your website. You can access website analytics, and retrieve and analyze data to learn more about your potential buyers.
As previously mentioned, the website plays a key role in the success of your ecommerce business. Only have your ecommerce website designed and developed by a reputable and experienced Shopify developer.
2. Defining Your Business Goals and Objectives
Of course, you want your ecommerce business to succeed. But how do you accomplish your goal?
Even though there is a market for online selling and the numbers show that an ecommerce venture is viable, success is never guaranteed. You have to take a realistic approach to running your ecommerce business by defining your goals and objectives that are within reach and your capabilities.
Short-term and Long-term Goals
You can set several short-term goals that will help you achieve your long-term goal. Again, the goals you set must be realistic.
For example, if you have a budget for managing an inventory that’s valued at US$100,000, it’s not realistic to target a year-end net income of US$1,000,000.
If you sell your merchandise at twice its cost and assume a net profit margin of 40%, targeting a net income of US$80,000 to US$100,000 would be more realistic.
The question now is how do you attain that number?
- Goal #1 – Hit 10,000 followers on social media by month #2.
- Goal #2 – Generate 2,000 leads by month #2.
- Goal #3 – Convert 2% of leads to sales by month #2
- Goal #4 – Have the ecommerce website rank on the first page of the SERP in 3 months.
- Goal #5 – Hit 50,000 followers on social media by month #6
- Goal #6 – Generate 1,250 leads by month #6
- Goal #7 – Convert 2.5% of leads to sales by month #6
You don’t have to set a list of goals for the entire year. You can set goals per quarter or every 6 months. Then, make adjustments as you go along.
Defining Key Performance Indicators (KPIs)
KPIs are benchmarks that are quantified by data as a reliable measure of your performance toward achieving a specific goal.
In our example, one of our short-term goals is to hit 10,000 followers on social media. Possible KPIs to measure this goal are:
- The number of shares and likes.
- The volume of social interaction via comments.
- The number of unique website visitors.
- Social media impressions.
- Audience reach.
You don’t have to use all 5 KPIs. Select 2 to 3 that are most relevant to your goal. Keep track of changes in KPIs because the data will be used to measure progress and as the basis for making decisions.
Establishing a Unique Value Proposition
The Unique Value Proposition (UVP) is a statement that explains to your target market what makes your business different from your competitors. This difference or unique feature about your business is why your products offer the best solutions to their problems.
As a statement, the UVP is short in length but high in value. In one statement, the UVP must be able to articulate why the consumer should choose your business over the competition.
In an ecommerce website, the UVP is found on the home page which is the usual landing page when someone clicks on your URL. The UVP is the first thing a visitor sees on the home page. It must make an impact within 6 seconds or the visitor might click out of your website.
3. Developing Your Product and Service Offerings
At this point, the ecommerce business plan has identified the following:
- Who – Your target audience and competition
- Why – Your goals and objectives
- How – The KPIs
Now, you’ll have to identify the “what” – what types of products will you sell online?
Identifying Product Niches
You’ll have to return to your industry study and determine the key niches in your proposed line of products.
Again, let’s assume you’re planning to sell shoes online. Based on your research, the top-selling types of footwear are:
- Athleisure – 45%
- Cross trainers – 28%
- Basketball shoes – 15%
- Running shoes – 10%
- Walking shoes – 2%
Given the data, it would be a good strategy to carry more inventory of athleisure shoes because they account for nearly 50% of the market share. Likewise, the bulk of your marketing budget should be focused on these top 3 selling niches.
Defining Product Features and Benefits
Where will you source your products? Are these branded items? Will you import them or source them locally? To have an idea, revisit your UVP. What makes your products unique and stand out from the competition?
Staying on with our example of footwear, this type of merchandise can be differentiated by:
- Aesthetic appeal
- Specific function
- Technology/Innovation
- Price point
- Brand endorsement
For athleisure, you might decide to sell shoes that have been designed for urban/everyday wear with more emphasis on looks and comfort than function and technology.
In comparison, cross trainers, running shoes, and basketball shoes have specific functions and should be promoted based on the latest technologies used during the design process as well as special features.
Pricing Strategy and Cost Analysis
Once you’ve determined the niche you want to participate in, you’ll have to come up with a sound pricing strategy.
Pricing can be a tricky proposition. As a new player, you don’t want to price yourself out of the market. Similarly, you don’t want to drop your prices so that your products appear more as commodities instead of something unique and high value.
Review your industry study and find out what the average price is for each product or similar ones in the market. Calculate your costs for selling the products.
Run tests to see which price points will give you acceptable profit margins without compromising the perception of your brand in the market. Moderate profit expectations for the first year.
When you’ve built up your market and brand reputation, you can dictate the prices you want for your products.
4. Building Your Ecommerce Website and Technology
The ecommerce website is your central hub of retail operations on the Internet. From sharing your UVP to product descriptions to the checkout counter, shipment, and after-sales support, the ecommerce website takes your customer through the entire buying process.
Choosing an Ecommerce Platform
Without a well-designed ecommerce that consistently functions and performs at optimal levels, your ecommerce venture might be cut short.
