hippypink - 12:07 am on Jul 23, 2007 (gmt 0)

i work with hundreds of e commerce shops, including some of my own, so I have a little insight here:

most importantly, you need:

1. a solid product
2. a solid plan, and likely cash, to market it,
3. and the devotion to execute it.
everything else is secondary

I see lots of ecommerce sites come and go, but the above formula is always key. When I say "solid product" I mean, a product people want, and ideally, you are the only provider, its protectable (e.g. patent), its marketable online, etc... A lot goes into this alone, but most people don't realize what people want, and are buying already. This is probably the biggest problem I see. For example, I know someone who wants to sell baby bedding, because it's easy to drop-ship. However, there are thousands of these stores online, and few are very profitable from what I have seen for just that reason--too many competitors as a result of no barrier to entry--ultimately they all pretty much compete on price until margins are sometimes next to nothing. If this store had some uniqueness, such as how they sold the product, or perhaps their own brand, then maybe this would be a diff story. I am confident of this info because I know other people who sell baby bedding and no matter how much they make, they just are not taking much home at the end of the day.

So actual standard (fixed) costs on a small business that you run yourself:

1. CART
Commercial solutions run between $10 - $500 per month, plus a small setup fee. For most people with a new venture, a cart that costs $100 a month should be plenty to get them going very well. Best advantages to commercial hosted solutions often include--plug-and-play, someone else is maintaining it for you, making sure it's up and running, usually free upgrades for life, support, training, easy for newbies, hosting.

If you go open-source, expect to do it yourself, or hire some company to setup and customize, which runs $1,000 and up ($2,000 - $5,000 is typical). Then of course, you need to pay for hosting, upgrades, maintenance, etc... free support from community, and commercial support available separately.

To find out if hosted solution iis right for you, there is a good article on howstuffworks.com that goes into more depth about hosted software (asp model) and pros/cons. Personally, I use open-source for about 75% of operating my business, but not for ecommerce.

2. MERCHANT ACCOUNT & GATEWAY
At least $25 a month for the merchant account; plus the gateway (e.g. Authorize.net is my fav) which runs about $10 -$20 per month -- plus transactions fees (about $0.35 in total). Paypa* is an option, but I wont debate that here.

So your total fixed monthly costs probably be around $50 - $150. this is cheap compared to costs of brick-and-mortar.

Variable costs:

3. shipping - usually you pass these on to customers as they shop.

4. products - are you manufacturing something, reselling something, etc... drop-shipping for example is usually tough because it's so easy for someone to compete against you.

5. web design, product photography, office expenses, computer, and more

In my case, I design my own website, since I do this all day long at my day job; do my own product photography since I am an experienced photographer (incl. serious retouching in photoshop); hire inexperienced models for around $10 per hour; have a computer of course; and dont have office expenses except occasionally buying equipment, business cards, etc..

MARKETING

The big grey area. I personally depend on SEO a lot, which drives hordes of people to my site. I do my own, but you can hire a good company for around 5k, and 1k per month. PPC marketing, email marketing, viral marketing, affiliate marketing, etc... are also extremely popular.

I know people for example that do ALL their marketing off of their email lists that have built over the years, others that depend completely on affiliates, and others that depend on PPC--and these people can do really well. Off-line and traditional advertising can be really powerful as well.

These are all generic tactics, and quite often it's the company's that have the most unique/targeted marketing along the most unique/targeted products, that do the best; but point is, be prepared to set aside a lot of money for marketing (10% - 75% in the beginning).

in summary, find something you are good at, then query the real world out there as to potential demand. Sell it out of your car trunk if needed (it's happened before). Even that one of my online stores makes several thousands per month (and half is profit), I have not given up my day job yet. Maybe if I break 300 - 500k per year, then i will. basically, I just am reinvesting most everything back into growth of the business instead of taking out a salary. My wife runs the business by day, which is very little work actually. I figure I will need to hire help when I reach a few hundred K annually.

Until then, I recommend reading everything on WebmasterWorld, and all the best free info you can find on marketing, business, etc... Find some great (highly rated) books on Amazon, then check them out from your local library. I have not paid for very much in my desire tot learn how to run an online business. for example, Aaron Wall's site taught me most everything about SEO.