The Startup Checklist: Things to Ponder before Starting Your Own eCommerce Business
Through the years that I have been working on ECVV.COM, the most common question members ask is “How should I start my business?”
In truth, and new members should know, is that this question is really hard to answer. I should first point out that there is no such thing as a 100% fool-proof method that would help you start up. For years, we have seen even the most legitimate of suppliers gone bad and suddenly disappear from existence. This is not to scare anyone though; what we are saying here is that having a business always has risks involved, whether to your money, or reputation. If you are not willing to take such risks, then starting an eCommerce business might not be best suited for you.
If you are of course, still reading this, then you should know by now of the risks involved and are willing to take the plunge anyway. As I said above, there is no guaranteed way of starting up right, but definitely, there are ways of easing the worries you might have. As with such, here’s my personal checklist to ponder on while starting an eCommerce business.
I. Have you performed Due Diligence?
Performing due diligence ( https://en.wikipedia.org/wiki/Due_diligence ) should be the first thing you should know how to do (without asking questions on the get go). Check a supplier’s website and see if the information there is true and correct. Call their numbers and check whether they answer your enquiries. Check if they are a registered company from Companies House or their respective country’s trade department.
These steps are vital for you to immediately know if a supplier did take time to work on these small details. Personally, I first do a whois search on their domain( http://whois.domaintools.com/ ), try to find out the person who registered the site, and hopefully could get some company information as well to compare it to their declared address. I also do check Duedil (https://www.duedil.com/), or Companies House, for company registration. It also helps to get to know whether they have multiple avenues, or people who are connected to them – such as their CEO – who can easily be reached via social.
Google is also a good source of information. Usually, you just type in the company’s name and you might see some reviews for the business posted somewhere the web. The more you know about the company, the better.
II. Supplier Pricing
This is oftentimes a good giveaway to determine the legitimacy of a supplier. But first, you must understand 2 things:
1. If you have a product in mind, you should study the product first. Get a visual analysis on what is the average retail price of that item. This means check multiple marketplaces that you know of, compare prices between sellers, and have an average retail price point.
2. A product goes to multiple hands before reaching a retail customer, and each hand the product goes through have different pricing points. It commonly goes from Manufacturer, to Wholesalers / Distributors, to Retailers, before going to the consumer.
Studying these 2 points, you should be aware that dealing with a wholesaler means they ask for a price that should cover the manufacturing cost, manufacturer’s profit, up to the wholesaler’s own added profit. Simply put, if you see a product that has an average price of £100, you should take note that the retailer also gets profit, further down up to the manufacturer. A good price point then for a product coming from a wholesaler should be around 70 – 85% of average retail price – thinking realistically.
What’s the point then? The point is, if you try to buy a good product, and see that the price is way below retail price, like too good to be true pricing, then already set your doubts. Logically, how could they, and everyone below them, could get profits from such a very low price? That means the product you are looking at could be fake, or that the supplier is.
Cheap is not always the best solution. Always check the price, set a profitable price point for you, and take note the suppliers that could provide you with that price point. Too good to be true? Then trust your gut when it says no.
III. Is it real? Is it fake?
Let’s admit it, fakes are everywhere, and you will come across them more often than not. If you are hunting for some branded goods, then it is very well important to have items checked for authenticity.
Sadly, there is no easy method on verifying products if they are real or otherwise, so this is a method you should make yourself. Do some research on verifying your products, perhaps a product registration on the brand’s site, or that contact the brand personally for verification. It is better to approach them yourself than have them approach you with a seize order!
The law is always the law, and it is best that you comply to them rather than face dire consequences later on.
IV. Have you communicated with them?
In trading with sums of money for pallets and boxes of products, communication is the key to keep the business flowing.
It is important that you have multiple avenues for communication with the company. Call them up with an inquiry to determine yourself whether they could answer your questions promptly, are very accommodating, and very approachable when it comes to business. Check also if they have social media, can be messaged thru those channels, able to reply via email, etc. Better to have more ways of communicating than just email!
