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E-commerce: definition and 10 important tips for starting your online shop

A guest post by online entrepreneur Shabbir Nooruddin

Getting into e-commerce has been one of the best learning experiences of my life. What I learned while managing a business would be difficult to find in an MBA or other business program.

All of the learning successes arose from my mistakes. Every mistake is an opportunity to do better next time - as long as you really analyze what you could and should have done better. I want to share with you some of my ecommerce missteps so that you can avoid them and get there faster.

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Table of Contents

  • What is e-commerce? Meaning and definition?
  • What are the forms of e-commerce?
  • What are the benefits of ecommerce?
  • How does e-commerce work?
  • How can you sell online?
  • Ecommerce Tips: What Are The Most Common Mistakes?
  • What is e-commerce? Meaning and definition

    E-commerce is derived from the English term electronic commerce, in German electronic commerce. This is not limited to online shopping, e-commerce also includes services such as online banking. The pivotal point here is the World Wide Web - instead of coming into contact with their customers locally in the shop, retailers can reach their customers via the Internet.

    What are the forms of e-commerce?

    If you decide to sell your products or services online, you have the option to sell your products to individuals (B2C) or business people (B2B). B2C e-commerce is the most widespread form of e-commerce worldwide. B2B e-commerce, on the other hand, is a practice that is gaining momentum, offering new sources of revenue for merchants looking to take their business to the next level.

    What are the benefits of ecommerce?

    The greatest advantage of e-commerce is undoubtedly its reach. Companies can operate in international markets even without an extensive branch network. The beneficiaries are the customers who can draw on a wide variety of offers - regardless of their location, because e-commerce is also possible with a smartphone. The only requirement is a stable internet connection.

    How does e-commerce work?

    In e-commerce, a distinction is made between two basic sales platforms with which companies can sell their products. Your own online shop or sales via a so-called marketplace. Sales platforms such as Amazon or eBay are the most prominent examples. Both variants in e-commerce have their own advantages. While online retailers can use the reach and awareness of marketplaces for themselves, it is possible to find your own style with your own shop that is precisely tailored to your target group. For this reason, many retailers use both routes for themselves and sell their products through different channels.

    You can get exciting insights into e-commerce from real retailers in our podcast. Listen in here or follow us!

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    How can you sell online?

    We recommend opening an online shop via an e-commerce platform. By creating your own ecommerce website, you can have more control over your activities and build a real brand identity, and with a system like Shopify you can sell on social channels and marketplaces at the same time.

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    Ecommerce Tips: What Are The Most Common Mistakes?

    Mistake # 1: You are not calculating accurately enough

    As any seasoned entrepreneur will tell you, the most important core skill in running a business is math. When I started my business was more of a hobby and I wasn't paying as much attention to the numbers as I should have.

    So I ended up in a niche that was in high demand but didn't have enough sales potential to be worthwhile. The products I wanted to sell were very cheap and I had to sell a lot more than I thought to make some profit.

    Business math in e-commerce is very simple. Use this formula to find out how profitable your business can be:

    Profit = Demand * (Sales - Expenses).

    Let's say there are a total of 20,000 people searching for your product (generously based on the main keyword and some long-tail search terms).

    Let's further assume that you can somehow get to half, then we have 10,000 potential customers. Assuming a conversion rate of 1-2 percent, you get 100-200 sales. If your average order value is 100 euros and your net profit margin is 30 percent (with a turnover of 100 euros, minus your costs, 30 euros remain as income), this means that you will achieve a profit of 3,000 to 6,000 euros.

    That is only a rough estimate. But no matter which area you want to get into, if you have calculated everything well, you can estimate what is in store for you. It took me two shops before I could really learn my math lesson, because even though my second company had a very high average order value, the profit margin was so low that I hardly made a profit after all costs were deducted.

    Reading tip: You can find out how to write your own business plan here.

    Mistake # 2: You fail to identify the niche in the market

    My stores were both based on the dropshipping model. That meant I was competing with hundreds of people selling the same products as me.

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    So if I couldn't somehow differentiate myself from the rest, I'd just stick with an “I'm in” store and not add anything outstanding to the market.

