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

Ecommerce is absolutely booming right now. 

In the U.S., ecommerce sales are expected to grow from $374.3 billion to $476.5 billion in 2024, a 39% increase. And more than 90% of consumers reported that their online shopping frequency has increased due to COVID-19

If you’re wondering how you can get a piece of the ecommerce pie, you’re not alone. 

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, here’s 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.

What is Ecommerce?

Ecommerce Google definition: commercial transactions conducted electronically on the internet.

Ecommerce is officially defined as commercial transactions conducted electronically over the internet (ya know, electronic commerce). 

In other words, 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.

Ecommerce Models

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 simple enough, healthy profit margins are tough to achieve when extra costs are added to the equation. Costs to run an online store while acquiring and retaining customers takes a significant amount of revenue. 

And yet, it is possible. Ecommerce is thriving, and it’s not going anywhere.

If you invest in the right channels, with the right creative, and the core ecommerce playbooks? You’ll be making money in no time. 

How Does Ecommerce Make Money? 

So, how exactly do ecommerce businesses make money? Here are a few ways.

They invest in their owned marketing channels. When all of your customer communication happens online, investing in your owned marketing channels (like your website and email) is a must. 

“Email lists and websites are the two only things you can own on the internet. Everything else is just rented.” — Tobi Lutke

There are so many channels where you’re just “renting” space, so it’s important to build your email list and have a great website. 

Email lets you communicate with people one to one, versus one to many (like Facebook ads, YouTube, influencers, etc.). You control the creative, and the end-to-end experience (which emails they receive and when).  

Your website is your digital storefront. It’s how customers browse and buy your products, and shapes the experience (and impression!) they have of your brand. 

They market in multiple channels. Multichannel marketing is marketing that reaches a target audience through multiple communication channels and platforms throughout the customer journey. 

The advantage of using multiple channels is that you’re able to promote and sell your products anywhere a customer spends their time, from Facebook to emails to SMS. 

Three is better than one, right?

Right! 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 ecommerce merchants have the potential to rake in some serious dough when using multiple channels to market their products.

They make personalization a #1 priority. 91% of consumers are more likely to shop with brands that 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 popup forms that remind customers of items left in their cart, or a personal note from the founder with the purchase, a brand that goes the extra mile to make personalization a priority brings in more revenue than a business that puts personalization on the back burner.

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 how to get an ecommerce business up and running? 

Well, guess what … you’ve stumbled across the right blog post. Here are a few things you’ll want to do 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? 

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:

  • Find a gap in the market, and fill it. A lot of successful ecommerce brands were born because they saw a need for a product, and they made one. Check out these Black-owned brands for some inspiration.

  • Sell 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, 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. 

Pick an ecommerce platform. Once you’ve decided on what to sell and who to sell it to, it’s time to pick an ecommerce platform (AKA website AKA order management system).  

When it comes to your ecommerce platform, the best sites are those that cater to the customer. Keep the layout clean, include product images, keep the content interesting and to the point, and make it easy for shoppers to contact you.

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 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.

Pick an ecommerce marketing platform. An ecommerce marketing platform will help you collect, organize, and put the gold mine of customer data from your ecommerce platform to good use. 

Connect your ecommerce store to your ecommerce marketing platform, 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.

Not sure how to choose? Read how to choose the right ecommerce marketing platform.

Saving Money by Using Ecommerce Playbooks

Throughout this post, 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 marketing playbooks.

The best ecommerce marketing strategies help your online business collect valuable information about its customers and use it to personalize your communication to them. 

From what products customers are browsing through and looking to purchase, to what pages they’re visiting and links they’re clicking, successful ecommerce solutions gather critical customer information to help your business tailor each and every strategy.

Getting your ecommerce business up and running can be a bit nerve-wracking, especially from a financial standpoint. But there is a way to effectively save your precious dollars. 

Automate, automate, automate. 

Drip is loaded with automation tools that are guaranteed to put more time (time = money!) back into your busy day. 

Our pre-built ecommerce playbooks for welcome series, abandoned cart, abandoned browse, win-back, and post-purchase run automatically. Install and activate each playbook in a few easy clicks, then set it and forget it.

Successful Ecommerce Playbooks: 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 playbooks, and investment in the right channels.