[2020 Mega Guide] How to create an online shop from scratch: basic issues, legal requirements, strategy, and more!

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This is almost certainly the most highly anticipated post in this blog.

Here at Doofinder we have seen all types of e-commerce shops and we have been telling you about how to optimize your e-commerce shop for years—so it was about time to write a post telling you everything we know about how to create an online shop.

If you have been following us, you already know that it’s not just about the technical part. There’s a lot more to it than that.

That’s why we have organized this guide into the following sections:

  • Part 1: basic concepts to understand before creating an online shop.
  • Part 2: analysis and planning.
  • Part 3: creation and optimization.

Read carefully and take notes. There’s a lot to do and learn. ;)

Part 1. Basic and essential concepts about online shops

If you are starting from scratch or just barely starting out, this section will suit you perfectly. We’re talking about the basics, about all those questions asked by people who are just beginning with their online shops.

First and foremost, for anyone who’s completely lost out there…

1. What is an online shop?

An online shop is a website from which you sell your products. It is the online version of any business that you may find in your city. It is a place that we go to and buy what we need.

The definition of online shop is nothing special, although we can’t say the same about the name. There are few terms around with so many synonyms. Other names that you may see referring to an online shop are:

  • Online store
  • Virtual shop
  • Internet shop
  • E-commerce
  • Electronic shop
  • Cybershop

For our purposes, any of these options are valid.

2. What do you need to launch an online shop?

We’ll start picking up the speed bit by bit. After learning about what an online shop is, you may be asking yourself what you need to start one.

Here you have the essential information organized by term. We’ve already talked about many of these concepts in the blog, so we’ll also provide you with the link to each post in case you want to read more about some of the terms.

  • Niche: your niche is the area or market at which your shop is aimed. It can be a small micro niche or a mega niche because of the size of the target audience.
  • Strategic plan: plan or roadmap that includes the steps you’ll be taking and potential problems. We will allocate a whole section to planning since it’s a key step toward success.
  • Hosting: a third party’s space to host your website. We will also talk about this—don’t worry—but we also have a whole post dedicated to hosting for e-commerce.
  • Name and domain: they should be the same and, if possible, the domain should end with .com, although that’s not mandatory. Here you have post about how to choose a name.
  • CMS: the platform that you are going to use to start your website instead of creating the website from scratch. If you want to learn more, read our analysis about the best CMSs for e-commerce.
  • Payment method: the way you will receive money from your clients. We will talk about all of them, but you can find more information in this post.
  • Lead: there is a step in between somebody who’s just learned about your shop and those who are already clients. We call those potential clients leads. Here you have a special post about how to get leads.
  • Conversion funnel: the sales process we pass users through starting from the first moment they visit the shop until the become clients. More info here.
  • Conversion rate: the percentage of people that visit your website and end up buying. If you want to know more, we have a whole post dedicated to it.
  • Buyer persona: your business’ ideal client. You must know their demographic characteristics, likes, habits, and buying behaviors. More info here.
  • Value proposition: the reason why clients will choose your shop instead of the competitors; a unique value that differentiates you.

We could add many more definitions, but this is plenty for now. Having a clear understanding of these concepts is enough to move on. Just one more thing—though not a concept per se, it is essential: perseverance.

We don’t need to tell you that there is no such thing as free lunch and there’s no such thing as miracles—at least in this sector.

The only path to success is through effort and perseverance in addition to doing things properly.

This post is meant to help you do things the right way, but we can’t remind you enough about all the work it takes. So, let’s roll up those sleeves get to work!

3. Types of online shops

If you go out right now and ask ten people about the different types of online shops that there are, we can assure you that only a few of them, if anyone at all, will list all the types you’re about to see right here.

Each comes with its pros and cons, but don’t worry about your particular case for the moment, just keep an open and mind and let the ideas flow without filters.

A. E-commerce for physical products

The typical shops we’ve known our whole lives—selling online. You have your products and you serve your clients with the difference being that your shop is now open 24/7 and you have to ship your products.

This has some advantages compared to traditional shops:

  • You sell to everyone.
  • It’s possible to automate many tasks.
  • You can start it yourself and with quite a small investment.
  • You have more freedom regarding schedules and mobility. Although, especially at the beginning, you will have to work almost nonstop. ;)

You probably had this type of shop in mind when you started reading this post, but there are many more variations. Keep reading.

