By Jessica Bruce

Starting an ecommerce business is a dream for many. If you are an aspiring entrepreneur looking for profitable business ideas to make wealth, it’s more like that you are aware of the abilities of this segment to help you realize that dream. After all, eCommerce is a trillion-dollar market and massive enough to accommodate numerous multi-billion business ideas. 

Unfortunately, the same gigantic nature of this segment often forces small entrepreneurs in believing that eCommerce is not their cup of tea. They live in a myth that you need a billion-dollar investment to get success in this segment. No doubt, an eCommerce venture with an enormous investment would have enough funds to experiment with unique business ideas, business models, and cutting-edge marketing, but it doesn’t mean you can’t have a profitable business on a tight budget.

Gone are the days when only hefty investments could end you up with a beautiful eCommerce store. Today,  numbers of affordable alternatives have made it possible to acquire not only advanced eCommerce stores in minutes but also to compete with the giants within the same constraints.  

This article will take you through a 4-step guide to uncover multiple ways to acquire your dream eCommerce venture on a tiny budget. You will see that it is possible to run a successful eCommerce business right from your living room. Let’s check them out. 

Step#1: Choose your profitable product line (niche)

Whether you are running on a tight budget or possess a hefty investment, it’s a non-negotiable step for any eCommerce venture. You need a product line-up that people would be interested in the current scenario. It’s all about demand and supply chain. Sometimes, you have to identify a demand and fulfill it to make money, while many a time, successful ventures just create a demand.

Nevertheless, if you can crack this very first step well enough, the rest of the journey is just a piece of cake. So find a product line up that has the potential to sell well. 

Look at the interests of the people around you and their problems, you will find a profitable eCommerce niche  right there. Examine the current trends, markets, and their support infrastructures. You can stalk the products popular on marketplaces like Amazon and eBay. Products popular on such marketplaces are always a quick shortcut to find your niche. You can track the trends on social media and search engines, too. Besides, consider the following aspects to make your ideas more solid:

• Price point: What is the price point of the product? It shouldn’t be too cheap or too expensive. 
• Profit margin: Calculate your margin after deducting overhead costs in storage, shipping, and taxes.  
• Shipping difficulty: How fragile or durable is the product to ship without in-transit losses in logistics? 
• Nature of the trend: How big is the trend? Would it last for a long time or just a momentary hype? 

Once, you picked up some product ideas, map them with the considerations in the next step to finalize your decision about selling them online in your store.  

Step#2: Carefully select a business model and supply source

The previous step talked about the need to identify a demand and mapping a profitable product idea to it. However, demand is a relative phenomenon. You can’t always meet all kinds of demands, especially when you are working on a tight budget. It’s always in your interest to look for existing demands, rather than trying to create one.  

That’s where the concept of supply-chain comes into the play. Be advised that supply-chain is a decisive factor in eCommerce and it plays a major role in helping you to pick a business model for your venture. You will have to pick an eCommerce business model, based on the way you find it feasible to establish your supply chain. Let’s see how. 

There are four major eCommerce business models. We can paraphrase it as ‘there are four major ways to establish your supply chain for an eCommerce venture’:

Inventory model (Direct supply-chain, Major investment, Bigger margins):

The model demands you to acquire your inventory of products in advance from a supplier, wholesaler, or manufacturer. Here, you are responsible for the purchase, storage, and management of your stock. For doing so, you will need in-house or contracted logistics, warehouses, and shipping infrastructure. 

Income: Your income will be the difference between your cost price of the stock and sales price. Since you own the stock, you can set big margins at your sales price. This model gives one of the biggest profit margins.

Cons:

• Requires a big investment in stock and supply-chain
• Requires a big team to manage the business process

Suitable for: It’s suitable for entrepreneurs with unique product ideas and decent investment to manage the inventory in-house. If you want to earn big margins, it’s a perfect model. 

Marketplace model (Indirect supply-chain, Lower investment, Lesser Margin):

The model does not demand you to keep or manage the inventory in-house. You can create a marketplace website and allow third-party sellers to sell their inventories on it. Sellers will be responsible for managing their supply chain and logistics. Your website will simply act as a medium that connects sellers with customers.  

Income: Your income will be through the commissions you will charge from sellers on each product they sell from your website. Here, you will make money without even having a stock of your own. 

Cons:

• Marketplace software solutions are usually expensive than inventory model solutions
• Requires a bigger team to manage a big site with multiple sellers and other B2B partners

Suitable for: It’s suitable for entrepreneurs looking to make decent money without spending extra in inventory management. Since you are making money from commissions, even the lower margins will keep you in profit. 

Dropshipping model (Indirect supply-chain, Least investment, Least margin)

This model is similar to the marketplace model but in a different way. You will source the supply directly from the manufacturers and suppliers rather than the wholesalers. Your customers won’t see your website as a multi-vendor marketplace from the front-end. Instead, you will sell your products under your own branding. 

However, at the back-end, it will function as a marketplace. Your website will transfer the orders to the dropshipping suppliers, and the suppliers will ship the products directly to your customers. The difference between the marketplace and dropshipping models is you don’t have to manage the shipping.

Income: Similar to the multi-vendor model, you will make money from the commissions paid by dropshipping suppliers to you.

Cons:

• Since the suppliers manage the shipping, the margin is much lesser than the marketplace model
• You don’t have a command on the quality control of the products you are selling on the site

Suitable for: The business model is suitable for entrepreneurs looking to make money without investing in the supply chain and logistics at all. Although the income margin is lowest among all the models, Dropshipping is the most risk-free and affordable business model in terms of venture capital.

