The exact cost to start an online store can vary greatly depending on the business model you choose. This post will enumerate the costs to start an ecommerce business for the 4 most common business models.
- Dropshipping From Your Website
- Selling Wholesale Products On Your Website
- Selling Private Label Products On Your Website
- Selling Private Label Products On Amazon FBA
First off, the cost to start an ecommerce business depends on your monetary aspirations. For example…
If your goal is to start the next Ebay or Etsy, you’ll need a large amount of upfront cash to jump start your business.
If you want to start the next Amazon.com, you’ll need to invest a significant amount of money to hire engineers and web developers.
But if all you want to do is make enough money to quit your job and start a lifestyle business making 6 or 7 figures online, then you don’t need much money at all!
In fact, depending on what your income goals are, you can start an online store for less than $3 a month.
The other day, a reader who signed up for my free 6 day mini course asked me the following question.
Your free course is pretty extensive and exhausting to read through. Can you give me some kind of idea in one simple sentence how much this would cost me to start up?
It seems there’s a lot of money to put into this before you even start earning anything! Frankly, I don’t have any money to start this up, that’s why I need to begin earning the money first!
Unfortunately, not everything can be summed up neatly into a single sentence! There are many variables involved which I’ll discuss below.
Get My Free Mini Course On How To Start A Successful Ecommerce Store
If you are interested in starting an ecommerce business, I put together a comprehensive package of resources that will help you launch your own online store from complete scratch. Be sure to grab it before you leave!
Your Startup Costs Depend On Your Ecommerce Business Model
When it comes to starting an online store, your startup expenses will depend on several factors.
But the most important factor that determines your overall cost is your online business model. Below is a description of the 4 ecommerce business models covered in this post.
- Dropshipping From Your Online Store – Dropshipping is a business model where you take orders from your website but your supplier stores and ships your merchandise to the end customer.
- Selling Wholesale Products From Your Online Store – Selling wholesale is a business model where you purchase inventory up front for brands that you do not own and sell them on your online store.
- Selling Private Label Products From Your Online Store – Selling private label is a business model where you manufacture your own products and sell them under your own brand on your website.
- Selling Private Label Products On Amazon – Selling private label on Amazon FBA is a business model where you sell your own branded products on the Amazon marketplace.
In addition to startup costs, each ecommerce business model will also be evaluated based on the following criteria.
- Revenue Velocity – How long after launch do you expect to make significant money?
- Barriers To Entry – How hard is it to copy your business?
- Portability – Do you want to be able to run your business from anywhere?
- Scalability – Do you want the business to scale easily once it grows?
Business Model #1: Start An Online Store Dropshipping
Dropshipping is by far the cheapest and easiest way to start selling goods online which is why most new entrepreneurs gravitate towards this business model.
Without going into too much depth, dropshipping is attractive when you are willing to sacrifice some amount of profit in order to avoid carrying inventory.
When a customer places an order, you then place an identical order with your supplier and the supplier ships the product to the end customer.
The amount of profit made is the selling price minus the cost of goods sold and a small dropshipping fee.
Related: Dropshipping Vs Affiliate Marketing: Which Online Business Will Make You More Money?
Cost To Start A Dropshipped Store
If you don’t have time to read this entire post and you just want to know how much money you need to start a dropshipping business, here’s the short answer.
Based on data from students in my ecommerce course (~4000 students), you should expect to pay between $3 and $500 on average to start a dropshipped online store.
Depending on your tech and design skills, there will always be outliers who spend more or less, but this is a realistic amount to pay.
On the low end of this spectrum, my kids started their own online store selling entrepreneurship tshirts online over at KidInCharge.com for only $2.99 all inclusive!
Of course I helped with the design, but my kids funded their print on demand dropshipping store for just a couple of bucks!
Here’s a breakdown of the expenses required to start a dropshipping store.
Register Your Domain: ~$10
Registering your domain will cost you around $10 using registrars like NameCheap or GoDaddy.
Your domain is the address for your website and what customers type into their browsers to find your online store.
There’s not much to say about registering your domain except that you should obey the following criteria.
- Choose a domain that is easy to spell
- Choose a domain that is memorable
- Check the USPTO trademark database to make sure you aren’t infringing on someone else’s name.
Some webhosts like BlueHost will give you a free domain upon signup.
Select A Shopping Cart: $3 – $29
Your shopping cart website will cost you between $3 – $29 per month depending on which ecommerce platform you choose.
The cheapest way to start a dropship online store is to use a free open source shopping cart like WooCommerce and host it on a cheap web host like Bluehost.
Below are step by step instructions on how to install WooCommerce on Bluehost for less than $3. Bluehost will also give you a free domain upon signup.
Click Here To Signup For Bluehost For $2.99
If you are not tech savvy at all and would rather focus on sales and marketing, then I recommend going with a fully hosted shopping cart like BigCommerce or Shopify
A fully hosted shopping cart will cost more money but you won’t have to manage the server that runs your website and you’ll receive free technical support.
Bottom line, you are paying the extra money for convenience and peace of mind so you can get up and running faster.
If you are new to ecommerce, I recommend test driving all of the platforms above to see what you like the best.