B. Online shop for virtual products

What if you didn’t have to ship your products?

An e-book, audio content, or any other product that can be downloaded or consumed online doesn’t require any shipping.

Think about online courses or any other online platform. The main advantage compared to selling physical products is the scalability: you can send as many products as clients are willing to buy.

C. Selling services

It’s not just about selling products, whether physical or downloadable. Psychologists, teachers, lawyers, consultants, coaches, and many others professions sell their services online.

The most common appear to be consulting sessions and classes.

Technology has improved enough as to be able to complete a session or a class online the same way you would do it in person.

Could your skills fit into this type of online shop? Would there be enough people willing to pay for it? We’ll take a look at some different ways to analyze that later.

D. Dropshipping

This online shop model has been the craze for the past few years. It’s quite an attractive way to sell without stock, because you can forget about everything related to product management.

And it’s very easy to set up.

Your shop just sells the products from a supplier’s catalog. The supplier is the one who stocks and ships the products, whereas you focus solely on the commercial side of the business.

This system has 2 main advantages:

  • You save on the initial investment: you only pay the supplier for the products you sell.
  • You can forget about stocking and shipping: the supplier is the one in charge of stocking the products and shipping them to the customer

It’s also important for you to know the downside to this model:

  • You manage the customer support service: in the client’s eye, you are the person in charge. In sectors that receive many complaints, the commission that you get wouldn’t make it worth the trouble.
  • You get a commission: your shop, your brand, your clients, and all the effort to get them… and in the end you only keep a commission from a third party. That might not be enough for you…

In any case, if you want to learn more about dropshipping, don’t skip this post.

E. Affiliate shop

Affiliation is about recommending products from third parties in exchange for a commission after the purchase has been completed.

Many people understand that this isn’t an online shop itself, but the reality is that there are many e-commerce businesses based on affiliation.

Advantages:

  • Comfort: you don’t have the products or ship them and you are not in charge of the post-sales services either.
  • Easy to start: a website with reviews of a few products can be enough to get things started.

It’s true that you only have to focus on selling, but that doesn’t make it a perfect system…

  • Very low commission: one of the most difficult steps, if not the hardest, is getting clients. You will be doing a huge job in exchange for a commission that will rarely reach 10%.
  • You depend on third parties: if the affiliate program you are working for changes their conditions, you may be out of business overnight. It happened not so long ago when Zalando stopped its affiliate program leaving all the shops that used to promote its products hanging.
  • Lack of branding: it’s difficult to create a brand with a website that sends clients to another website, don’t you think?

The affiliate system always has two approaches:

  1. The affiliate
  2. The founder

Both of them are analyzed in this post about affiliate marketing.

Before we continue, remember how important it is to read without judging. Just learn about the different possibilities of starting an online shop. Write down some ideas and then we’ll learn how to analyze them later.

F. Marketplace

In this case, your shop doesn’t have any products. Instead, it’s a platform that allows other people and shops to make sales.

Amazon, though it now sells its own products, is the most well known marketplace.

Anyone can sell on Amazon or on other platforms in the same vein, such as eBay, Rakuten, AliExpress, etc.

Keep in mind that it’s not just huge marketplaces for everything—for smaller niches there are also some multi-vendor platforms delivering mouth-watering profits.

You’re obviously not going to become Jeff Bezos, but think about whether your sector might work with the type of platform that allows third parties to sell their products.

G. Membership

This is the model showing the most growth nowadays. The reason why is easy to explain: recurring payments.

It’s hard to make the first sale in a normal shop. Selling it a second time is also difficult, and the third time even more so. Recurring sales mean that clients pay a fixed amount each month or each year.

We have seen membership sites for almost everything and even if you don’t believe it, you’ve seen them too. The membership model has always existed with physical businesses: gyms, academies, clubs… Spotify and Netflix are just two of the many well-known examples of this recurring payment model.

Once again, as the Americans say: niche is rich.

Smaller markets may present the perfect setting for a business based on memberships.

H. SaaS

SaaS or Software as a Service is a combination of a system to sell virtual products and a membership.

