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How Does Ecommerce Make Money? Tips to Getting Started Selling Online

If cartoon thought bubbles existed in the real world, there’s a 99.7% chance you’d see one with a money symbol hovering above an ecommerce business owner’s head. Whether you’re chin-deep in the ecommerce business world, or you’re new to the game and ready to wade into the kiddie pool, we’re willing to bet that money is on your mind.

In this blog, we’ll cover exactly how ecommerce businesses make money, what it takes to start a successful ecommerce business, and how ecommerce strategies can help your online business save more money.

How Does Ecommerce Make Money?

From a formal standpoint, ecommerce is defined as commercial transactions conducted electronically over the internet (ya know, electronic commerce). From an informal standpoint, ecommerce is simply the buying or selling of anything online. From physical goods like T-shirts, pie tins, and hermit crab huts, to services such as online courses and consulting, to digital goods like software and ebooks, ecommerce is the word that sums up online buying or selling.

There are a variety of ecommerce models, including:

  • Making and Selling This model is just what it sounds like. You own the entire product and brand by making your own products and selling them through your own store.

  • Working with a Manufacturer Have a great idea but aren’t able to produce it yourself? This is the model for you. Work with a supplier to make the product you have in mind, then sell through your online shop.

  • Wholesaling/warehousing Curate and buy great products, store the inventory, and sell the goods through your online store for a bit of a profit. You have total say over which products you sell, but you do have to buy them upfront.  

  • Dropshipping This method puts your store as a sort of middleman between consumer and supplier. Sell products from a variety of suppliers without ever having to buy products upfront or store loads of inventory. Once an order is placed, the supplier handles the fulfillment and shipping.

  • White/private Labeling White/private labeling involves an ecommerce store purchasing premade products, then applying its own private label to the product to make it a part of their brand. This is great for stores that specialize in making one product but want to supplement it with related products.

No matter which revenue model is chosen, making real money with ecommerce comes from sourcing goods for cheaper than they’re sold for. While that sounds like a simple enough strategy, consider that healthy profit margins only gets tougher to achieve when extra costs are added into the equation. Costs to run an online store while acquiring and retaining customers could take a significant amount of revenue.

Ecommerce Revenue-generating Strategies

When it comes to actual strategies that successful ecommerce stores put into play, ones like these are almost ubiquitous: 

They embrace multichannel marketing. Multichannel marketing is marketing that reaches a target audience through multiple communication channels and platforms throughout the customer journey. Basically, the main purpose of multichannel marketing is to help an online business promote and sell its products anywhere a customer spends their time, from Facebook to emails to their actual, tangible mailbox.

According to Shopify, multichannel marketing and selling increases revenue by an average of 38% with one channel, 120% with two channels, and $190% with three channels. With these numbers in mind, it’s clear that an ecommerce business has the potential to rake in some serious dough when the right mix of channels is in play.

They make personalization a #1 priority. According to global professional services company Accenture, 91% of consumers are more likely to shop with brands who recognize, remember, and provide relevant offers and recommendations. Ecommerce businesses that connect with customers through highly personalized methods of communication cater to exactly what online shoppers are craving—a personalized experience with a brand.

Whether it’s sending emails that highlight product recommendations, tailored ads that remind customers of items left in their cart, or postcards that arrive via snail mail, an ecommerce business that goes the extra mile to make personalization a priority brings in more revenue than a business that puts personalization on the back burner.

They cozy up with an Ecommerce CRM platform. Another way ecommerce businesses make money is by utilizing an Ecommerce Customer Relationship Manager, like Drip. While a traditional CRM can help a business organize its customers and make a few sales along the way, it just wasn’t built to benefit customers—it was made for sales teams.

But an Ecommerce CRM is built specifically for delivering the best customer experience to online shoppers. Designed to hold millions of records, Drip ECRM keeps tabs on exactly what customers are up to 24/7 so that ecommerce businesses can use all of that customer data to effectively market to any customer using unique journeys.

Starting an Ecommerce Business

How do you start a successful ecommerce business?

Are you ready to embrace the world of ecommerce? Great! Are you ready to sell, sell, sell and make money, money, money? Excellent! Are you nodding your head in agreement to all of these questions and suddenly realizing that you have no idea whatsoever on how to get an ecommerce business up and running?

Well, guess what … you’ve stumbled across the right blog post. Here are a few of the top basics you’ll want to cover at the start to get your ecommerce business rolling down the runway toward takeoff:

Decide on the product to sell. If you’re going to start an ecommerce business you’re going to want to sell something. Are you interested in selling physical goods like baseball caps, cribbage boards, or coffee mugs? Or are you looking to sell digital goods like new software or ebooks? Or perhaps selling services such as online courses, consulting, or freelance services is more your style?