Meanwhile, here are a few posts to help you make your decision.
- BigCommerce Vs Shopify – A Comprehensive Review And Comparison
- WooCommerce Vs Shopify – Which Platform Is Better For You
Get An SSL Certificate: FREE
Your SSL certificate should be included for free for any platform that you choose.
Back in the day, you had to pay for a cheap SSL certificate to secure your website. But almost no one today pays for their certificate.
Bluehost, Shopify and BigCommerce will give you an SSL certificate for free and the only reason to pay for SSL is if you need extended validation.
In general, only established companies and/or financial institutions require an extended validation SSL certificate.
Sign Up For Credit Card Processing: FREE
Credit card processing should not incur a monthly fee. Instead, you will be charged on a per transaction basis, typically on the order of 2.9% + $.30.
When it comes to accepting credit cards online, you will probably choose between one of the big three, Paypal, Authorize.net and Stripe.
All 3 of these payment processors have their pros and cons which are thoroughly outlined in my post on The Cheapest Credit Card Processing Option For Small Business. However, when you are first starting out, you’ll want to go with Stripe and Paypal, both of which carry no monthly fee.
Once your store starts generating more than $5000/month, you can look at other cheaper options but it shouldn’t cost you any recurring fees to accept credit cards when you first start out.
Editor’s Note: Shopify forces you to use their payment processor called Shopify Payments so you don’t need to worry about this step if are using Shopify.
(Optional) Purchase A Shopping Cart Template Or Theme: $20 – $200
Buying a template for your website is entirely optional because there are many free themes that are widely available. However, if you choose to buy a theme, it will run you between $20-$200 depending on your platform.
In general, themes for WooCommerce are cheap and plentiful and you can probably find a good theme to use at no cost. For example, the theme I used for my kids’ online store was 100% free.
Editor’s Note: If you signup for Bluehost using this link, I will send you my theme for free. Just send me an email, attach your Bluehost receipt and I’ll email the theme to you.
If you are looking for a drag and drop page builder for WooCommerce, I recommend a theme called Divi.
Designing a theme with Divi is completely graphical and will allow you to design a great looking site without any technical experience.
Meanwhile, if you are on Shopify or BigCommerce, themes will typically cost you $200.
For Shopify, I recommend the Turbo Theme
(Optional) Design Your Logo: $5 – $299
If you are not artistic, then hiring a graphic designer to design your logo will run you anywhere from $5 to $299.
If you are on a budget, you can try to design your own logo using a free drawing tool like GIMP. But because your logo is important for establishing your brand, you should invest the money and get it done right.
Here are a few places I recommend to get the job done.
- Outlinematic – I love their personal touch and they’ll do as many revisions as you need until you are happy. Use coupon code: Steve for 10% off.
- 99 Designs – Crowd source dozens of graphic designers against each other to create a logo that you like. Will cost roughly $299.
- Fiverr – Get a logo designed on the cheap. Quality control can be a problem here though. You get what you pay for.
Tallying Up The Costs For Dropshipping
Here are all of the costs associated with starting a dropshipped online store.
- Register Your Domain – $10 (Bluehost will give you a domain for free on signup)
- Install Your Shopping Cart (Choose One)
- Sign Up For Shopify – $29
- Sign Up For BigCommerce – $29
- Sign Up For WooCommerce – $3
- Sign Up For An SSL Certificate – FREE
- Sign Up For A Credit Card Processor – $0/month, 2-3% fee per transaction
- (Optional) Get A Logo Designed – $0 – $299
- Outlinematic – $99
- Fiverr – $5+
- 99 Designs – $299
- (Optional) Purchase A Template For Your Website – $20-$200
If you tally everything up above, the total comes out to between $3 and $438. $3 doesn’t sound like a whole lot of money does it?
With a free open source cart like WooCommerce, your monthly costs for a bare bones site will be on the order of $3.
Open source is what my wife and I used to start our online store over at Bumblebee Linens.
In fact, we are still on the same open source platform as when we started in 2007 except our web hosting bill is higher due to increased traffic!
However if you are tech averse and don’t want to deal with any website setup whatsoever, you can opt for a fully hosted platform like Shopify or Big Commerce.
The main advantage of a fully hosted ecommerce provider is that they’ll take care of all of the setup for you including payment processing, security etc…
While running a dropshipping store costs much less to start than the other online store business models, there are several disadvantages which I will outline below.
Note: If you want to easily find dropship vendors, consider signing up for a service like Worldwide Brands.
Dropshipping Revenue Velocity
The revenue velocity of a dropshipped online store is much lower compared to a store that purchases inventory up front. After all, not having to worry about inventory or fulfillment costs comes at a price.
When it comes to dropshipping, your wholesale price will be higher. In addition, most dropshippers also charge a small fee whenever a dropship order is processed.
All of these costs add up and the end result is that your profit margins will be much smaller (10-30%).
The other thing to consider is that with dropshipping, you are selling someone else’s product. As a result, you will be competing with many other vendors who are are selling the exact same thing.
And guess what happens when you have multiple sellers of an identical item? The price tends to spiral to the bottom.