It would also not hurt to see if some of their higher management staff is on social. Linkedin IDs, Facebook, Twitter, any type of social media page the owner of the company might have. This is so you would know who to link the company to for issues, and of course, to know if the people behind the company are real humans with reputations to take care of.
V. Setting your Price Point
As above, before dealing, you should know how many hands has your products passed. Now this includes you. With the item above, I only talked about the companies each increasing their prices for a profit, but on your end, you should consider more.
Apart from the price of the item, have you considered how much will you spend to ship those items to you? Do these items require VAT? All of these are needed to make sure you get an outlook on all the charges you must first include before you are able to sell them.
Consider your price point well and best to plan ahead! If you want to be competitive on pricing, playing around the average price point should be fine, inclusive of all costs, and a worthy profit for you. Never forget the profit, else, why bother selling?
VI. Managed your Finances?
Consider this: it is great and all to have a good business running immediately, however all of these things have a cost. You have just started, and likely have a budget on hand, ready to use for your business. Mind all of your expenses; it will bite you hard once you go overboard.
It is important to note that starting up is not just about buying wholesale and selling retail, you have costs as well. Setting up an eCommerce store requires money, having your own logos, name, eBay templates, to your cart platform, all these require money. You might have been shopping endlessly and forgetting that you need to also set up your own reputation in selling.
You might consider “sure, I’ll just add a few more quid along the way”. That only helps at the short term. Stick with your planned budget, and do not spend a penny more. Be prepared to a budget that you are comfortable losing, you will never know how fast your ROI might be in the world of business. At times, you could go rock bottom, but hey, it’s part of the risk, and you just spent what is just comfortable for you.
VII. Be ready for Surges / Droughts
Most people think that due to the rising popularity of eCommerce worldwide, is that selling online is a good way to make an easy quid. Bad news, it does not look pretty at all. A good chunk of online startups fail due to failure to support their business, especially when the going gets tough.
Once you start selling, perhaps on eBay, you might get an initial boost from the marketplace giant. After which, that’s it.
Feedback rating matters in eBay, and as a new seller, you might not get those immediately. In your first month, you could expect dismal to low sales of your product. Once you hit a better feedback score and get good sales, there will be days where sales are at the minimum. For a business owner, these instances hit so hard, and the ones you should prepare well. It’s not always Christmas, and never a bad idea to be ready for such cold days.
VIII. Someone contacted you to supply goods? Make sure they are who they say they are!
There were quite a few instances in this community where one person tried to pose as a “sales person” of a certain supplier, sending emails to people and pretend that they are “legit”. Their motives could be none other than to scam you, but it is a rule to not deal with them immediately.
First thing you should do is to check the email address. The “from” email address should be under the domain where they claim to be a part of. Do not trust generic email addresses such as gmail in this point, as these email providers can be used by anyone. Simply put, would you use a generic email if you want to pull in a client?
You should then cross check the person who sent you an email and inquire to the company concerned whether that person is indeed connected to them, and is authorized to sell products to you. You may also send the company a copy of the email for them to double check whether it indeed came on their behalf.
Ultimately, if you have not contacted this company before, and suddenly a person claiming to be the company’s representative started to sell a product you might like and checks out with what I mentioned above, then best to not fall for it. Make transactions thru official channels only, such as the company emails and site support tickets.
Yes, reality is harsh. Getting your own feet in the business arena is something not planned on a whim. The best part about this checklist, is that you have to do them all yourself!
Do not worry though, some startups really take their time before making their businesses official. It takes hard work and guts to build a business, not to mention sustaining it. The ultimate rule here is that, when starting, be smart.
A lot more ways to be fully effective in business, and not only this checklist will be able to help you out. The ECVV.COM is always eager to help new buyers. Of course if you got a lot more questions, feel free to ask us.
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