Trying to figure out what to sell can be a big brain-drain for some ecommerce newcomers. To help narrow the playing field down a bit, here are a few tips to keep in mind:

  • Consider selling something that’s timeless. Sweatshirts, household essentials, and inflatable toys make great gifts and probably won’t rot or spoil in the back of a refrigerator (if they do, we have questions).

  • Be cautious with items that have expiration dates. By the time you finish reading this sentence, those electronics and college-course medical books you were thinking of selling are already obsolete and outdated.

  • To everything (turn, turn, turn) … there is a season (turn, turn, turn). Products pertaining to a particular season—bunny-shaped “Hoppy Spring!” throw pillows, beach-themed garden gnomes, melty face jack-o-lantern candles, and a giant inflatable Krampus—will likely only be purchased during a specific time of year. To keep the cash flow coming in year round, it might be wise to turn, turn, turn away from selling seasonal goods.

Choose your audience. Who are you looking to target? Camping enthusiasts? Humans looking to expand their education? The dog parent who spends 62% of their income on greyhound Gromit’s fashion wardrobe? Narrowing down your audience before your ecommerce business gets up and running has the potential to influence your marketing and selling strategies further down the road, so be sure to plan ahead.

Study the competition. Knowing what your competitors are up to—what they’re selling and how they’re marketing their product(s)—will help you determine the best way to set yourself apart from the crowd. Check out how to conduct a competitor analysis.

Set up a website. Once you’ve decided on what to sell and who to sell it to, it’s time to roll out a website. When it comes to website musts, the best sites are those that cater to the customer. Keep the layout clean, include images, keep the content interesting and to-the-point, and make it easy for shoppers to contact you.

Pick a shopping cart platform. Shopify is a great platform that lets you sell from anywhere (online through your ecommerce store, through social media and online marketplaces, even in-person at retail spots and pop-ups!). The platform even lets you build and customize your ecommerce business through simple interfaces and templates.  

There are a lot of ecommerce platforms out there, though, like WooCommerce, BigCommerce, and Magento, so be sure to study which fit your needs right now. Are you setting your store up alone or do you have the luxury of a developer? How many SKUs will you have? What’s the rest of your tech stack look like (and does it integrate)? Consider all of these questions before locking in.

Get an ECRM. An Ecommerce CRM platform (ahem, Drip) will help you collect, organize, and put that gold mine of customer data to good use all from one platform. Connect your ecommerce store to Drip, and suddenly you can see what all your customers are up to and create the most relevant, personalized marketing strategies based on their real-life actions.

From personalized content to behavior-based automations to dashboards that display the full scoop on how your marketing efforts are performing, Drip helps your ecommerce business snuggle up nice and close to its customers with an experience they’ll want more of.

Saving Money by Using Ecommerce Strategies

Throughout this blog we’ve touched on how ecommerce businesses make money as well as what it takes to get an online store up and running. Now that you’ve been enlightened and have come to terms with two important points—1) that there IS money to be made in the world of ecommerce, and 2) that it IS possible for you to start your own ecommerce business—we have one additional topic to cover: how you can save time and money by using excellent Ecommerce CRM strategies.

The right Ecommerce CRM strategies can help your online business collect valuable information about its customers. From what products customers are browsing through and looking to purchase, to what pages they’re visiting and links they’re clicking through, successful Ecommerce CRM strategies gather critical customer information that can help your business tailor its marketing strategies.

Getting your ecommerce business up and running can be a bit nerve-wracking, especially from a financial standpoint. But there are ways to effectively save your precious dollars. The following three strategies are a great place to begin:

1. Start small. When your ecommerce business is just beginning to flap its little wings and catch a few drafts of air, conserving time is equivalent to conserving money. Consider utilizing cheap, pre-built site templates or user-friendly apps so that you can avoid having to hire outside help.

2. Take advantage of automation. Drip is loaded with automation tools that are guaranteed to put more time (time = money!) back into your busy day. Create one-step if-this-then-that rules inside the platform as well as workflows and campaigns that automatically reach customers with personalized content at every stage of their journey for the right message at the right time, every time.

3. Utilize segmentation and personalization capabilities. The more you personalize, the more ROI your ecommerce business will see with every email, which means wasting less time on ineffective strategies. Drip uses tag- and event-based segmentation which lets you add visual identifiers to your customers so that you can better understand their behavior or engagement level.

And with one of Drip’s latest tools—a new Shopper Activity API—your business can even segment customers based on the items and brands they’ve purchased.

Successful Ecommerce Strategies: There’s Money Waiting for You

The ecommerce business world doesn’t appear to be slowing down anytime soon, so if you’re interested in setting up shop there’s no better time than now. All it takes is a desire to sell, a few good ecommerce strategies, and a four-letter Ecommerce CRM platform that always has your back: Drip.

 

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