How much does it cost to start an e-commerce business?
Let’s talk about costs. As you can imagine, starting an online business will save you a number of costs
associated with brick-and-mortar stores: rent, property insurance, furniture, and more. That said,
however, while it is perhaps easier to fund an ecommerce business on a tight budget, there are still a
number of different costs that will be required to get started.
Therefore, as is the case with any business, it is difficult to determine exactly how much it will cost to
start your own e-commerce business. Your startup costs will largely depend on the type of e-commerce
the business you’re starting up. Some depend on the software or platform you choose, and how you are
buying your products among other factors. With that in mind, you will probably want to think carefully
about your initial budget and keep track of all your expenses along the digital entrepreneur journey.
However specifically, I advise you to consider the following costs: Business Licenses and Permits:
Depending on the type of entity, location, and what you sell, you may incur a variety of licensing and
permit costs.
eCommerce Software
While it may be free to download an open-source platform, there will be other costs associated with this type of solution. These costs are (developer fees, hosting, add-ons, etc.). For an all-inclusive platform, on the other hand, you’ll be able to find some of the basic options at low prices ($ 16 per month for the Square Online Store). More advanced and expansive solutions will require higher costs, with Shopify Advance’s limit at $ 300 per month.
Domain name and hosting
Some e-commerce solutions will include a domain name or hosting at the cost of the platform. Some will allow you to purchase your domain name through them. If you need to purchase your own domain name and hosting, you could pay anywhere from € 40 per year for the domain up to around € 100 per year. For an average of € 60 per month for hosting.
Payment Processing
To accept payments online, you will need to work with a payment processor such as Square, Stripe, or PayPal. Some e-commerce software solutions will include their own payment processing with the platform, while others will allow you to integrate with your preferred system. In general, you will pay around 2.9% plus € 0.30 for each transaction made in your shop.
Inventory and Shipping
Depending on what you sell, your inventory and shipping costs can vary dramatically. That said, however, of all the costs we’ve discussed so far, your initial investment in inventory will likely be the largest. I recommend that you purchase inventory carefully, especially when you are starting out for the first time. You definitely don’t want to spend too much money on products that you won’t be able to sell. Shipping costs, of course, will depend on the sales and shipping services you use. But it will also depend on the size of the products you send and the shipping speed options you offer to customers.
Marketing and Advertising
As a general rule, it’s safe to set a budget of around 6% or 7% of your gross revenue for marketing and advertising. At first, this can be difficult to estimate, so you’ll definitely want to take advantage of all the free marketing and advertising options you have available. Additionally, you may also incur additional costs for things like equipment, employees, consultants, and more.
How to calculate the cost of setting up an e-commerce website?
The best way to calculate the cost of building an e-commerce website is to compare different e-commerce platforms, tools, add-ons, and add-ons that you’ll need based on your business needs. This is the only way that will give you an accurate cost of an e-commerce site.
Since there are several ways to create an e-commerce store, most online e-commerce website cost calculators end up being completely inaccurate (so it’s best to avoid them). To be very close to the real cost and to know how much you can spend on e-commerce, we will break down our e-commerce cost analysis into the following main expenses:
- Hosting costs
- Payment processing costs
- Website design costs;
- Cost of add-ons and extensions;
- Total costs of an e-commerce site;
- Costs to grow your business
E-commerce cost
Many of you have asked us to write how much does an e-commerce website cost? Knowing the cost of
setting up an e-commerce website is important because it helps you calculate the investment needed to
start your new online business idea.
The challenge is that there are many factors involved in setting up an e-commerce site, and all of them
will affect the overall cost of your business. If you don’t have a clear business plan, you can easily end up
spending a lot of money. But don’t worry, we’re here to help.
When entrepreneurs decide to start an e-commerce business, knowing how much money to spend is one of the most daunting things. The plethora of offers can be intimidating and ultimately overwhelming, simply because extremes tend to collide: some people think you can start your business with almost no money, others say you need a lot. of capital to achieve this. The most reliable answer seems to lie in the middle. There really is nothing quite like starting a business for free, but you don’t need a lot of money to do it either.