    I just jumped into the deep end with my first online shop, assuming I had found a good niche. But I had neither examined my competition in more detail nor analyzed the market situation. So I didn't notice that the “heavyweight” in my niche was simply brilliant. They had every product I had, hundreds of customer reviews, thousands of likes on social media, a popular blog, and loads of media coverage. They just covered every place in the market, but I thought I could compete against this company. Of course, commercially, my business was a disaster.

    There was a big gap in my second shop - not in terms of products, but in terms of information and communication. I took an opportunity, started my market research, and managed to uncover a very comprehensive resource in my niche.

    Not that the information wasn't available elsewhere, but I presented it in a way that was easy to use and helpful to visitors. The result? With the help of Search Engine Optimization (SEO), I was able to grow the business to 15,000 organic visits per month (in a highly competitive niche!).

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    The easiest loophole to find is an information loophole.

    The easiest gap to find is an information gap: you don't need to invest a lot of money, and your business value lies not only in your products and customer list, but in your content as well.

    Mistake # 3: You are selling too many products

    My first shop offered environmentally friendly recycling bags. But since I didn't sell many bags, I gradually added more environmentally friendly products from my supplier.

    Ultimately, I had an unbalanced mix of products that had little in common other than being environmentally friendly. That could have worked if my brand had been more general, which it wasn't. This hardly affected our sales figures from the paid traffic, but it was becoming increasingly difficult to address a specific target group.

    The mistake here was more in branding than financial planning, but branding is just as important because your brand is what defines the value of your business.

    Reading tip: We explain how you can build a brand story here.

    Mistake # 4: You don't have a content plan

    Another mistake I made with my shop in e-commerce: I wasn't focusing enough on content marketing, which made it difficult to get organic and social traffic, especially with a product as nondescript as reusable bags. I corrected this mistake on the second business, which was based on content marketing.

    It's difficult to write good content for a boring niche.

    Let's be honest: How much can you write about reusable bags? The key (and I didn't learn that until later) is not designing content marketing around the product, but around the customer.

    The key to content marketing is not to design the content around the product, but around the customer.

    Let's stay with the example of reusable bags: Who would possibly use them? But someone with great environmental awareness. So it stands to reason that this target group is also interested in healthy nutrition, exercise, yoga and natural wellness. These are assumptions to begin with, but a little research will confirm them.

    By building your content marketing strategy around your ideal customer instead of a product, you have more reasons to write and more approaches for customer contact.

    Of course, we have already published many useful articles on content marketing. You can find these articles here!

    Even if your niche is very technical and you manage to write 50-100 articles about the intricacies of your product alone, the influence of this information remains limited. To complete your endeavor, you need to find more intersection with your customers than just the fact that they buy what you sell.

    Reading tip: We present here 20 Shopify retailers who have implemented their online shops very well.

    Mistake # 5: You are not thinking through your freebies well enough

    For some companies, offering a free product works well. In my eco-friendly niche, such an opportunity fell at my feet.

    Unfortunately, I misjudged the situation and made a loss for the entire project. There was only one sale out of 300 samples sent. That hurt.

    Reading tip: Here are 20 super effective ways to promote your product.

    Free offers, sweepstakes, and giveaways can be an efficient way to market a product, but not for every niche in the market. Free gifts work with perishable or consumer items: skin care, groceries, nutritional supplements, and the like. For all other products - even a product like clothing where someone could order another item - this calculation is difficult.

    The lesson I learned from this expensive experience was that these gadgets don't really drive sales; they build a brand. And for that you need a plan.

    Mistake # 6: You haphazardly run competitions

    As I recovered from the freebie debacle, I continued to search for effective ways to better market my bag business. I decided to run a competition with a blogger. I figured we could generate links while increasing my social media followers and email lists.

    This time I was better prepared financially because the prize was only a 50 euro voucher. The result? I almost tripled my social media numbers, and the contest was a hit.

    Or not? I had already made mistake # 4 and didn't have a social media plan to keep all these new followers on board.

