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Starting an ecommerce business with no money isn’t right for everyone, but there are ways to work around the standard startup costs. You just have to know what you’re getting into and be willing to keep your nose to the grindstone, just like any small business owner.
So how does one launch an ecommerce company on a metaphorical or literal dime?
Let’s dig into profitability trends in the industry, online store startup costs (and how to get around them, if you want), and what real-world ecommerce founders have done to keep their costs low in the early days. Plus, if you decide the low-cost life is not for you, we’ll cover funding alternatives to get you started as an ecommerce entrepreneur.
What we’ll cover:
- Ecommerce profitability trends
- Online store startup costs (& how to bypass them)
- Dropshipping vs. storing your own inventory
- What ecommerce store founders say
- Alternatives for hopeful business owners
Ecommerce profitability trends: The more you scale, the bigger your margins
Starting an ecommerce business from scratch is just one part of the process. The next? Profiting.
Before we dig into what it takes to start an online business with little-to-no money, we’re looking at how to make a profit in the industry. That way, you can make a successful business plan from the start.
According to Charles Nicholls, founder and chief strategy officer of SimplicityDX, returning customers are the backbone of a successful ecommerce business. “The quarter of conversions from returning customers generates 43% of brands’ revenue and 100% of the profit,” Nicholls writes.
That’s why second sales are vital for these brands. In fact, new customers are more of a drag on ecommerce revenues than ever before, but returning customers are more profitable (with the latter generating an average of $38 of profit per order in 2022, compared to just $28 in 2013).
Here, you can start to see that any ecommerce founder should focus on the long game, meaning patience and strategy are key.
Part of that strategy involves scaling.
Business consulting firm McKinsey & Company notes the ongoing prevalence of online shopping, making ecommerce a naturally attractive industry for entrepreneurs. “Across categories, we’re seeing a [20–40%] increase in net intent to shop online post-COVID-19,” the firm writes.
Meanwhile, ecommerce brands focusing on consumer packaged goods (CPG) are beginning to generate healthier margins. Scaling is a major factor, suggesting even those who launch ecommerce firms with modest capital should prioritize strategic reinvestments in their business as revenue comes in.
Check out this killer insight from McKinsey:
“Companies with large online-sales volumes in a category are more likely to be profitable. But the most crucial success factor is a company’s ability to optimize, in a precise and data-driven manner, the three main profit-and-loss (P&L) drivers: marketing investment, costs associated with revenue-growth management (such as trade and promotional spending), and supply-chain costs.”
For hopeful entrepreneurs who have limited funds, keep these three factors in mind as you grow your business. While you may be able to start your ecommerce operation on a bare-bones budget, the reality is that growth costs money, but optimizing your expenses to keep margins flush and generate profit is key.
Online store startup costs (& how to bypass them)
If you’re bent on bypassing ecommerce startup costs, you’ll need to know what costs to avoid (and whether it’s smart to skip the investment). Otherwise, you’re just throwing darts at the wall.
|Common ecommerce startup cost||Should you skip this cost?||How to bypass it|
|Amazon||Consider how many units you expect to sell in a month and whether the per-unit transaction fee makes sense. Make sure you price your products in a way that accounts for this cost.
Fulfilling your own orders may be a smart move for someone new to Amazon ecommerce.
|If you want to avoid a native site and stick solely to Amazon, you can do so for free with the Individual selling plan, but you must pay a portion ($0.99) of each item sold. Depending on the volume you sell, this could help you avoid the $39.99 per month Professional plan costs.
You cannot bypass Amazon’s referral fees (between 8–15%, depending on the product category), but you can avoid fulfillment fees by fulfilling on your own.
|Website||It depends on your skill level. Fortunately, there are user-friendly platforms out there that make it possible for practically anyone to build a website on their own using templates, but that can take a lot of trial and error (which, in turn, takes a lot of time).
Ask yourself: Are you willing to wait to launch your business? Are you confident in your ability to create a well-laid and beautiful (if simple) website that functions as it’s supposed to?
|Build and design a website yourself to save on hiring a professional.|
|Domain name||Only skip this step if you’re okay with sacrificing a clean URL in the beginning of your business. You usually have to deal with a funky URL extension when you get a free domain name.
Once you have some money to reinvest, consider upgrading your domain name with an affordable (but paid) provider.
|Get a free domain name from Hostinger, IONOS, Bluehost, DreamHost, InMotion, Dot TK, or another solution.|
|Hosting||Free hosting may lack a lot of features that a paid plan provides.
Before deciding if you want to skip this cost, compare your options between a paid solution like Shopify and some of the free alternatives out there.
|Choose a free hosting platform like WordPress, Wix, Weebly, or another solution.|
|Branding||It depends on your skill level and what kind of impression you want to make with your business.