Not so long ago, IT tools and software were sold as a physical CD. Then they began to be available as downloaded files from the Internet.

Nowadays it’s possible to have a computer without any software at all installed and work only with all the tools available in the cloud. SaaS access happens online, so clients can use it with any type of Internet connection.

The advantages are obvious: recurring income and scalability. However, there’s one problem: SaaS creation isn’t easy, fast, or cheap.

Part 2: Ideas analysis and planning

Surely you have come up with some different ideas after having read about the various models. Falling in love with an idea is one of the most common drivers when starting out.

It’s similar to what happens when couples first meet.

At the beginning, everything is beautiful. It’s not until after some time that you start seeing the unbiased reality.

In order to avoid making that mistake and jumping into a pool without water, let’s see how to properly analyze and plan the creation of a virtual shop.

Hold that thought…

Do you already have an idea? If not, here are a few to get you started.

1. What kind of shop to start? Most common ideas

Instead of giving you a list of good ideas to create your shop, we are going to do some reverse engineering.

We did some Googling and found out the most searched for topics when creating an online shop. This doesn’t mean that your shop can’t be about these topics, but you certainly wouldn’t be the only one out there, which has its own consequences.

Use this list as inspiration or perhaps to fall out of love with one of your ideas.

A. Clothes: shoes, T-shirts…

We know. It’s the first thing everyone thinks of.

We aren’t going to directly tell you that it’s a bad idea, but at least specialize your shop.

That means that if you are going to sell “T-shirts”, your competitors will be the whole world. However, if you sell something more specific, such as “T-shirts for left-handed people” or “T-shirts for pregnant women in their 5th month of pregnancy”, your target audience will be much more specific.

Remember one of the basic concepts that we mentioned at the beginning, the buyer persona or ideal client. The more specific the problem that your product solves is, the better. If you start just another T-shirt shop, with nothing to differentiate it, you’ll struggle to stand out from the crowd.

Related posts: if you want to start a clothes business, especially for T-shirts, read this.

B. Babies

It’s typical for new parents to immediately become baby product fanatics. So much so that many of them decide to start online shops selling baby clothes, toys, etc.

Again, this is a sector with tons of competitors, so you’ll need a clear path for differentiation will have to put in a ton of work.

C. Cosmetics

Another classic idea is beauty products or make-up.

The normal approach is to think that there is high demand for these products.

And that’s true—a huge amount of people buy cosmetic products—but remember that you don’t want to sell to everyone. That would be sales suicide because the big brands will eat you up (for example, what happens in Spain with El Corte Inglés).

D. Animals, wine, eco products…

While they may seem like niches in virgin territory, it’s still quite difficult to break into these markets.

Do you want to sell products for animals?

Be original, hyper-specialize your shop, or create a unique service.

If you have doubts about specialization, have a look at this girl’s example—she sells sessions to talk to animals. It may sound funny, but this is an example of how you never know where you’ll find a successful niche, no matter how small or weird it may seem.

E. Crafts

Lastly, we have selected the crafts and Do It Yourself sector because of how many searches are carried out for it. It’s quite common for people who specialize in building a craft product and want to start the online adventure.

The plus side is that they are normally very specific products.

The challenge in this case, however, is visibility. If you already know your audience and your offline shop is working well, full steam ahead. But, if you are starting from scratch, it’s better to start selling through marketplaces such as Etsy, Amazon, Handmade, or Artesanio.

Validate your business idea first, and then you can jump into creating your own online shop.

How to analyze an idea for an online shop

Let’s imagine that you already have an idea in mind. Before doing anything else—no matter how good the idea may seem—you need to analyze it and check if it would be profitable.

Here are some factors to take into account.

1. Competitors

We talked about some sectors with a lot of competition in the examples above. The only possible way to succeed in those markets is specialization.

In order to check how competitive a certain niche is, the best tool is trained intuition. That means that the more ideas you analyze, the easier it will be to discard them.

It’s easy to spot the points in favor for a business. Especially if it’s your idea, the real challenge is to be able to analyze it objectively.

In any case, if your intuition is not trained, we’ll give you some other ways to size up the competition that your shop may have.