Thanks to marketplaces like Amazon, the competition is fierce. And unless MAP(minimum advertised price) pricing is strictly enforced, you will just be another retailer trying to compete for the best deal.
Dropshipping Barriers To Entry
In addition, the barriers to entry will be lower. Because of the low upfront investment involved and the ease of putting up a website, it can be relatively easy for someone else to copy and replicate your exact same shop.
While they still have to discover who your suppliers are, locating your sources can be as easy as making a purchase from your store and looking at where the package came from.
Dropshipping Portability/Scalability
But the beauty of running a dropshipped store is that your business will be truly portable. Since you don’t have to worry about inventory, you can run your business from anywhere there’s an Internet connection.
This means that you can run your online store from a coffee shop in a foreign country or wherever you want!
Because you don’t have to worry about inventory, your business is also extremely scalable. With a computer server taking and managing orders, you will only have to hire additional help as your customer support volume rises.
Business Model #2: Start An Online Store Selling Wholesale Products
Starting an online store the traditional way with inventory carries all of the same costs as starting a dropshipped store except that you also need to set aside money for your initial cost of goods.
Depending on what you plan on selling, your inventory can cost hundreds or thousands of dollars based on the minimum order quantity (MOQ) that your vendor requires.
In general however, when it comes to buying wholesale products within your home country, the minimum order size is typically on the order of $100-$200 depending on what you sell.
Cost To Start An Online Store With Wholesale Products
The only difference in startup costs from a dropship store versus a traditional wholesale online store is the initial cost of inventory.
As a result, you should expect to pay between $3 – $500 on average to start a traditional online store selling wholesale products in addition to the cost of your inventory.
However, just because you are buying inventory upfront does not necessarily mean that you need to physically carry inventory.
In fact, you can use a 3PL or fulfillment center to store and fulfill your goods to the end customer.
(Optional) 3PL Or Fulfillment Center: Varies
A 3rd party logistics firm or 3PL is essentially a fulfillment center.
You ship all of your inventory to a 3PL and they will store and ship your goods to the end customer. Fulfillment centers can also handle basic returns and customer support as well.
Here’s how a typical 3PL works
- You receive an order on your online store
- Your ecommerce platform forwards the order to your 3PL
- Your 3PL ships out the order to your customer in your own branded box
- Your customer receives their order without you having to touch your inventory
The cost of a 3PL varies greatly depending on the size, weight and volume of your products and your sales volume. And if you are brand new to ecommerce, it probably doesn’t make sense to hire a 3PL until you reach about 100 orders per month.
Tallying Up The Costs To Start An Online Store Selling Wholesale Products
Here are all of the costs required to start a traditional online store including inventory.
- Register Your Domain – $10 (Bluehost will give you a domain for free on signup)
- Install Your Shopping Cart (Choose One)
- Sign Up For Shopify – $29
- Sign Up For BigCommerce – $29
- Sign Up For WooCommerce – $3
- Sign Up For An SSL Certificate – FREE
- Sign Up For A Credit Card Processor – $0/month, 2-3% fee per transaction
- (Optional) Get A Logo Designed – $0 – $299
- Outlinematic – $99
- Fiverr – $5+
- 99 Designs – $299
- (Optional) Purchase A Template For Your Website – $20-$200
- Initial Cost Of Inventory – $100+
The total comes out to between $103 and $538 as a bare minimum investment.
In terms of initial inventory, I recommend that you be as conservative as possible until you know that your product will sell.
A typical wholesale supplier in the United States requires a minimum order value of around $100 which is pretty manageable considering that you can reorder at any time and receive your products quickly.
Selling Wholesale Revenue Velocity
The main advantage of carrying inventory over dropshipping is that you will make a significant amount of money much faster. As with everything in life, more risk carries more reward which is why my wife and I decided to carry our own inventory when we first started out.
Despite having to risk more money(about $630), we were able to make over $100,000 in profit after only a year of being in business. And unlike dropshipping, the profit margins are much higher and you are in more control over your shipping costs and delivery times.
Selling Wholesale Barriers To Entry
Carrying your own inventory has other advantages as well. Because you have to secure vendors in order to source your goods and you have to purchase in bulk, the barriers to entry are much higher than dropshipping.
Since you are in control over your shipping and branding, it’s much harder to copy your online store idea.
Not only would a competitor have to copy your website but they would also have to find your vendors (much harder since you are shipping products yourself) and be willing to shell out more money upfront.
I’m not saying that it would be impossible to copy your business idea, but in general it’s much less likely due to the increased upfront risk involved.
Selling Wholesale Scalability/Portability
Of course the downside is that you have to find a place to store your goods and you have to take care of shipping your product. However there many ways to avoid storing physical inventory.
We already discussed the use of a 3PL which will store and ship your goods on your behalf for a small fee. You can also use Amazon multi channel fulfillment to ship orders as well (more on this later).
But bottom line, when it comes to managing inventory, there are going to be increased headaches compared to dropshipping and you’ll have to weigh the downsides versus the increase in profit.
There are also cash flow issues associated with paying for upfront inventory that you need to consider as well. For example, we routinely invest hundreds of thousands of dollars on inventory every year and don’t see the returns until months later.