Similar to the website, ask yourself how much time you have and whether you’re confident in your abilities before skipping this step.
|Create a logo and design theme yourself without the help of a professional. Use a platform like Canva to get started.|
|Staff (web developer, manager, director, customer service, etc.)||If you have time for a full-time gig or serious side hustle, go for it. You can always add employees down the line (just make sure your business entity reflects that!).||Be a one-person show (at least in the early stages of your operation).|
|Business license||Once you start making a profit and want to formalize your business, you can choose a business structure and get a license in the state you reside.||Sell products on Amazon, a Shopify store, Facebook marketplace, eBay, Etsy, Craigslist or another online platform that aren’t in a federally regulated category.|
|Payment system||You can always upgrade to an integrated point-of-sale (POS) system down the line when you’ve tested the market and your business is more mature.||Most payment systems take a transaction fee, but you can stick to ones that don’t have an upfront cost. Consider PayPal, Amazon, or ecommerce solutions on your chosen free hosting site.|
|Marketing||This can work, but it’s not easy. Become an organic marketing student of the web and keep testing new methods until something sticks. Don’t give up!||Use organic marketing tactics like social media and keyword optimization. Avoid paid advertising.|
|Manufacturing||It’s definitely possible to keep manufacturing costs low or stick to pre-existing products for a low wholesale investment.||“Steer clear of complex materials or any potential manufacturing challenges,” writes online education company Foundr.
You can also avoid manufacturing costs by selecting cost-efficient, high-value items that are already manufactured.
|Packaging||You want your packaging to give a good impression, but it’s okay to avoid anything fancy (especially in the fledgling days of your business).||Stick to plain packaging and avoid any customization. Pack lighter and smaller.
Avoid outsourcing packaging to your manufacturer as they will likely overcharge you.
|Shipping||It’s totally normal to charge customers shipping fees. However, bear in mind that promotions are a good business model, so consider offering free shipping or other discounts from time to time.||If you sell through Amazon, shipping costs are built in. These prices vary depending on if you choose Fulfillment by Amazon (FBA) or fulfill your own products.
If you’re selling elsewhere, you can charge customers shipping.
A few words of wisdom on starting an ecommerce business with little money
As you can see, it’s hard work to start an ecommerce business with literally $0. However, it’s definitely possible to do so with little money. Catherine Erdly, founder of The Resilient Retail Club, writes, “Keeping it lean as you start out will help you conserve precious cash for when you have a clearer idea about exactly what you want to build later on.”
Erdly also advises to avoid overcommitting to stock because “keeping your quantities small is absolutely crucial to help you control your costs.”
Another thing: In today’s day and age, there are so many options for a digital marketing strategy. You can build an email list and get really good at email marketing, take advantage of affiliate programs with bloggers and influencers to reach massive amounts of potential customers via affiliate marketing, and much more. In short, the internet is your oyster. Use it wisely!
Dropshipping vs. storing: Best business model for a tight budget
Let’s dig into whether dropshipping or storing your own products is the best avenue for you.
What is dropshipping?
Dropshipping is a way for ecommerce businesses to sell products without storing the inventory themselves. Sellers often purchase products from a third party (like a wholesaler or manufacturer) and act as the middleman to connect consumers to the product.
Is a dropshipping business cheaper than storing your own products?
Dropshipping used to be a niche entrepreneurial interest, and gained widespread popularity in the entrepreneurial world during the COVID-19 ecommerce boom. This is largely because it requires less upfront investment (if any at all, depending on what platform you use) than storing inventory. It also has the perks of low overhead, location flexibility, and scalability.
Who should store their own inventory?
Dropshipping does have its drawbacks. If you’re looking for bigger profit margins early on, dropshipping may not be for you. Dropshipping tends to be highly competitive, and you’ll need to find a vertical that you can wiggle into without too much investment. You’re also putting your inventory in the hands of another entity, which can cause problems (especially if supply chain issues occur). It also means that you’re not in control of product quality. Taking order fulfillment into your own hands can mitigate some of these types of risks.
Ultimately, the route you choose depends on the type of products you’re selling, your unique business goals, and the amount of money you’re willing (and able) to invest up front. Research companies that have taken both routes so you can get a feel for what’s possible.
Ecommerce store founders prove it’s possible to launch with near-zero dollars
Brandon Coder, founder of Coder Enterprises LLC, is a 19-year-old entrepreneur based in Lancaster, Pennsylvania. Before even graduating high school, he launched his dropshipping operation and managed to earn enough to buy his dream car (a Tesla). In a matter of two years, he went from $0–$1 million in revenue—all with $0 up front.
Coder says, “During the pandemic, I saw YouTube videos where people were making profits on Facebook Marketplace.” His advice? Use platforms that already exist.
Coder has reinvested some of his profits in outsourcing work to virtual assistants and even getting a paid mentor, who has taught him to code in three different languages. Now, he knows how to create ecommerce websites that are beautiful and actually convert.
