How to start an online business

Online businesses are increasingly becoming the standard in today’s economy. E-commerce gives anyone and everyone the chance to become small business owners easily and with less capital investment than ever before. However, whether you make jewellery in your free time or have found the solution to a global industry problem, running an online business can still be rather complicated. We are here to help you navigate through the ins and outs of the eCommerce world!

Choosing the right business model

When it comes to starting a business, you will be faced with an endless line of decisions to make. Do not be discouraged! In order to create a successful online business, you need a clear idea of what you want from it. The first of these decisions is your business model.

There are a variety of different business models; however, most often they come down to either B2B, or B2C. So what does that mean?


Business-to-business refers to a model in which you sell your product or service to another business. The advantages of doing so are that order sizes and repeat orders are typically larger and more frequent.


Business-to-customer refers to a model in which you sell your product or service to the end consumers directly and it is the more common business model for new small businesses. Generally there are more consumers wanting to buy from you than businesses, and sales cycles are typically shorter than those of business-to-business model.

Choosing your product

Once you have your business model sorted, it’s time to figure out the type of product you want to offer. This might sound very self-explanatory, but there are different product types that carry different benefits and disadvantages. If all you’ve got is a general idea, this will help you translate that into a successful product. So what are some of your options?

Physical products

The most obvious and far most popular online product is physical goods. These make up the majority of eCommerce businesses – however, physical goods present challenges faced by no other type of product, such as inventory storage, shipping, breakage, and insurance. You will also have to think about the production of your goods – but more on that later!

Digital products

Digital goods are probably the second most popular – they have the advantage of not needing inventory storage or physical delivery, unlike physical products. Digital goods can be anything from music, ebooks, videos, images or software. They can also include information-based goods, like health guides and other ‘how to’ products.Because a digital product can be resold thousands of times over, their margins are considered the best. However, they also come with the challenges of privacy.


Unlike products, services are a bit less tangible and more dependant on human factors. Online services can range from consulting, web design and development, content writing/editing and a variety of other options. They allow for a way to build credibility through online presence and to gain exposure. However, online services come with limitations – these services are typically delivered by a person and are therefore limited to that person’s time and skills.

Choosing a production model

Generally, this only applies if you have physical goods to sell. However, you should seriously consider your options before investing into one or the other.


Making your own product is the easiest way if you’re good at it – arts and crafts, jewellery, beauty products, clothing items can all be handmade. It puts you in control of the quality and the brand; however, it requires time and commitment and like online services, there’s not much room for scalability. The primary costs associated with making your own products include the purchasing of raw materials, the storage of inventory, and labour. Naturally, this option is limited as not all products can be made by hand.


Finding a manufacturer to produce your products for you can save you some time, but not money. When choosing the right manufacturer, take into consideration location as overseas manufacturers will often save you money. However, local manufacturers are more easily manageable and will most likely provide better quality too.


Acquiring your products wholesale means buying your inventory direct from the manufacturer or from a middleman supplier at a discounted wholesale rate. In turn, you can resell them at a higher price. This carries less risk than simply sourcing your goods from a manufacturer as you’re dealing with brands that are already established and validated on the market. This means that there is a lower risk of wasting time and money developing a product no one wants.


Dropshipping means you are selling products you don’t actually own. You take orders from your online business and forward them to your supplier/dropship partner – after this, they ship the product to your customer on behalf of your company. The biggest advantage of dropshipping is that you can offer a large selection of products without having to worry about the inventory. It’s also a rather convenient way of testing out new products as it requires less effort on your part.

Choosing your online service offer

If your product is digital or service-based, none of the production techniques will matter. However, you still have some important decisions to make. How you offer your product will largely depend on its nature, but here are some of the most common ways to incorporate them into eCommerce.


This is the most obvious choice: you offer your digital products directly, which customers can then purchase. Once they’ve paid for it, it’s theirs. The biggest advantage of this is instant gratification, however, a direct online service lacks scalability and different tier pricing.


The word ‘freemium’ is made up of ‘free’ and ‘premium’, and it refers to an online service or product whose original features are free, but which can be upgraded for a price. This way, the business offers both free and paid services. The free features will generally add value to the brand while the upgraded features should offer some sort of benefit to the user.


The subscription model is quite self-explanatory – users pay a fee regularly in exchange for access to your digital products or services. It is convenient for both the customer and the business. If the service provides a lot of value, customers will likely keep subscribing for a long period of time.

Customised goods

Customised goods can play into both physical and digital products. Your business provides the base product which customers can then change around to their liking. These can be basic T-shirts with design options or website templates with customisable aspects. This model works great with different tier pricing, as well as custom pricing per edit.

Choosing a way to compete

Once you have picked a business model, a product type, and either a production method or an offer model, there is only one thing left: selling your products! Unless you are the very first to offer it (in which case, you still need marketing), chances are, you have competition. How will you and your business compete?


As a small-sized business owner, competing on price won’t be the smartest option. Generally, bigger brands typically have better margins and can always go lower than you. Unless you are at their level, do not lower your price just to attract customers.


Competing on quality comes down to having a superior or better-made product. This is a great way to compete and it will result in your market shifting towards longer lasting, well-made products instead of cheap substitutes. It might mean more financial commitment, but it will be to the advantage of your business in the long run.


Competing on selection is a great option for carving out your own space in the marketplace. You also save more as opposed to upping your quality. However, it comes with the risk of increased inventory and storage of that inventory if you are utilising any other method than dropshipping. It can still establish your business as an authority, which will pay off in the long run.


Providing better service than your competitors can be a time-consuming strategy as a small new business. However, it can also work out very well. Word-of-mouth marketing is the most powerful form, and providing exceptional customer experience will result in recommendations and as such more sales.


One of the best ways to differentiate yourself in the market is to provide additional value to your customers that your competitors lack. These can range from great product descriptions to learning centres, installation guides, and so on.

Following this guide, you probably have yourself a great online business model ready to launch. However, before you do, there are a few more things to consider. It’s best to invest some time into a more detailed business plan. Set short and long-term goals for your business and make sure you have ways to achieve these. Secondly, do not take marketing lightly! It might sound like a good idea to just wing it – however, eCommerce is a bit different when it comes to advertising your business. Make sure you have a marketing strategy in place in order not only to reach the most people, but to reach the most relevant potential customers.

At the end of the day, you are probably starting an online business that you are passionate about. Let that passion fuel you and your business will take off!

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