Related: 3 Ways To Sell Products Online Without Inventory, Shipping Or Fulfillment
Business Model #3: Start An Online Store Selling Private Label Products
Selling your own private label products offers the highest profit margins and is the fastest way to make significant money with your ecommerce business.
By working with overseas factories, you can create your own branded line of products and keep the majority of the profit.
While manufacturing your own products may seem intimidating at first, it’s actually fairly straightforward once you’ve gone through the process a single time.
In terms of getting started, selling your own private label products requires the same startup capital as starting a wholesale online store except that you need to set aside more money for your cost of goods.
Because you will be working with factories overseas, your minimum order quantities will be in the hundreds or thousands of units.
However, even though you’ll be investing more money upfront, buying direct from a factory will result in up to 10X lower prices than buying wholesale within your country.
For example, buying a handkerchief wholesale in the United States might cost us $4/piece. But a factory will charge us 50 cents per piece in volume!
Editor’s Note: Read the following post if you are interested in learning more about how to import from China.
Cost To Start An Online Store Selling Private Label Products
The main difference in startup costs between a wholesale store versus a private label store is the initial inventory purchase.
Because you will be importing goods from overseas, you will need to pay to transport your goods from Asia to your home country and pay customs.
As a result, you should expect to pay between $3 – $500 on average to start your website in addition to $1000-$2000 for the cost of manufacturing and shipping your products.
In fact, the average cost of starting a private label business for the students in my ecommerce course is on the order of $1000-$3000.
Below is a breakdown of your typical product sourcing costs for private label.
Obtaining A Sample Product: ~$150
Obtaining product samples from the factory will cost you roughly $150.
Even though the cost of your product samples can vary depending on what you sell, you can assume that it’ll run you about 50 dollars per sample for a product that costs 3-5 dollars to source in volume.
The easiest place to find overseas factories is by using a service called Alibaba. And as you are evaluating which factory to work with, you should obtain a sample from at least 3 different suppliers.
Never trust the photos that you see on Alibaba or believe what the manufacturer says. The only way to tell whether your product is well made is to obtain a physical sample.
Buying Your First Bulk Order: $600 – $1500
For a product that costs $3, your first bulk order will cost you between $600 – $1500.
In the beginning, you should order as much product as necessary to validate that your product will sell. And the minimum order quantity will vary depending on the size of the factory.
But you should be able to find a supplier on Alibaba that is willing to sell you between 200-500 units to start.
In this example, we will assume that your product costs $3 per unit and that the MOQ is 500 units.
500 pieces may sound like a lot but it’s a good first order size which will allow you to set aside some units for promotion while still making a decent profit.
In general, I would not go lower than 200 units because replenishing your inventory can take several months.
(Optional) Get A Factory Inspection: $300
A factory inspection will cost you around $300.
Because you are shipping your goods from overseas, you will want to catch any product defects at the factory before it reaches your warehouse.
As a result, you should hire an inspector to inspect your goods before they are shipped.
A factory inspection in China will cost you $300 and I recommend getting an inspection for any large order you place.
If your order size is too low to warrant paying $300, then I would simply have the factory take detailed photos of your completed products and send them to you for review.
We use Qima.com (formerly AsianInspection.com) for all of our inspections.
Freight Forwarding And Transport Costs: ~30% Of Your COGS
A rough estimate of your transport costs is to add an additional 30% markup to the cost of your product.
For example, if your bulk order value is $1000, then you should assume that it will cost you $1300 total after shipping and transport expenses.
You should also check the customs duties for your goods. In most cases, your duties should be in the single digits but sometimes certain materials can incur abnormally high tariffs.
Overall, the cost of freight and customs will depend on the weight and size of your products and your customs duty rate.
To get an accurate estimate, please consult a freight forwarder for a real time quote. But in most cases, adding an additional 30% to your cost of goods is a good, back of the envelope calculation.
Tallying Up The Costs To Start An Online Store Selling Private Label Products
Here are all of the costs required to start an online store selling private label products including inventory.
- Register Your Domain – $10 (Bluehost will give you a domain for free on signup)
- Install Your Shopping Cart (Choose One)
- Sign Up For Shopify – $29
- Sign Up For BigCommerce – $29
- Sign Up For WooCommerce – $3
- Sign Up For An SSL Certificate – FREE
- Sign Up For A Credit Card Processor – $0/month, 2-3% fee per transaction
- (Optional) Get A Logo Designed – $0 – $299
- Outlinematic – $99
- Fiverr – $5+
- 99 Designs – $299
- (Optional) Purchase A Template For Your Website – $20-$200
- Getting Product Samples – $150
- Purchasing Inventory – $600 – $1500
- (Optional) Getting A Factory Inspection – $300
- Freight Forwarding – $180 – $450
The total comes out to between $933 and $2738.
Realistically, most students in my course spend around $2000 to start their private label business with a single product.
Selling Private Label Revenue Velocity
The main advantage of selling private label products is that your margins will be far greater than any other product sourcing method.
Compared to dropshipping which only carries a 10-30% margin or selling wholesale which carries a 50% margin, selling private label products can yield margins as high as 90%+!
Most of the products that we carry in our store have at least a 66% margin and certain products have a margin as high as 95%. This means that you get to keep the majority of the revenue that you generate.