Here are some of the essential factors – and their costs – that you need to consider when starting an e-commerce business;
Branding (Cost: from € 20 to € 15,000)
The brand is often seen as the corporate visual entity, but this belief is incomplete – it is about more than what customers see. Branding can even be viewed as a moral concept, as it encompasses your company’s values and mission. In short, branding is extremely important. This doesn’t mean you have to invest huge sums of money, just keep in mind that if you want to hire experts to take care of your branding, you have to be prepared to pay for that expertise.
However, if your capital is limited, there is no need to despair. There are branding platforms like Tailor Brands that you can use to build your brand at a very affordable cost. Unlike what seems to be the design norm, which charges you for the design, you can get a subscription that lets you create anything related to your brand for a few dollars. You can also hire a freelance branding consultant on sites like Upwork who can help you with a custom design for your brand.
Accommodation (Cost: 0 €)
Financially speaking, accommodation is not a concern for you, since you literally have nothing to spend on it. The reason: almost every major e-commerce platform, like Shopify for example, gives you free hosting if you decide to create an account with them.
The best part about this very valuable benefit is that you also don’t have to worry about your business traffic. You can start with very low traffic, let’s be honest, but even if you increase your traffic, later on, you won’t see any cost in depending either.
Domain (Cost: 0 € to 15 €)
The area of your business is definitely an issue that should not be overlooked. Its relevance lies in your brand. Your domain can be thought of as your alias on the web, so it’s an important part of who you are. For many visitors, your domain is actually the first impression your business makes on them, so make sure it speaks volumes about what your business aspires to convey.
In an absolutely ideal scenario, your domain matches your business name, but the reality may be different. As for pricing, if your business name is very original, you might be lucky enough to find a cheap domain that is a perfect match for your business name. If your business goes by a common name, things will get trickier. You can still get a domain for under twenty dollars in services like GoDaddy for example, don’t get me wrong, but the choices for your domain will be reduced.
Design (Cost: from € 0 to € 400,000)
Technically, design is part of your company’s branding, but it is so relevant that it deserves to be considered separately. This is where most entrepreneurs falter. Since there are so many options to create your design very cheaply or even for free, business owners think they can get away with going to a website and doing their business design.
Going down this path is not promising: due to the fact that most people opt for these free services, their designs appear to be the same. And if you want to stand out with your business, it’s best to create a unique identity that is true to the branding you’ve established.
This is no easy task, which is why you may need to devote a considerable fraction of your capital to design purposes. The good news is, if you are able to hire a group of professionals who can handle your design, then they can create a strong visual identity that will help your business succeed. Ultimately, we live in a visual age everyone seems to be plugged into their phones looking at photos on Instagram or videos on YouTube, so if you manage to grab your customers’ attention, then half of the war is already conquered.
Other expenses (Cost: from 0 € to 20,000 €)
Photography
An attractive business consists of having attractive products. And your products might already be attractive, but if you can’t translate that charm into your website, you’re really not doing anything.
How could you do it? With good photography! E-commerce has gained so much importance that a new kind of professional is emerging: the e-commerce photographer. I know what you might be thinking: this is another cost that needs to be added.
Well, you can always hire an e-commerce photographer, or you can get a high-resolution camera, some extra accessories to build your own studio, and you can do it DIY! It may take a long time at first, but if you finally master it the return on your investment will be very high.
Logistics
If your business sells products, you need a place to store them and also a complete process for distributing them. Fortunately, there are several services that can take care of both of these tasks. It’s understandable that having low sales at the start doesn’t really require hiring companies like this, but surely you must have big ambitions for your business, so you can start researching now to find out when the time will come to rely on these services.
Software
Having an e-commerce business means having to tackle multiple programs and tools to bring your business up to speed. And even when you can use most of this software for free, it ends up being too limited, especially if you hope to grow over time.
We strongly suggest that you do a thorough study of the main programs and tools that you need to use so that you can then find out what meets your needs. Having a good understanding of your needs will lead you to a wise decision.
Choosing how to spend your money when starting an e-commerce business shouldn’t scare you. On the contrary, it is something you need to take seriously. The more effort and attention you invest in finding your costs, the more your expenses will be reduced.
