10 Things to Consider When Starting an Online Business

Should I start an online business? Here are 10 things to consider.

In this seller meetup Session, Seller Ambassador Debbie Cai shares some key considerations and thinking points for starting an online business. Are you ready to take the first step? Here are 10 important considerations before you start your Amazon business.

1. What do you want to sell?

The first decision that comes to mind when starting an online business is product — what do you want to sell? There are many categories available for you to sell on Amazon, you may check out the Amazon Best Sellers (updated hourly) to find out what are some of the best-selling products on Amazon.com. You need to be familiar or passionate about the category you choose to sell. Alternatively, you can also mine for keywords to find products with a high demand and low supply and seize this opportunity.

Tip: Amazon works well for businesses with unique products so take an existing product type and put your spin on it.

2. Who is going to supply your product?

Choosing the right supplier for your business is vital. As a new business, your first order will be small. Ensure you order small quantities for testing and do not put all your investment into your first batch without knowing if it can sell.

Tip: When starting out, ask your supplier lots of questions. Be meticulous. Don't assume anything. Find a supplier who is willing to give you their time to answer any doubts you man have.

3. What kind of business do you want to build?

Go back to basics, and think carefully about the different business models you want to follow. Each model is anchored by a different way of sourcing products. For example, a reseller will have a very different approach as compared to a private label seller.

Tip: There's no right answer to this. Both types of sellers can succeed.

4. What kind of packaging do you need?

A lot of sellers who are just starting out think of packaging as one of their first considerations. But instead, what you should be considering is designing very basic and protective packaging that uses easily sourced material in the vicinity of your supplier factory. In other words, the easier it is to transport your packaging to your supplier's factory, the cheaper it is as you cut on transport costs and time. Sustainable packaging is also an important consideration that helps the environment and may be valued by customers. Finding the right-sized and recyclable packaging helps minimise waste.

Tip: Don't waste too much time and money on the early stage of expensive packaging and design because this is not retail. Customers are more attracted to your product features and appearance than they are to the packaging.

5. How are you going to fulfill your orders?

There are a few ways of going about fulfilling your orders. The first way could be to use your home and manage all the packaging and logistics by yourself. If you don't want to handle that yourself, you can hire a third-party service to help. Alternatively, you could use fulfillment by Amazon, whereby Amazon helps to store, pack, and ship orders as well as handling returns, exchanges and customer service.

Tip: You may want to avoid dropshipping. Amazon’s business model puts the onus on you to have control over your product quality and inventory. A lot can go wrong when depending on factories to direct fulfillment orders. Sure, dropshipping may be an easier and lower cost business model to start, but margins are low and it's difficult to master if you want to make a significant profit.

6. Getting inventory from factory to warehouse.

There are many elements to consider when it comes to shipping. Will you use sea freight, air freight or international courier? Deciding which method to use will largely depend on your product volume, weight and dimensions.

Tip: For shipment of up to 99kg, I use FedEx/DHL. For shipments 100kg and above, I use air freight. Many sellers who move inventory in pallets or container loads use sea freight, it can take months but costs the least.

7. Does your product require special approval, permits or licenses?

Make sure you look into all the approval requirements not just from Amazon but also government authorities and international custom regulations before you invest or buy your first batch of inventory.

8. How to price your product?

here is no perfect formula to pricing, and it really depends on how you want to set up your business. There are several strategies you can use to determine your price, such as adopting cost-based, market-based or value-based pricing. As a brand owner, you can conduct analysis of the market, and factor in your cost of production, and determine what you believe your customers would be willing to pay. Conducting A/B-testing is a good way to work out the best price for your goods as well.

Tip: Amazon works well for products with adequate profit margins.

9. How are you going to fund this startup?

Funding your startup is one of the most important considerations you have to make early on. Here are some important factors:
• Budget – How much capital do I have to put into the business?
• Inventory – How many units of goods am I able to afford?
• Timeframe – How much time am I willing to take to test my products?
• Salary – Should I be expecting to take a salary?
Tip: Give yourself as long a runway as possible. Don't get discouraged if your first (or second) product doesn't give you the results you want. Be careful how you spend your capital and live to fight another day.

10. Am I psychologically ready?

Not enough people talk about this before starting a business - am I psychologically ready to start a business? If you are looking to get rich quickly or a quick shortcut to success, there is no guarantee that this will happen. When managing an e-commerce business, you need to be thinking on your feet, make changes to strategy and tweak along the way. Make sure you are going into this venture with your eyes and mind open, it's up to you to make it a fun and rewarding one.

Tip: Talk to your family members and mentors that you trust before starting business. Having their support on this intramural journey is a plus.
Want to hear more tips and tricks from successful Amazon sellers? Sign up for the next Seller Meetup Session to learn more from our Amazon Seller Ambassadors.
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