Higher margins also help make Google advertising and Facebook advertising more profitable because you can spend more money to acquire a customer.
Selling Private Label Barriers To Entry
The main downside to selling private label products is the upfront cost. Because you are dealing with factories in Asia, your minimum order quantities will be much higher than acquiring your goods wholesale in your home country.
In addition, importing goods from China carries other disadvantages which include:
- Longer lead times for manufacturing
- High costs of shipping and freight forwarding
- Customs duties and tariffs
- Cultural and language barriers with your suppliers
- Higher costs of quality control
But because the barriers to entry for selling private label products are much higher, you’ll have less competition and you can establish your own brand.
You are in full control over your entire supply chain which makes it much more difficult for another store to compete with you.
Selling Private Label Scalability/Portability
Selling private label has similar downsides to selling wholesale in that you have to deal with inventory and fulfillment. However, because your margins are significantly higher, you can sell on Amazon and use Amazon as your primary fulfillment center.
Amazon Multi Channel Fulfillment allows you to use Amazon as your own personal 3PL. When an order comes in, your shopping cart will notify Amazon and Amazon will ship your product to the end customer.
By leveraging Amazon or a 3PL, selling private label products can be as scalable as a dropshipped online store.
Business Model #4: Selling On Amazon With FBA
Selling your goods on Amazon is probably the fastest way to make money selling physical products online. Compared to starting your own online store, Amazon has an ENORMOUS built in marketplace of customers that are ready to purchase your products immediately.
In fact when I first started selling on Amazon, I just threw up a few products and made $3k in the first month doing practically zero work. Yes. The marketplace is that huge!
Now there are many different ways to sell on Amazon that are beyond the scope of this post. But bottom line, Amazon charges you a lot of money for the privilege of selling on their platform.
Cost To Start Selling On Amazon FBA
If you run the numbers, it doesn’t make sense to sell on Amazon unless you have at least a 66% margin for your products. As a result, you need to sell your own private label products to make the numbers work.
In terms of cost, the amount of money to start a private label business on Amazon is roughly the same as starting your own online store selling private label products with a few additional line items.
Here are the additional costs to sell on Amazon as a professional seller.
- Amazon Professional Sellers Account – $39/month. This is required to list your own private label goods online
- (Optional) GS1 Barcodes – $5-$250. You need a GS1 barcode in order to create a product listing on Amazon.
- (Optional) Amazon Brand Registry – $275-$1000. Amazon Brand Registry requires a trademark which will cost you up to $1000 dollars.
- (Optional) Jungle Scout – $40. Keyword research tools like Jungle Scout are helpful for analyzing which keywords to target for your Amazon listings
- Amazon FBA Fees – The cost of Amazon FBA depends on your product. But as a rough guideline, you will pay Amazon an additional 10-15% of your revenue.
As mentioned earlier, Amazon’s selling fees are extremely high at 15%. And if you take into account FBA fees, you could be paying Amazon 25-30% of your revenues just to sell on their platform.
As a result, you need to sell high margin goods. If you sell private label goods on Amazon, be prepared to purchase at least 500 units upfront from your supplier. You can get by with less, but you’ll likely run out of inventory and stunt your growth.
On the low end, if you skimp on tools, Amazon brand registry, barcodes, factory inspections and logo design, you can start for as low as ~$1000.
On the high end, if you include all of the costs of product sourcing and tools, it will cost you roughly $4000.
Most students in my course spend between $2000-3000 to get started selling private label on Amazon.
Selling On Amazon FBA Revenue Velocity
The main advantage of selling on Amazon is that you will make a significant amount of money much faster than any other ecommerce business model.
They have a large built in audience and especially over the holidays, it seems like whatever you throw up there will sell. In fact, I’ve had several students in my class make 6 figures in less than a year on the platform. Here are a few examples.
- Student Story: How Toni Made 100K In A Single Month Selling Jewelry On Amazon
- Student Story: How Lauren Makes 6 Figures Selling On Amazon And Her 2 Prong Approach To Ecommerce
Selling On Amazon FBA Barriers To Entry
The main downside to selling on Amazon is that all sales are transparent to all other sellers.
For example if you use a tool like Jungle Scout, you can find out roughly how much money a certain product made in the last 30 days.
As a result, if you sell a popular product on Amazon, it’s only a matter of time until copycats come in and flood the marketplace with similar or identical items.
Amazon is a cut throat platform and you have to be constantly on your toes and monitor your listings.
In addition because you don’t own the channel, Amazon could ban you, change the rules or raise the selling fees at any time.
Here are a few posts that I’ve written on the topic.
- The Dangers Of Selling On Amazon And Horror Stories From Real Amazon Sellers
- The Future Of Selling On Amazon And Key Takeaways From My Ecommerce Mastermind
- How To Prevent Your Amazon Listings From Getting Hijacked, Stolen Or Piggybacked
- How To Launch A 6 Figure Amazon Private Label Product – The Definitive Guide
- What Amazon Doesn’t Want You To Know About Running An Ecommerce Business
- Underhanded Tactics Evil Amazon Sellers Are Using To Cheat And Get Ahead
- The Most Profitable Way To Run Amazon PPC Sponsored Product Ads – A Step By Step Guide
Selling On Amazon FBA Scalability/Portability
Thanks to FBA, Amazon takes care of storing your goods, shipping them to the end customer and handling returns. As a result, selling on Amazon is highly scalable.
