🏗️eCommerce Startup Costs to Plan For
eCommerce startup costs depend on many factors, including business model and platform. Track and manage your upfront and recurring business costs with CommerceNavigator. Start for free now.
Starting an eCommerce business is relatively affordable compared to a brick-and-mortar store. However, there are still some expenses you’ll need to plan for – whether upfront or recurring over time as your business grows. eCommerce startup costs vary depending on the business model, size, and platform. If you already have an excellent business idea, here is how much you need to start.
eCommerce Startup Costs: What You Should Know
Starting an eCommerce business could cost anywhere between $0 - $50,000. But this could go significantly higher or somewhere in between. Why?
The cost to start your online business depends on many factors. For example:
If you’re starting afresh or taking your small business online.
The products you want to sell.
Business model.
The eCommerce platform or online marketplace you want to use.
Type of marketing you plan to do, etc.
It’s important to know that eCommerce startup costs differ. Your choices will influence what you should or shouldn’t plan for. But the costs aren't always about your preferences. Some startup costs are essential, and regardless of your business choices, you need them to get going.
We'll discuss some essential eCommerce startup costs that apply to almost any online business. We'll also mention the nice-to-haves that, although they aren't necessary to start, they're helpful.
Essential eCommerce Startup Costs to Plan For
Here are essential eCommerce startup costs for your online business:
Website Development Costs
If you’re going to own your eCommerce store, you must plan for website development costs like domain name, hosting, website design, and plugins. This is important for those who want to create their eCommerce website from scratch or use an eCommerce platform like Shopify or BigCommerce. You also need to pay monthly for these platforms. Shopify starts at $29/month, and BigCommerce starts at $29.95/month. WooCommerce is a free WordPress plugin. But you still need to pay for your WordPress website hosting, domain name, and other additional features.
Buying a new domain name generally costs between $10 and $20 yearly. Since you’re just starting, a shared hosting plan with a low number of visitors monthly would cost around $3.50. You'll probably pay more if you expect to have many visitors because you’re taking your business online.
You don’t need to plan website development costs if you only want to sell on online marketplaces like Amazon, eBay, Etsy, and Walmart. For example, you can create an Amazon seller account for free but with a $0.99 commission on each sale. You’ll also need to pay recurring monthly costs for a professional or business account, which costs $39.99/month on Amazon.
Legal Certificates, Licenses, and Permits
You may need relevant certificates, licenses, and permits to run your eCommerce business. This depends on where you live, the products you want to sell, and if you sign up as a business account on online marketplaces.
Business license fees in the United States are state-based. The required type and level of business insurance will also vary depending on your country, region, and products. See the US Small Business Administration website for more detailed information on required licenses and permits in the USA.
Payment Processors
You need to set up payment processing on your eCommerce website. Some of the most popular ones are:
Stripe – costs 2.9% plus $0.30 per transaction. There’s an extra 1% charge on international cards.
Square – costs 2.9% plus $0.30 per transaction.
PayPal – 2.9% plus $0.30 per transaction (US). 4.4% plus a fixed fee that depends on the country where the purchase is from (International transactions).
Apple Pay – no extra merchant fees
Google Pay - $10 minimum account activity fee and 1% transaction fees capped at $3/transaction.
Inventory
Inventory costs depend on your business model. If you don’t plan to use Dropshipping, you need to buy inventory and store them. You should budget between $100 to $1,000 depending on the quantity you want to start with and the country you’re ordering the inventory from.
However, if you’re using the Dropshipping model, you don’t need to buy inventory until a customer orders from your store. Although the Dropshipping model reduces your eCommerce startup costs, you have no control over the products. Your supplier might also run out of stock anytime – even after you have an order.
Bookkeeping Software
One of the biggest mistakes most first-time entrepreneurs make is overlooking their bookkeeping from the start. You need to track expenses when starting and managing your business as well as your income. Accounting for your business income will also make your taxes easier when the time comes. There are many accounting software, and you can start for free on CommerceNavigator.
Marketing
You can pay to advertise your products on Shopify or Amazon. For example, Amazon advertisers pay $0.81 on average for every click. The costs to advertise on these platforms aren’t set in stone. Marketing expenses will depend on the size of your campaign and the platform.
Search Engine Optimization (SEO) is another marketing strategy you should plan for, especially for your eCommerce website. This will help your site rank highly in search engine results organically and attract more visitors to your website.
Logistics
Logistics costs will vary based on the business model, platform, etc. You'll need to plan for warehouse costs if you're not dropshipping. Packaging costs are important, especially for those who sell handmade products or will ship products directly to their customer. It goes without saying that you also need to plan eCommerce shipping costs. You can learn how to save money on shipping here (link to how to save money on shipping post).
Although not ideal, remember to plan for unexpected costs like returns and refunds, lost packages, equipment maintenance, and quality issues.
Nice-to-Have eCommerce Startup Costs
Now that you know the most important things you need to budget for, here are other expenses that will help you. This also includes ongoing eCommerce costs to manage your business growth:
Website maintenance costs per month or year. You may also want to buy premium themes.
Logistics costs like inventory management, email marketing, and customer relationship management software
Marketing costs, such as Google and YouTube ads, Pay Per Click (PPC), Google Shopping Campaign, and social media/web content creation and marketing.
Business logo design
G Suite Account
Tools like graphic design, video creation, lead generation, social media management, and content creation.
Enter CommerceNavigator
eCommerce startup costs aren't equal, and many factors go into budgeting when starting your online business. Some are necessary to get off the ground, while others will come as you scale higher. Starting your eCommerce business with clean bookkeeping will help you avoid future accounting mess and ensure you don't run into problems with the IRS. CommerceNavigator helps you manage your business and personal finances effectively with an overview of all income and expenditures. Learn how it works here.
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