How to start an online retail business

If you’ve ever wanted to try your hand at opening your own e-commerce shop, don’t start until you read this guide on how to start an online retail business.

The 6 steps to help you start an online retail business include:

1. Land your winning idea
2. Get the right licenses and permits
3. Create a marketing and advertising plan
4. Protect yourself with small business insurance
5. Build an e-commerce shop
6. Hire help if you need to

1. Land your winning idea

Find a product or a service that plays to your strengths and interests you, then monetize it from there.

The sky’s the limit, but here are a few ideas to juice your creative energy:

• Create handmade clothing, jewelry or other personal and household goods and sell them on Etsy or sell them at home.
• Develop an online course if you’re a subject matter expert with an in-demand skill.
• Research a product that could sell well on Amazon, and then open an Amazon shop for profit.
• Craft your own beauty products or fragrances with a unique spin.
• Launch a local service in your town, such as food delivery, petcare, or furniture moving.

Look out for these common e-commerce risks.

2. Get the right licenses and permits

Licenses and permits keep your business above board and in compliance — both essential when it comes to reporting income. Here’s what to get:

• An Employee Identification Number (EIN): An EIN from the IRS is an assigned number you need to pay your taxes. An EIN is free and you can apply online.
• A business license: Whether you’re running an e-commerce retail shop or a brick-and-mortar store, you need a business license to operate legally in the U.S. How much it costs and what it requires will depend on your city and state.
• A seller’s permit: Most states require retail stores to have a seller’s permit to collect sales tax on what you sell. Many states don’t charge for this permit, but those that do typically charge less than $100.

Read these e-commerce accounting tips to help with business operations.

3. Create a marketing and advertising plan

Your young business will need to do some promotions to cut through the noise, gain traffic and convert new buyers.

Here are some ideas for marketing and advertising a small business used by online retailers:

• Social media campaigns promoting holiday discounts and sales. Think Black Friday, Small Business Saturday, Cyber Monday, and so on.
• Paid online media and direct mail advertising directing customers to your site.
• Create discounted product bundles to incentivize a higher ring per sale.
• Offer product giveaways or start a loyalty program.
• Build an email list and create email marketing campaigns that promote customer referrals.

4. Protect yourself with small business insurance

Whether your business is brick-and-mortar or e-commerce, you need retail insurance to help protect it from a wide range of accidents and unexpected events that can lead to a financial loss. Consider these four types of small business insurance and determine what’s right for your business:

1. General Liability insurance: This can help protect you if you’re liable for a product malfunction, if there’s an injury to someone who’s not an employee, or if you or an employee cause damage to someone else’s property.
2. Professional Liability insurance: If someone accuses you of a business mistake or misrepresentation, this can help cover costs for legal fees, court costs and damages.
3. Workers’ Compensation insurance: If you hire employees, your state will probably require workers’ compensation. It can help pay for medical expenses and lost wages if an employee gets sick or hurt on the job.
4. Commercial Property insurance: If a covered event such as a fire or vandalism damages your inventory, fixtures or other business property, this can help cover repairs or replacements. And, if you have to shut down operations temporarily due to a covered event, it can also help replace your lost income.

5. Build an e-commerce shop

When considering an online retail platform, compare cost, ease of customization, marketing capabilities, inventory and budget tools, security and platform customer service options.

You’ll also need to evaluate these essential functions to help customers shop and buy:

• A payment processing system. Credit card payments are standard for online orders. However, a growing number of customers use digital wallets like Apple Pay or Google Wallet or peer-to-peer services like Venmo and PayPal. Include these options for easier mobile shopping experiences.
• Shipping. Customers want their gifts to arrive on time. Add language to your site that lets people know the last day they can order gifts in time for the holidays.
• Streamline checkout. Make payments easy and keep checkout to one page. Don’t require customers to create an account or save their contact and payment information to purchase. If they don’t finish checkout, send a shopping cart email reminder to help convert more sales.
• Create a gift guide. Add a gift catalog to your website to promote popular merchandise.

6. Hire help if you need to

Increased sales means increased work. Someone will need to provide customer support as well as package and ship orders. Hiring extra staff can make a difference in getting packages to the right place on time.

How NEXT helps small businesses owners grow

NEXT helps small businesses in 1,300 professions get just the right insurance coverage they need. We make business insurance easy with 24/7 access to your policy via web and app to help you manage your coverage.

Start a quote, customize your options and access your certificate of insurance online — all in about 10 minutes.

Start an free quote with NEXT today.