In general, running an online shop is cheaper than maintaining a physical store. In this article, we will try to answer how much does it cost to start an online store.
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How Much Does It Cost to Start An Online Store?
Not all online businesses need an upfront investment.
For example, you can start an online shop for free with platforms like Payhip.
But, if you think from a long terms perspective, you must have a definite startup budget before you start. These are the eCommerce startup costs that you must not ignore.
Let us dive into the details of these minimum expenses for running an online business.
In this article, we will cover:
- Building you shop
- Managing inventories
- Customer acquisition
- Processing payments
- Customer retention
How much does it cost to start an eCommerce business?
A typical online business needs to focus on the following:
- Build an online shop
- Manage inventories
- Customer acquisition
- Payment Processing
- Customer retention
You need to consider all these to calculate the eCommerce cost structure for your own business.
Let us give an overview of the expenses related to these broader heads.
How Much Does it Cost To Start An Online Shop
If you think about your online business as a long term venture, focus on branding.
Cost of the Domain
While you can start your shop as a free subdomain on some eCommerce platforms, it is necessary to buy your own domain.
Remember that your branding starts with the name of your shop. Try to secure a brandable top-level domain.
Typically, a domain costs only around $10 per year. Namecheap often runs promotional campaigns wherein you can buy a domain including a free whois guard at a much lesser price.
Cost of eCommerce Platform
You need eCommerce software to run your online business. Moreover, a server must host your software and data.
If you are looking for a free online store builder, you can check Payhip. But mind that these free alternatives are never as powerful as Shopify or Sellfy.
Your cost of running an online shop will vary based on your choice of platform.
Cost of SSL
Every online business involves money. So, security is of utmost importance. So, you must install an active SSL certificate for your online store.
These security certificates encrypt the data and keep them safe from hackers. Most hosted eCommerce platforms like Shopify and Sellfy offers free SSL certificates. But if you self host, buy your own SSL certificate.
Cost of eCommerce Theme
If you care about user experience, you must also invest in a proper premium theme for better results.
While you can start with a free theme for your online shop, premium themes can often boost conversions. A ready-made premium theme can range anything between 60 to 200 USD.
As an alternative, you may hire freelancers to create a more personalized experience.
Cost of creating a Logo
Though it is not absolutely mandatory, a great logo can definitely boost your branding.
If you have the skills, do it yourself.
But if you do not have the necessary expertise, either use one of the online tools or hire a freelancer. Mind that this will have some expenses.
Inventory is the main selling point for any eCommerce business. So when you start calculating the eCommerce cost breakdown, consider the expenses for procuring the products as well.
Now, this cost will vary based on your business model.
In this model of online business, you maintain your own inventory of goods that you want to sell. So, here the cost to run and maintain your inventory will depend on the products you sell.
If you are operating a dropshipping business, you will not stock products in your own inventory. Instead, you order a product from your supplier when your customer places an order.
In a dropshipping business, your cost of managing inventory is zero but you usually pay a flat monthly fee to a dropshipping platform like Spocket.
Costs for Customer Acquisition
Your online store needs customers. But unless you are an established offline brand, customers will not flood in as you open your online store.
You must actively promote your shop and attract visitors.
Whatever promotional strategies you may choose, it will have some expenses associated with it. Set aside a budget for this.
Expenses towards processing payment
In an eCommerce business transaction of money happens digitally. And to accept online money, you must have an efficient payment processor active in your store.
If you use a hosted eCommerce platform like Shopify or Sellfy, the payment gateways are already integrated with a payment processor. But for self-hosted eCommerce platforms, you must add a payment processor on your own.
These payment gateways are usually free to start with. But they charge a fee on the transaction amount.
Cost of Customer Retention
As a shop owner, you must think about strategies to retain your customers.
There are several strategies to build loyal customers. For example, you can create an attractive loyalty program for your online store. Or, you can offer solid discounts to your returning customers. There are specific tools and software that specializes in these.
It may be too early to invest in customer retention when you start your store. But if you want to include these right from launch, add them to your online business expenses.
eCommerce Business Startup Costs – Summary
In this article, we answered how much does it cost to start an online store. Let us summarize these online business startup costs for ready reference.
|Theme and Logo||Free – Medium||Usually One time|
|eCommerce Platform||Free – High||Monthly|
|SSL||Free – Low||Annual|
|Inventory||Free – High||Ongoing|
|Promotion, Advertisement||Free – High||Ongoing|
|Payment Gateways||Free – Low||Usually One time|
|Customer Retention Programs||Free – Medium||Monthly|
In short, the startup costs for an online business are variable and will depend on your choice of options and business model.
I am sure you are now aware of the different expenses you need for starting your eCommerce business.