You also end up spending less on customer support because Amazon handles the majority of it for you. In fact, the only thing limiting your growth is your cash flow and your ability to keep Amazon’s warehouses full of goods.
Once you have your product sourcing flow nailed down, the sky is the limit.
A Table Of Startup Costs For Each Business Model
| Business Model | Minimum Startup Cost |
| Dropshipping | $3 – $500 |
| Selling Wholesale | $103 – $600 |
| Selling Private Label | $1000 – $3000 |
| Selling Private Label On Amazon | $1000 – $4000 |
Decisions, Decisions
When it comes to starting an online store there’s more to consider than just how much it costs to start. You also have to consider your end goals and how much you are willing to risk in order make money sooner rather than later.
After running my own online store, selling on Amazon, and helping many others start their own dropshipping stores, I can honestly say that there are pros and cons to each option.
What’s important is understanding what you want out of it, your tolerance for risk, and what you want your end game to be especially if your goal is to improve your lifestyle.
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Related Posts In Getting Started With Ecommerce
- 10 Key Ecommerce Statistics Why You Need To Start An Online Store
- How To Start An Online Store Or Boutique In 6 Easy Steps
- 3 Ways To Sell Products Online Without Inventory, Shipping Or Fulfillment
- How Long Does It Take To Start An Online Business?
- Private Label vs Retail Arbitrage vs Dropshipping vs Wholesale – 8 Ecommerce Business Models Compared
Steve Chou is a highly recognized influencer in the ecommerce space and has taught thousands of students how to effectively sell physical products online over at ProfitableOnlineStore.com.
His blog, MyWifeQuitHerJob.com, has been featured in Forbes, Inc, The New York Times, Entrepreneur and MSNBC.
He's also a contributing author for BigCommerce, Klaviyo, ManyChat, Printful, Privy, CXL, Ecommerce Fuel, GlockApps, Privy, Social Media Examiner, Web Designer Depot, Sumo and other leading business publications.
In addition, he runs a popular ecommerce podcast, My Wife Quit Her Job, which is a top 25 marketing show on all of Apple Podcasts.
To stay up to date with all of the latest ecommerce trends, Steve runs a 7 figure ecommerce store, BumblebeeLinens.com, with his wife and puts on an annual ecommerce conference called The Sellers Summit.
Steve carries both a bachelors and a masters degree in electrical engineering from Stanford University. Despite majoring in electrical engineering, he spent a good portion of his graduate education studying entrepreneurship and the mechanics of running small businesses.
I hate to sound bad but this question kind of bugged me. I mean what do you expect, something for nothing? No wait, some people do expect this.
You have to invest a little bit to get started, that’s just being realistic. If you don’t have money to put into it, get a job, or a second job and quit buying a few “wants” and put the money into your business to get it going.
I wouldn’t spend money willy-nilly without any thought of course but with wise spending it wouldn’t cost much to get going as this article points out. If you’re not even willing to go this far, then maybe you really don’t want to work hard enough to make this happen in the first place.
On the dropship/stock inventory topic, we have always done both. We started with a very small inventory and have built this up over the years with our own branded products, and we continue to dropship where it works for us.
Hey Mark
These questions sometimes bug me as well but I’ve found that people who are new to starting businesses all tend to have similar fears. And a lot of times, it’s just a matter of providing a little reassurance to nudge them over the edge. Most people have enough money, they just want a sure thing which is never the case.
BTW, completely agree with your strategy of combining dropshipping with inventory. In a way, it provides the best of both worlds. Stock up on what makes you the most profit and use dropshipping to fill out your shop. THanks for the comment.
Hi Steve,
Well you’re a patient and understanding person:) You’re right though, if we all waited for the full guarantee or sure thing, nothing much would get accomplished. Sometimes you just have to take the leap of faith and see where it leads. Ideally without spending a lot of money to find out.
Thank you Steve and Mark for addressing this. The viability of mixing drop shipping with branded inventory was my first question after reading this post. I realize I’ll need to make an initial investment, but I plan on selling on my own website and eventually having branded products. One of my main concerns has been the upfront costs of filling out an entire online store.
Steve do you have any specific advice for mixing drop shipping with inventory or can you point me to any other posts you might have already written dealing with mixing these methods?
Hi Steve,
so, after setting up the online store, creating the website and stocking some products. what are the procedures, for attracting traffic to your site for more sales. also, considering the site to be new, how do you create awareness to start selling your product?
I didn’t know really that much about drop shipping before. Thank you for the comparisons. I like the above idea of using both especially at the start.
Ah, but what kind of inventory? That is the rub. I’ve had a detailed description of how to select a nitch and still don’t have the foggiest of what will get me money fast and long.
Awesome article and site Mark. I have been making money from blogs and ppc traffic for awhile now and am now expanding into an ecommerce store. Your articles have helped me big time! For me Drop-shipping is definitely the way to go.