  • Number of results shown by Google: Try entering a keyword for your shop and checking the number of results on Google. For a generic search such as “men’s T-shirts”, Google has almost 200 million results. For something more specific (and stupid) such as “yellow T-shirts for left-handed men”, there are just over 100,000 results.
  • Quality of the results: Visit the websites that appear on the first two pages. Are they online shops? What feeling do you get from them? Can they be improved? Low quality among the results could mean a chance for you to compete against them.
  • AdWords: It’s a good sign if you see Google Shopping ads or paid ads when you search for the products that you would be selling. However, a high CPC means that there are lots of competitors. If you don’t know what Google AdWords or CPC is, read this.
  • Compare the supply and demand: There are many possible strategies for capturing traffic from search engines. Use Google’s Keyword planner in order to check home many people search your products. As an added bonus, you can have a second look at the number of results how many are paid ads.

Analyzing the competition is important, just as analyzing internal factors is. Don’t forget to study the following:

  • Margin and profitability threshold: A detailed income and expenses plan will help you calculate how many units per month you’d need to sell in order to make money—and that’s your threshold. Is it feasible? Would organic traffic alone be enough?
  • Key partners: You aren’t going to be alone in this. If you’re planning to ship products or have a subscription base, you’ll need a shipping company and a marketing email provider, for example.
  • Your satisfaction and limits: This is a long-distance race, so you better enjoy running. If you are going to start an online shop about cats but hate them because you are allergic, it’s just not going to work. It’s not about living out your passion—it’s the clients who must be passionate about your products—but you should at least not hate them.

Let’s go a step further.

2. Analysis tools

Here are two great tools to make your job a bit easier:

  • Canvas business model: Thanks to a simple-to-use panel, you will be able to note down all of the important aspects to bear in mind when creating the shop (income and expenses, key partners, value propositions, etc.) in no time at all.
  • SWOT: This establishes a two-sided analysis—on the internal side it analyzes Strengths and Weaknesses, while on the external side it analyzes Opportunities and Threats.

Unless you are going to ask for financing and your bank requires it, you won’t need the traditional business plan of the past.

While everything might look great on paper, reality usually has other plans in mind, so don’t take shortcuts on the planning—but don’t wait too long to start putting it into practice either. In this other post, we talk about how to create an e-commerce business plan.

Once you’ve evaluated the market difficulty according to your situation and abilities, it’s time to decide whether to go for it or not.

Be patient and don’t be afraid to reject many ideas. That’s the best way to find the real winning idea.

3. Other important aspects to define before creating your shop

Imagine that you already have the idea… so what else do you have to take into account?

A. Name and domain

What’s the objective of your shop’s name? Do you want it to be a brand name or use the website domain to more easily secure a better position in Google search results?

Choose carefully and think about it because once you start selling, changing your domain would cause you all sorts of headaches, losses, and problems.

There are three main options:

  • Exact Match Domain (EMD): includes the name of the main product in the URL.
  • Brand domain: a generic domain that has almost nothing to do with the name of the product.
  • Mixed: a mix of the two previous options.

In any case, ask yourself the following questions:

  • Is the .com domain available? You can choose others, but .com websites continue to be the best options.
  • Are the main social network profiles taken? Avoid problems in the future when you need them.
  • Does the name sounds okay in other languages? This can help you avoid future misunderstandings.
  • Is it copyrighted? Make sure that there are no other brands that have registered the name.

Just like in a physical shop, you’ll also need to know which products you are going to sell and what the main categories are. In fact, it’s even more important for online shops.

With that in mind, let’s take a look at how to organize your content.

B. Information architecture in an online shop

When creating an e-commerce shop, you need to consider the following points of view:

  • The user: Your shop should be intuitive and easy to browse.
  • The search engine: Content, categories, and products have to be organized in a very clear hierarchy so as to facilitate easy searching.

That means that even though customers are the priority, you can never forget about what’s good for Google in terms of both design and usability,

Homework: URL organization

Grab a piece of paper and a pen and write down your website’s structure, starting from the Home page. You should have something like this:

Your drawing should include all the pages that your website will have and their position in the hierarchy. Also think about all the possible URLs that will be created:

  • Home/category-1/product-1
  • Home/shop/category-1

Choosing one model or another will depend on your shop’s needs and characteristics, but take that into account and think about it before building your website.