Since Coder found guidance through online platforms, he wants others to have that chance, too. Anyone can join his Discord server, Financial Freedom, for tips on how to get started.
Here are some other insights from ecommerce founders who started with a tight budget:
“One of the most important things is to keep inventory low and rely on organic growth as much as possible. With a well-executed marketing plan, it's entirely possible to grow a business without spending a lot of money up front.” - Hannah Nash, co-founder of jewelry line Lucy Nash
“Find a niche you know and can reach without starting with high-cost paid media. For us, it's aquatic sports. I am a swimming coach, my husband is a water polo coach, we both completed through college, and our kids compete in sports. We have a large network of friends and acquaintances who are involved with aquatics.” - Katie Minister, founder of poolside-friendly apparel and accessories company Chlorine Deckwear
“To start, build a website with pages that can rank for keywords using search engine optimization (SEO). It may take several months before your website ranks for profitable keywords. But once your pages rank, you will get sales 24/7/365 without spending money to buy traffic. Build an ecommerce website asset once and reap the rewards of SEO forever!” - Matiah Fischer, founder of RetireBetterNow.com
“The story of my company starts with me selling my products from the trunk of my car at music festivals, so large capital definitely will not determine whether a company is successful or not. I simply went where my target audience was and sold them something I knew they wanted or needed. It's better to have a few great products than a bunch of mediocre ones. Focus on creating the best product possible and the rest will fall into place.” - Brian Lim, CEO and founder of iHeartRaves
In addition to focusing on what customers want, Lim says you should find the right suppliers for your materials, get creative on packaging, do your own marketing, and automate what you can. He adds, “Saving money is important, but don't sacrifice quality. In the end, it's important to remember that quality is more important than quantity.”
Alternatives to starting an ecommerce website with no money
You can start an ecommerce business with little-to-no money, but that’s not for everyone. If you decide you want to start selling products with capital on your side, here are a few funding options to consider:
Crowdsourcing: Plenty of new businesses with really great products use platforms like Kickstarter for raising money. Just look at Zach Goldstein, founder and CEO of Public Rec.
Goldstein says, “I started my retail business, Public Rec, using the Kickstarter platform to crowdfund my idea. I crushed my original fundraising goal of $15,000, raising over $180,000 by investing in and listening to my customers and supporters.” Seven years later, Goldstein’s business is still going strong.
Of course, you’ll need your own products to take this route (not many people would be interested in crowdsourcing a dropshipping venture). Make sure your products are seriously good, and be willing to create a customer-centric business that takes feedback to heart.
Small business loans: If you believe in the potential of your own business plan, a small business loan can help you get off the ground. Of course, there are Small Business Administration (SBA) loans and traditional bank loans, but those can be hard to get for entrepreneurs with no business credit and only a plan to sell online.
Alternative online lenders can help launch an ecommerce platform with the right funding value and decent interest rates.
FAQs on starting an ecommerce business with no money
How much do beginners make on Shopify?
According to a 2022 study from Littledata, the average revenue per Shopify customer is $92. New small business owners report making anywhere from $1,000–$10,000+ per month on Shopify, but remember: Shopify stores have relatively straightforward scalability.
How long does it take to make money with ecommerce?
You can see a return on your ecommerce investment within a few months to a year or more, but it all depends on how much you’re selling compared to how much money you invest in the start. The less money you spend on your ecommerce operation upfront, the likelier you are to reap a profit sooner.
What are the challenges of having an ecommerce small business?
Some of the challenges of having an ecommerce small business include cybersecurity, website conversion, competition in the market, streamlined order fulfillment, policies around returns and refunds, customer loyalty, and profit margins—just to name some. By being aware of the potential pitfalls, you’ll be better able to overcome them.
What is the first step to start an ecommerce store?
The first step to starting an ecommerce store is deciding what you want to sell. Of course, there are many steps after that (like what platform you’ll use, how you’ll market your products, and more). However, you can’t sell anything without a good product or line of products. Start there and fill in the gaps as you go.
Is B2B or B2C more successful for ecommerce stores?
Business-to-consumer (B2C) tends to sell more in the ecommerce space than business-to-business (B2B). This is because B2C closely resembles the traditional retail model consumers know. However, B2B products may allow you to target your audiences easier and incur larger profit margins. None of this is guaranteed, and you should test your market with the products you hope to sell.
Last word on starting an ecommerce business with little money
More than a fifth (20.8%) of all sales are projected to take place online in 2023, according to Insider Intelligence. As you can imagine, that makes ecommerce a competitive place.
Still, there are plenty of verticals that remain in demand, and there’s room for more ecommerce entrepreneurs with the right business plan and mindset. What’s more is that a lack of startup money is no longer an insurmountable obstacle.
If you want to start an ecommerce business with little-to-no money, you can. Just know that there are hurdles you will have to overcome—maybe even sacrifices you’ll have to make—but you can always invest back into your business once the profits start rolling in.