    The trick with social media is that you have to take care of your followers right from the start. Post content every day. Post regularly and start conversations, give tips. Little did I know that Facebook and Twitter were so much work. Little by little, my followers forgot me. Learned another lesson.

    Reading tip: You can read our most popular article on social media marketing here.

    So if you are planning a competition, plan that afterwards. This planning could prove to be more helpful than the contest itself.

    Mistake # 7: You're wasting too much time on odds and ends

    In economics there is the concept of alternative costs. Essentially, it is about the fact that there are “costs” when taking advantage of a certain opportunity - namely the fact that your time is tied up with it and further opportunities cannot be used in the meantime. In other words: a perceived opportunity costs you every other opportunity.

    If, like me, you run your business with minimal resources, you probably do everything yourself. You built and expanded the website, you upload the products, you write all the product descriptions, you do the marketing yourself. A fantastic one-man or one Woman show.

    On the one hand it's great that you do everything yourself, on the other hand it's incredibly time-consuming. You don't have that time elsewhere — with your family, developing new ideas or doing business, for example.

    Simple activities fall into two categories: necessary and unnecessary.

    Simple activities fall into two categories: necessary and unnecessary. Try to automate as many simple tasks as possible. These processes cost a little, but outweigh the otherwise resulting head (and heart) pain. In addition, there are often people who are happy to do this for reasonable payment (uploading inventory, maintaining data, etc.).

    Unnecessary bits and pieces belong in the trash. “Unnecessary” means things like playing around with your web logo, fiddling with a few pixels of image size, eternal hesitation in deciding on the color of a button or other minimal changes that probably only you will notice afterwards.

    "Don't get bogged down in the small and small" is also one of the top tips from German and Swiss Shopify experts who have their say in this article.

    Some of the above activities can have a positive effect on your conversions, but only if you have a lot of visitors and sales to compare. At the beginning of your business, you should avoid time wasters.

    After two hours of small-scale work, you think you've worked a lot, but realistically, you could have used this time more meaningfully.

    Mistake # 8: You don't know who your ideal clientele is

    I learned from this mistake in my first online shop, but it also gave me problems with the second project.

    Closely examining your niche is twofold: finding the product and recognizing the customers. The trick: if you have customers, you can build a product to match, but it's very difficult to have a product and then chase customers.

    How to find the perfect products for your shop can be found here!

    It's very difficult to have a product and then chase the customer.

    The common advice is: look to numbers and analysis when looking for a niche, and that is undoubtedly important. Unfortunately, I ignored finding an ideal customer and creating a customer profile.

    Even if your niche has sufficient demand and offers a good selection of products - without understanding your ideal clientele, you will make your job more difficult. This is what happened to me with my second business. I had a few very good months, but I wasn't targeting my customers with enough precision and I certainly lost some sales as a result.

    If you look very carefully, you will see that niches still have sub niches. The more precisely you address a target group, the better, because this way you can identify your customer needs much easier.

    In my second online shop, I was selling rather complicated electronic devices. Even within the almost infinite range of products in my niche, there were different levels: some were less complicated, some were in the middle, and others were highly complex.

    My shop offered all three levels. If I had focused on one type of product, I would have been able to establish a closer connection with my customers - and it wouldn't have been that difficult to network with the right influencers. My dilemma looked something like this: "Too professional for beginners, too very beginners for professionals."

    Mistake # 9: You don't have a robust marketing plan

    “No plan, no success” is the motto here.

    If you're building an ecommerce website, knowing your customers and where to find them, your marketing plan should be easy to set up. Unfortunately, I wasn't clear about all of these elements, and so my marketing plan was more of the kind: "Just knock something out, it will work." One day I tried this, the other day. Not exactly a recipe for success.

    Every e-commerce company should have a decent marketing plan that covers it all. But some channels will quickly prove to be more efficient than others. For some companies, pay-per-click (PPC) advertising will work; others will do better with SEO or social media. Email is also a reliable sales channel.

    Whatever your plan, make sure you have it ready when you start business. There will always be new opportunities, but your (hopefully solid) foundation will ensure you steady, scalable growth.

    Mistake # 10: You are falling for empty promises made by a PPC company