C. Defining a strategy to attract

One of the biggest challenges that online shops just starting out have to face is attracting visitors. That’s why it’s essential to put a strategy in place to get traffic to the shop.

These are some of the many possible sources of traffic:

It is impossible to predict what percentage of your users will come from which source, but you can estimate what kind of resources you’re going to dedicate to each source of traffic, especially at the beginning.

Phase 3. Creating your online shop

Time to get into action. The previous planning work should have left you with a clear roadmap of what to do and when to do it. That means it’s time to get our hands dirty.

1. Choosing your hosting

This decision may not seem so important, but if you don’t choose the right one, you may end up having lots of problems.

There are plenty of relatively cheap options out there, so avoid free hosting. Seriously, don’t even think about it. We have seen way too many cases that ended up paying huge prices for that mistake.

In order to help you decide, we’ve created this super guide about hosting for e-commerce shops.

2. Choosing a CMS

CMS stands for Content Management System. A CMS is the software that you’re going to use to manage your virtual shop.

The most common choices for e-commerce are:

  • WordPress: This CMS can be turned into almost anything thanks to plugins (in this case, WooCommerce). It’s the cheapest and easiest to use.
  • PrestaShop: It’s better than WordPress if you’re going to launch a shop with many products. It does, however, have a bit higher learning curve to get started.
  • Magento: This is by far the most difficult one to use and is only advisable for users with a lot of experience.
  • Shopify: The best option to start a shop with zero previous e-commerce know-how, but it has a monthly fee, of course.
  • Other options: Blogger, Wix, and others—but we strongly recommend avoiding these types of CMSs to create your online shop free. You will regret it in the long run.

Related post: Which CMS you should use and which one is better for your shop.

3. Install a search engine

A shop with many products and dozens of categories can become an impossible maze for the potential clients. Even if you had just a few products and categories, visitors wouldn’t spend enough time in your shop to look around at the different options you offer.

How can you improve the experience of that potential buyer? With a professional internal search engine.

It allows a client to enter your shop, type what they are looking for, and instantly find all the related options.

4. Outsource the work

If you don’t want to or can’t dig into the work yourself, you can always hire someone to do it for you. There are no established rules when it comes to finding the right person or company that will develop your shop, but we can certainly give you some tips.

  • Don’t trust super cheap options: The reason is obvious—they won’t put in the effort and love that your shop needs.
  • Don’t let your friends or relatives do it: We’ve seen this so many times. Someone wants to start an online shop and the most important part, creating the shop itself, is left for a nonprofessional to do. It’s like asking somebody who knows nothing about architecture to design and build a physical shop.
  • Itemized and explained estimates: If somebody gives you a one-line estimate along the lines of “website creation: €2,600” without any further explanation, ask them for a detailed breakdown of everything included. You want to know exactly what you are paying for.

There are all kinds of options and a high price doesn’t necessarily guarantee anything.

You may run into agencies that charge an arm and a leg for a basic shop and others that do great work and set you up for less than €1,000.

Shop around, compare, then decide.

5. Legal aspects—do you need to pay freelancer fees?

Knowing how you’ll deal with the Treasury Department may be one of your main doubts or concerns before starting up your business.

Note: Keep in mind that the process we are referring to applies in Spain. If you are reading this from another country, you should check the applicable regulations, though it may be quite similar to this process.

If we are being 100% strict, it is compulsory to register as a freelancer with both the Treasury and Social Security.

You can’t avoid registering with the Treasury because you need to pay VAT. However, if your income is below the inter-professional minimum wage, you “can” avoid registering with Social Security.

We say “can” because there is no written law about it.

Officially, the Government can’t recognize it as law and you could be fined for not registering as a freelance worker. However, precedent has been set confirming the opposite.

In any case, thanks to the new law promoting entrepreneurship, you can pay just €50 per month for the first year. At that price, don’t even think about loopholes and get started with the shop you have in mind!

So what comes next after launching your shop?

Don’t think for a second that you can hit snooze once your shop has been created. The day you launch it is the day you start a new long and difficult phase that starts with gaining visibility for your shop.

The good thing is that while you were planning, you wrote a roadmap that you are going to follow now.

With some effort, persistence, and good tools, we can assure you that you’ll have a successful future with your online shop. Good luck!