Although this post is specially designed for all those entrepreneurs who want to create an online store for the first time and also do not have an offline business, many of the tips could be applicable to other cases. Javier Echaleku from Logocomunica presents his 10 points to take into account when we want to launch an online business.
The Internet has become another medium for the creation of companies, and the apparent ease of creating a “page with a payment gateway” has led many entrepreneurs to opt for this medium when creating their companies on the Internet . However, it must be borne in mind that an online store does not sell by itself but is governed by the same parameters as any other company even though its natural environment is the Internet.
With these little tips I hope to be able to contribute my grain of sand to the entrepreneur so that his internet business initiative is much more profitable and achieves the success that is sought.
1. Niche and more niche.
In a market as competitive as ours it is no longer worth setting up generic online stores that do not differentiate themselves. Find your niche, either for very specific products with little competition or covering needs that are not well covered in the market. At this point, making an exhaustive business plan analyzing product, competition and market can be vital in deciding whether or not to start the company.
2. Product providers.
One of the most critical points in your company and that will define the initial amount to invest and the structure that you will have to assume, is the way in which you will work with your suppliers. The rules are very simple, the higher the purchasing power, the better the margins and the better service. If you are going to be able to buy a little product, your cost will be higher and therefore your margin will be smaller. But if you buy a lot you run the risk that your market cannot absorb it and you will be left with excess stock and therefore money stopped. You should also consider the way in which you are going to distribute it. Are you going to set up a warehouse? Will you need staff to manage it? Another way of working with suppliers is with the “dropshipping” system whereby the supplier ships directly from their warehouse with your own delivery note. The downside of this system is in the control of stocks, you should consider how your store connects in real time with the stocks of your suppliers.
Before starting the business, it selects suppliers, analyzes different sales scenarios and evaluates all possible options for product acquisition. Make sure well because without product you will not have a store.
3. Transportation agency.
Whether you use your own warehouse buying the merchandise or if you opt for dropshipping, I recommend that you work with your own transport agency. The most appropriate choice will depend on the type of distribution you have to do, the type of product you sell and the service that the agency itself offers you. Today there are many options and they are all very different. Analyze all the points, prices, volumes, merchandise insurance, delivery times, the connection with your store for traceability, the different formulas for managing returns (which you will have) and order changes ( you will also have them).
There is no store without charges and nowadays you have to offer the maximum payment formulas to avoid losing sales. For this, it is important that you negotiate a virtual POS with your bank, but I assure you that they will make the most ridiculous hits, but this is the banking market. That is why I advise you to present a detailed business plan to the bank, sell them the idea, that they believe in it, after all they will be one more supplier and you need them.
Do not just pose “I need a POS” because you probably need many more things such as a loan for equipment or technological developments, credit policies to acquire merchandise and cover specific peaks in treasury, good conditions in transfers to pay your suppliers and employees with few financial costs , and above all that they treat you like a company and take you seriously.
5. Financial management.
This point is one of the most critical, the management of collections, payments and the financial “health” of your company. Let’s not confuse profitability with treasury. You can have a lot of profitability but you can accumulate many payments the same day that you have no income and then have a big problem. If you are not a financial expert, I recommend that you have one in your work team, either as an employee or as a partner, but who assures you that you will always be positive or at least helps you to anticipate when you will not be in order to manage that question with your financial provider, your friend the bank …
6. Customer service
In front of and behind an online store there are people, both those who sell (you, your team and your suppliers) and those who buy (your customers). Especially the latter need to feel that behind the store there is a company and people who are going to solve their problems, which will be many. If you think that you can create a store while working on another site from 9 to 2 and from 4 to 7 you will not be able to serve your customers in the way they expect and you will lose them. Establish all possible means to be in contact with them (phone, mail, chat, etc.) and act as if you had a physical store. Do not hesitate to call your customer by phone, check their data, listen to their voice, know who buys from you and you will know better what they expect from your store to improve it. Also before buying you will be asked many questions about the product, the service, the company, the guarantees. If you do not make it easier for them to solve those doubts, you will lose sales. If you can’t handle all of this, you need to have someone on your team to do it, you know, employee or partner.
7. Be a specialist.
Do not set up a skate shop if you have no idea about the sport, no matter how much niche you may have detected. Your client cannot know more than you about what he is buying from you because you will not know how to offer him what he is looking for nor will you understand his doubts. If you have found a niche but you are not a specialist in it, you already know what you have to do, have someone on your team, employee or partner.
8. The management team.
With all of the above (and much more that has remained in the pipeline) you will be able to realize that you alone will not be able to carry out your business, therefore look for partners and distribute the functions of each one well or create a team of employees considering their costs in the business plan. I still do not know anyone who is good at everything and also has time to carry out all the functions, and that in my career I have met many people who have promised me that they could do everything and have stayed on the road .
9. Sources of investment.
We have not yet started to talk about the costs of the platform or the investment in marketing and you will already be adding a good amount of money that you will need. The biggest costs are going to be those of personnel and the acquisition of merchandise, curiously the same as a physical store, but then you will add the creation of the platform and the need for investment in marketing to make yourself known.
With all these costs compared to the estimated sales capacity and the profit margin, you can analyze whether your business can be profitable or not. But the key will be how am I going to get the investment I need? I recommend that you distribute it with the following criteria. A part of your investment, sell something, take out your savings, ask for a personal loan, in short, take a risk. Then involve your family and friends, if they believe in you it will be easier for a bank or an external investor to do so. With all that has been achieved, write it down in the part of the business plan that talks about that point and present it to potential investors or seek bank financing.
Don’t ever go to them without showing them that you, your family and your friends are willing to risk for your idea because if they won’t tell you – if you and your environment don’t believe in your idea, why should I?
10. Technology development, design and marketing team.
I have saved this part for last because without everything else well resolved you should not consider looking for a serious development agency. I know that it is one of the first things you have thought about, but if all of the above is not clear to you, you will not be able to transmit the correct information to your technology and marketing provider and the work will not be able to be done with the necessary quality.
In addition, with everything we have talked about, select a provider who understands your project, who falls in love with it like you and your team and who fights for your idea. It is also important to know that these types of suppliers have costs for the development that these projects need and for the marketing follow-up that must be given to them, therefore consider it as an investment need in your business plan that is amortizable in the medium term.
With all this, I wish to have helped so many entrepreneurs who see their future find the right path to achieve many successes.
Javier Echaleku has been on the internet since 1996, he is an entrepreneur, founder and CEO of the agency specialized in electronic commerce Logocomunica. If you want to create an online store and you are interested in electronic commerce, I recommend you follow him on Twitter.
On June 6 Javier Echaleku and I will be giving a workshop course in Madrid to take your e-commerce to the next level. It is limited to 40 squares with a 40% discount for the first 10 and 20% for the next 10 places. Take advantage of the occasion and sign up now …