Tip: Please note that the best product, niche, and business model is the one with some competitors and demand, but not too many. Find the right balance between a decent demand trend and some competition, and you will have your niche.  

Step#3: Fulfill all the legal and safety formalities

Depending on your business model and region of operations, it’s imperative that you fulfill all the legal formalities and become a safe business. Registering yourself will help you to not only gain your customers’ trust but also to acquire different B2B services without any hassle.  

• Register your business under suitable models such as LLP, Private Limited, Corporation, INC, etc.
• Register and trademark your brand identity to prevent plagiarism and imitations 
• Register to VAT or any other tax structure that applies to your region
• Get a business bank account and register with a trustworthy payment gateway provider
• Create and update your business policies on the website
• Adhere to all kinds of cyber, labor protections, and foreign -investment laws

Tip: If you don’t have much of an idea, hire a business lawyer and a chartered accountant to help you out on the legal and financial formalities. This investment is imperative to run a stable, legal business without any hassle.   

Step#4: Create an online store

This is one of the most unclear steps when it comes to saving some money in an eCommerce venture. Entrepreneurs often fall prey to false positives and end-up investing fortunes in building their online stores. It’s due to the lack of technical knowledge and information on the alternatives. Check out the following alternatives, if you want to create an online store on a tight budget: 

Create an account on a marketplace site: 

This is the cheapest option to create an online store. You can simply sign-up on a popular marketplace site like Amazon, eBay, Etsy, or Alibaba as a seller and get a ready-made storefront without any development. The marketplace site will manage everything for you: marketing, logistic, online payments, and shipping. In return, they will charge some commission on each sale you make on the site. 

However, be advised that it will not be your own eCommerce store. You will be a mere seller among thousands of others on the same site. Moreover, there are strict rules and regulations on these sites that prevent you from promoting your unique brand identity. You won’t be acquiring any customer but making mere sales to the customers of the marketplace site itself.  

By choosing this alternative, you might start an online store with a tiny budget, but this won’t let you build your own eCommerce empire. 

Sign up for a SaaS-based eCommerce platform:

If you are worried about the limitations of selling on a marketplace site, you can create your own online store using a SaaS-based online store builder. SaaS-based solutions like Shopify, BigCommerce, Squarespace, and Volusion need not any introduction. 

You can simply sign up for a plan on any of these solutions and get a ready-made storefront on the go. By paying some recurring fee, you can ensure that you have a ready-made online store and yet strict marketplace rules do not limit your brand-identity. Unlike selling on a marketplace, you can have your own domain name here.  

However, although the initial investment in this model is much cheaper, the recurring monthly payments actually accumulate over time. Moreover, cheaper SaaS plans are usually not very practical in terms of features. You usually have to opt for expensive plans to get useful features, which may start from over $500/month. Besides, you don’t get any source code, and the SaaS-provider reserves all rights to take down your site for any violation of their policies. 

You would still be depending on a third-party entity to run your eCommerce business. Nevertheless, SaaS is a good option to start on a tight budget, but it’s better to switch to a more stable alternative as your business grows in time.  

Use a stock open-source eCommerce platform

Open-source eCommerce platforms or online store builders are free to use and you can get ready-made online stores just after installing their source code on a suitable web server. If you are on a very tight budget and want just basic eCommerce functionalities on your site, this is the best option for you. You might be aware of the names like Magento community edition, WooCommerce, PrestaShop, and OpenCart in this category. 

Although there are custom modules and extensions that you can purchase to extend the default features of your selected eCommerce platform, the stock features are competitive enough to run a full-fledged store in a tight budget. The only con of this model is the complexity of the site management. Since you own the source code, you are required to be extra careful for your website’s security and regular updates. You might find yourself in need of some extra hands from technical experts to manage your site. 

Unlike SaaS and marketplace alternatives, this option demands an intermediate level technical skill to run a website via it. Where SaaS and marketplace options are good for lone rangers, you will find the open-source online store builders extremely useful if you can afford some extra help or possess the little technical skills. Nevertheless, you can always hire community developers for any kind of work on your website. 

Purchase a Premium Turnkey solution

Premium turnkey solutions are almost similar to open-source eCommerce platforms expect they are not free to use and for a good reason. Where open-source platforms are generic, software developers sell turnkey solutions for custom business needs. You can demand your solution vendor to personalize the website as per your unique brand identity and niche. For example, you can purchase ready-made multi-vendor marketplace software and get a multi-vendor site out of the box. These solutions also come with open source-code access, hence no limitation on the customizations. 

This alternative is the cheapest route, right after stock eCommerce platforms we talked about in the previous section. By paying a one-time cost to purchase the source code, you will get a ready-made yet personalized website for any business model: inventory, marketplace, or dropshipping. Vendors sell most of these solutions as clone script. You can see them by Googling the terms like Amazon clone script, Airbnb clone script, marketplace software, etc.   

Continuous Marketing is imperative 

This was a four-step guide where we explained various alternatives you can adopt, based on your budget, to build an online store in a tight investment. However, be advised that marketing is still an imperative requirement. You still need to invest in premium marketing tools, Ads, social media strategies, and SEO to drive conversions. We would suggest you to choose an affordable alternative to build your store so that you can have some money to invest in marketing. All the best for your venture. 

Author Byline:

Jessica Bruce is a professional blogger, guest writer, Influencer & an eCommerce expert. Currently associated with ShopyGen as a content marketing strategist. She also report on the latest happenings and trends associated with the eCommerce industry. 

Follow me on Twitter @Jessicabruc (https://twitter.com/Jessicabruc)