I think you mean Steve, he’s written most of what’s here…for me, just few comments but they were no doubt, inspiring:)
Thanks for sharing your experiences – I’m in the process of setting up my online business. Some costs I’m facing weren’t addressed in your article – registering my business ($500 + 250 yearly in Illinois), quickbooks accounting software, accountant advising, etc. I guess some of the more legal/dry costs caught me off guard, and I wondered why I don’t see them mentioned often when it comes to starting an online business. Did you just start as a sole proprietorship and use free accounting software? Thanks again for sharing!
Too many people focus too much on the accounting, logo and legalities of a business upfront then after all that effort they find no one wants their product they have no sales and they give up. They wasted too much time and enrgy on the wrong things at he start.
Your best to start lean & focus your energies on what matters early on ie the market, competitors, potential traffic, marketing etc Set the company up as basic as you can and forget accounting its not an issue until you actually sell something ! You can get the best accounting package in the world but without sales its a waste of money.
The hardest part of starting an online store is not the legals and accounting its choosing the right products, knowing how to market, knowing how to structure your website for sales, doing social media, writing for your blog if you plan on doing this.These will make or break your business not accounting or legal.
Oh, Manny, I couldn’t agree with you MORE! I fell into the trap Mandy is obviously in…I wanted to make sure I did things RIGHT and that cost me a lot more money and I’m still not generating revenue.
I even paid to have my company name trademarked through a fancy-schmancy law firm. Grrr, it makes me crazy to think about it. I did most of the work and found errors they made that cost me additional time and money.
Great advice I wish I would have had/followed when I started!
@Mandy wow, that is really, really high at $500 + $250 yearly. The thing is you have to have at very least a Tax Resale number to even be considered by real dropshippers and suppliers.
Don’t give up, have a read below:
This is the most important thing you need to deal with a Dropshipper and/or Wholesaler to source your products to sale and that is the Resale Tax ID here:
“Register for applicable business taxes with the Illinois Department of Revenue. All business owners are required to register at tax.illinois.gov/Businesses/register. After registering your business and filling out tax schedules, you will receive a tax ID and a certificate of registration.” – source: http://www.wikihow.com/Set-up-a-Sole-Proprietorship-in-Illinois
That link is broken an you need to go here: https://mytax.illinois.gov/_/#2
Click the link to Individuals then Register my business (Form REG-1 for Sole Proprietorship)
I could not find the cost(s) however which is odd they aren’t showing that up front.
And agreed with the rest to keep costs down to bare minimum even as you make profit.
Steve, good basic article to get started. That is the main point -Get Started!
Don’t get bogged down with making it all perfect -all the details. You can
work on that after you are up and running making some money. Just get going -quit making excuses.
Steve,
Which drop ship company would you recommend. I am thinking of going with Dropship Design.
I have found that carrying inventory is way more expensive on the back end of my business than using a drop shipper. With inventory, I have shipping expenses that include supplies, time and have to do additional inventory accounting at the end of the year, which also takes time and money. With drop shipping, I don’t to worry about shipping costs or supplies. Drop ship fees are expensed on the back end at tax time, making account a lot easier. If something doesn’t sell, I just delete that item from my product mix. I am also able to add newer products quicker to my product mix since my money is not tied up in inventory. So for my jewelry and accessory business, drop shipping works very well. The idea is, you have to find drop ship suppliers that you can trust and quality made products.
Best Regards,
Christiane
thank you so much for your input, Christiane. I think I’d go with finding a means to drop ship. I’m in the process of registering a domain for a potential jewelry/accessory website (choosing a name is the hardest I swear). How long was it until you saw any significant or even non-significant revenue from your site?
Any suggestions on how to find these?
I really appreciate this post, Steve! 🙂 As a new mother and college grad, I wanted to stay at home with my daughter, but I still wanted to work. I went to college for fashion marketing and business and honestly, I wanted to go overseas for grad school, study more, and continue my work in the fashion industry as a stylist/fashion show producer, but life took a turn when I got married and had my daughter so I went with what life gave me (and I love it).
I currently work as an buyer for an online buying company which is really nice since I can work from home and stay with my daughter, but recently, I’ve gotten an brilliant idea to include what I’ve learned from school and from my CEO into creating my own online company. Essentially, since people know me as a person that can point you into the right direction of finding affordable fashion finds, I wanted to create a platform doing just that. I started a fashion blog for mothers, but I wanted something more straight to the point while still helping people so I went the affiliate marketing route.
I’ve been comparing templates and I’ve already started creating the website, writing everything down and factoring costs. It’s so true, when you want to start a business you have to invest something. It doesn’t have to be thousands of dollars, but if you want something nice that looks like an legit website to come to, you have to invest something. I was able to learn how to create an website online (in my fashion department in college, we weren’t taught that surprisingly), but with dedicating time and setting some money from my work at home job aside, I was able to get everything up and going. I started with a free website template first from Wix to get my idea going, then searched, gathered several paid themes together that I really liked, and asked fellow co-workers that are moms which website was appealing to them more (since mothers in general are my target group). I would’ve stayed with Wix, but they didn’t have filtering or sorting options and it was a bit complicated than anticipated. I started my website with around $300, no inventory included (my website uses affiliate marketing though opposed to dropshipping) and also I’m able to style people virtually and chat with them when they enter the site. I’ve been coming up with tons of ideas and a lady from my job that has owned an retailer business for 20 years has also helped me learn and gather new ideas.
