We use cookies to ensure you get the best experience on our website.

View our Privacy Policy

Jump to content

How to build a profitable ecommerce business

The saying goes: if you can put up a website, you can run an ecommerce business. Now, there’s no point in denying that. The internet has opened up a world of opportunities for new entrepreneurs and even established businesses looking to expand into the digital age. There’s a very important caveat in that, though.
6 key strategies you’ll need to build a profitable ecommerce business

While anyone can create an ecommerce business, very few people can make those businesses profitable with just a good product and sheer luck. Building a profitable ecommerce business is about pairing modern innovation with battle-tested practices – consistently and at the right time..

So let’s look at 6 key strategies you’ll need to build a profitable ecommerce business.

1. Sort out your business plan early

A good business plan is essential if you want to bring in investors and raise capital. Even if you already have all the startups money you need, a business plan will carry your venture from cradle to grave.

You can write down your vision, goals and product in half a page or less. That’s the easy stuff and it’s mostly to keep you on track. The bulk of a sound business plan is dedicated to operations, financial management, market analysis, quarterly and annual targets as well as the strategies to meet them.

For example, before you build the site for your ecommerce business, you’ll need to decide where to host it. You might have the capital to buy a Squarespace or WordPress subscription, but if your operations need more control of the site, self-hosting might mean investing in a web developer, who’ll cost significantly more.

A business plan keeps you honest and accountable to your own goals. At its best, it lays out the entire operation, making it easier to plan, manage, problem-solve and adapt. Get it right as early in the process as possible.

2. Develop your product for scale

Some products just aren’t developed to be profitable beyond that initial market. Perishable products tend to fare best within the city or region the business is operating in. When it’s time to extend the service range, you’ll need to factor in the logistics of distributing it.

You might tap out your local market and need to source a distributor. But if you sell perfumes, paint, nail polish, fragile items, alcohol or medicinal substances, that’s not an option.

These are product problems many retailers only realize when it’s time to expand operations. It’s hard to increase profits on a product that can’t grow with the business. There are solutions for most of these limitations, but they need to be factored into the product development phase.

3. Identify the areas of support

Because of the nature of ecommerce, it can be tempting to start it on your own or with one or two partners. There’s nothing wrong with that, but there will naturally be gaps that you can’t fill on your own.

There are dozens of professions that successful ecommerce businesses bring inn to help all the time. Web designers, business analysts, copywriters, accountants, administrators, lawyers… the list goes on. It’s not always a matter of expertise, either. Sometimes, there’s just too much work for one person.

Obstacles will pop up in front of your business all the time. That’s okay; you just don’t want to be one of them.

Mark out the areas where you’ll need help in the setup and in daily operations.

4. Lock in your supply chain

However your product is made, you need to be able to make it repeatedly and on time, every time. This is why having a solid supply chain is so important. The internet just facilitates your business, but the real world exists on both ends of it.

If you have suppliers, sign an agreement with them. If they can’t commit to a contract, it might be time to find more reliable suppliers. It’s hard enough to make a profit when your stock is ready but no one is buying. If the supply chain fails, then profits will be tanked from within.

If a potential problem is avoidable, take the steps to prevent it.

5. Manage the major risks

Speaking of potential problems, risks are a part of every business. A faulty product isn’t jjust expensive to recall, it could become an expensive liability. If your ecommerce business deals in a service, then malpractice that leads to injury can open your business up to a lawsuit.

These sound like unlikely worst-case scenarios, but you can and should protect your business with a strong risk management strategy. What this involves is assessing the things that could go wrong, and shielding your business through things like insurance, indemnity agreements, and sound policy.

You might also want to outsource tax and legal compliance services at least quarterly to advise you on potential risks.

6. Invest in a marketing strategy

You’ve got the site you sell through, an amazing product and a pretty good grip on operations. That’s great! But why is nothing selling?

The last thing we need to talk about is a marketing strategy. It’s not last because it’s important, but because it bookends the first point and threads itself right through this list. If you want to make your ecommerce business profitable, everything you do needs to be built around getting your product in front of people who want to buy it.

Sounds simple, but the internet isn’t a physical store that customers can walk into, so your audience is often decentralized. That’s okay; it just means you have to find them where they are instead of the other way around.

Your ecommerce marketing strategy should identify your target audience and tell you where to find them online. This is the information you need to strategize how to reach them. For example, if the overwhelming majority of your audience is on Facebook, you might need any combination of joining groups, investing in Facebook ads or setting up your store on Facebook outright.

If they’re best reached by securing an ad space in a regional newsletter, then all those other strategies are useless. Marketing is about finding the most cost-effective way to reach the most customers again and again and again.

Profits are for the proactive

You can use any combination of these tips or all of them. What will work for you depends on your situation and application. However you go about turning your ecommerce business into a profitable venture, though, remember that this advice is most effective when it’s applied proactively.

Profit comes to those who build towards it.

UK's #1 Finance Brand for Ecommerce

  • Experts in ecommmerce
  • Powerful software
  • Award winning finance experts
  • Free consultation
Talk to an Expert
SOS logo 1

Educational content just for startups. As a member, you’ll get unlimited access to an extensive range of guides, blogs and advice to help you run and grow your business.