The ideal ecommerce platform has the following characteristics:
- Mobile responsive
- Optimized for search engines
- Strong security features including SSL certificates
- Web pages have fast download speed
- Complete product descriptions
- Fully functioning buttons and icons
- Multiple payment options
- High-resolution images
- User-friendly and highly-navigable
- Strong Calls-to-Action (CTA)
Of course, your ecommerce website must look beautiful and appeal to your target market.
Designing and Developing Your Website
Have your ecommerce website designed and developed only by an experienced agency with qualified Shopify theme developers.
The ecommerce website is an investment, not an expense. Don’t scrimp on it by going the DIY route or hiring the cheapest freelancer. You want to give your shoppers the best online experience every time they are on your site.
Integrating Payment Gateways and Logistics Solutions
One of the challenges of running an ecommerce business is managing the rate of cart abandonment. This is a situation where a shopper has all of his items in his cart and abandons the purchase just before checkout.
Oftentimes, a shopper might end up abandoning his cart because the payment gateways and logistics solutions aren’t convenient for him. For example, the availability of Cash-on-Delivery (COD) as a payment option.
Review your Audience Profile and survey results to find out which payment gateways and logistics solutions are preferred by your market.
5. Marketing and Sales Strategy
A sound marketing strategy can help boost the sales of your ecommerce site. There are a lot of processes and tactics you can pull out from the ecommerce marketing toolbox.
However, to keep you from getting overwhelmed, here are 6 of the best ways to market your ecommerce site and generate long lines at the checkout counter.
- Implement Search Engine Optimization (SEO) practices to make your website and content easily found by Google.
- Utilize image-driven social media channels like Instagram.
- Open a Facebook store and integrate it with your Shopify ecommerce site.
- Include a live chat feature in your ecommerce store.
- Run a content marketing campaign with blogs, guest writing gigs, a podcast, and YouTube videos.
- Optimize social proof by highlighting positive reviews, 5-star ratings, and favorable testimonials from customers.
Stay active but you don’t have to post every day on social media. You can make a solid impact on consumers by posting 2-3 times a week. Focus more on quality posts.
6. Financial Planning and Budgeting
If you think that running an ecommerce business only entails expenses for your website, Internet service, electricity, a computer, and your products, think again.
An ecommerce business can run up the following expenses:
- Inventory management
- Warehousing
- Business permits and licenses
- Logistics
- Software subscriptions
- Transaction charges
- Marketing
- Payroll
You must also set aside funds to cover contingencies such as refunds and returns, and maintenance of your assets.
If you don’t keep track of your expenses, you might be disappointed when you see the year-end financial statements of your company. For this reason, prioritize financial planning and budgeting activities.
- Project your target revenues and expenses. At the end of each month, compare your projections with the actual figures to find out how your business has been performing.
- Identify your break-even point. It’s not realistic to expect a windfall right away. Every now and then, you’ll experience sluggish sales. By identifying your break-even point, you’ll have a better idea of your tolerance levels if the sales downturn period continues.
- Secure multiple options for funding and investment opportunities. Getting external funds is a great way of stabilizing your cash flow, especially at the startup stage.
Many entrepreneurs will apply for a small business loan but there are other ways to secure funding.
For example, you can bring in angel investors, venture capitalists, or new business partners involved in the business in exchange for funding.
Another option to consider is to keep your 9-to-5 job and bootstrap your ecommerce business.
7. Ecommerce Site Security and Customer Data Protection
The biggest threat to your ecommerce business is hacking. In 2022, 43% of hacking attempts were made on small businesses and mostly ecommerce websites.
Ecommerce websites are a favorite target of hackers because it’s a valuable source of confidential information that can be quickly monetized. Because of the rise of hacking activities, consumers have become wary of shopping online.
If you’re committed to starting an ecommerce business, be prepared to invest in security and customer data protection protocols that can rival the US Department of Defense.
- Get Secure Sockets Layer (SSL) Certificates for your website. If your ecommerce website doesn’t have SSL certificates, Google will make it “Not Secure”.
- Regularly update security plugins.
- Remove outdated plugins and ones that are hardly used.
- Restrict administration access to your ecommerce website.
- Sign up for website maintenance services that are offered by a reputable agency.
The cost of hacking goes beyond lost sales. Your business brand will be tarnished and customers might file a class-action lawsuit against your company.
Conclusion
Selling products and services on the Internet is a great idea. With more than 2 billion online shoppers every day, you’re assured of a busy market. And running the enterprise from your home sounds like a wonderful proposition.
But like any other business, you’ll surely encounter problems and unforeseen situations.
This is where having an ecommerce business plan comes in. You’ll be better prepared to handle problems that arise in the course of running a business and remain on track to meet your goals and objectives.
A study by Harvard revealed that startups that created business plans had a 16% greater chance of succeeding than those without business plans.
We made this comprehensive guide to help you create an ecommerce business plan. It’s also a good idea to delegate some of the areas of a business plan to people with the right skill set. For example, you can ask an accountant to make the financial study and budget.
Hire a freelancer writer to do market research on the ecommerce industry. Meanwhile, talk to other entrepreneurs who are doing online selling. Pick their brains, learn from their experiences, and get as much information as possible.
While business success is always uncertain, what is certain is that there’s plenty of room for growth in the ecommerce industry.