I agree that some people have money, but don’t know where to look or simply want all of the answers given to them without dedicating personal time into their business. Starting a business is hard work, but having several key things down is important. Knowing who your target market is definitely important because you can start something fine, but only a handful of people come to look or buy because the products aren’t targeted to them. For me, I’ve been seeing other websites that do what I want to do, search reviews about them, and gather information that I could or shouldn’t learn from them so my site is different, but still informational and engaging.
Woo! lol I’m done for now and I apologize for the long post, but I wanted to say this is a great article! 🙂 If you work hard and invest some time and money, you can see your dream become an reality. 🙂 I’m 24 years old and although I have a lot to still learn, I am willing to put in the work to see my dream become successful.
Thank you all for giving such a useful handy information.I am in ecommerce industry over a decade now but I still feel I lack in many arenas and when I tumble upon a helping blog like this, I feel rejuvenated and inspired to keep moving towards my goal. I am using both Inventory and dropshipping to get faster to my sale goal…so far so good!
Good luck to everyone:)
Hi Hafiz, which one you started with first. Based on experience, which model will be a better approach for starter?
Hi Steve,
That is an excellent and helpful article. It gave me a lot of courage to take a step for starting an online store. But there is a question that comes to my mind is that “Are the vendors at (http://www.worldwidebrands.com/) are reliable?” or make it more simple “Is Worldwide Brands reliable?”
I am a newbie to dropshipping and I would really appreciate your sincere help..
Thanks and Regards,
Aitzaz
Hi,
Can you put me through on how to start my online business? Your advice is very important to me on how to start and grow it steady
I am interested in Online sales Business (Drop-shipping or Hotel-booking business)
I really like this article a lot. It gives me an idea for my business and my life experience. Keep it up guys.
Hi, I’ve been thinking about starting up an online clothing store for quite some time. I’ve even been to a few careers advice meetings to see if they could put me in touch with someone who would be able to give me some guidance. However they thought it was a joke, I guess it’s due to my young age (19). So my question to you is, how do I find someone who is willing to give me some guidance/ build connections?
Hello! I was wondering if you ever recomend drop shipping first as you start your online business then if things go great and you learn your numbers and monitor growth and want to make sure success happens then start keeping inventory rather than spend a bunch on inventory up front in case your online store business fails?
Steve how much do you charge to work 1 on 1 with people?
Thanks for this article, very helpful
Hello,
That was a very informative article! Yet, i am still confused.
Let’s say that someone starts an e shop that sells design chairs from various manufacturers. Manufacturers and clients are all around the world. And let’s say that dropshipping is not available. How could he organize a delivery chain system where the 3PL company would collect the product from the manufacturer in one part of the world and deliver it to the client in another part of the world? Do 3PL companies actually do that? And if yes, is the cost worth it? If not, what other solutions are there?
Thank you
Working for a very large 3PL, I can answer that for you. 3PLs have a network of global warehouses and shippers, so yes, they can route your product to anywhere in the world. In essence, you pay a fee for leveraging their multi-billion dollar global infrastructure. Most also offer e-commerce and various technology solutions to help you optimize business operations (e.g. Cloud services, hosted infrastructure, hardware as a service etc.). Another helpful feature, depending on your product, is that 3PLs are able to manage product returns, product take-back and in some cases, like electronics, repair and refurbishment. It is certainly worth it at some stage, as you’ll never be able to replicate their networks and even huge companies, like Walmart or Apple, and yes, even Amazon, still use 3PLs. Whether or not you can afford it depends entirely on your individual financial situation.
Very informative Steve. It’s usually fear that prevents a lot of people to follow their passion and create something that will improve their lives. Starting a business should be based on your passion, so you can be motivated to stay the course even when things are bleak. With a lot of tools online today, it’s much easier to setup a business that you can focus on building overtime.
Hey, Great post.
Revenue velocity. Most people are too focused on the bottom-line, even before setting up a descend online store they mesmerise about the humongous revenue it could bring. In my opinion owing an eCommerce store of over own will give us immense flexibility, and over time it can e scaled to any extend.
Market place models are great, but an inventory mode help generate higher revenue. There are multitude of options that help us kick start our online store. I own my store in Shopnix (https://shopnix.in/) platform. Spending 20-30% of the total revenue just to own store on Amazon is not a viable option.
That’s a great point to highlight. With dropshipping most often we will be competing with the same products.
awesome article very informative
I have created a new clothing website, I am working hard to promote it, and it is doing very well now. I found a good Chinese clothing supplier (wholesale-lover.com). I am currently in the process of dropshipping, if we do better, I will carry out wholesale.
What online store platform do you use
thank you for sharing this i love it i just discovered your blog and i’m already in love! Thank you for posting so many helpful articles, especially this one which helps break down popular brands that we can trust. I just started working so I’m still learning everything in the industry, and this article has made me much more knowledgeable.