Only if you were staying under a rock for the past 3-5 years would you not know – how much potential an eCommerce business has. We Indians have come a long way. From thinking ‘everything sold on the internet is a scam’ to spending almost ₹478 crores on online shopping in 2020.
When it comes to starting a business in India, no other business model seems as promising, approachable, future proof and lucrative as eCommerce. But all things said and done, setting a proper direction before stepping into the online entrepreneurial world is important.
Once Tobias Lutke (founder of Shopify Inc.) said – “Ecommerce is not an industry, but a tactic.”
So in order to make you familiar with the ‘tactic’, help you choose the right path & prevent you from getting into an ‘information shortage’ state, I have gathered all of the required data which will help you learn about – how to start an eCommerce business in India.
What will we cover in this article?
- Why should you start an eCommerce business in India?
- What are the types of eCommerce business models?
- How to choose the best eCommerce business model for yourself?
- Investment required to start an eCommerce Business in India
- How to make a business plan for eCommerce?
- How to register an eCommerce business in India?
- Step by step process to launch your online store
- How to attract customers to your store?
So I promise that I will not leave any stone unturned.
But before we start with the ‘how’, just in order to charge you up a little bit, let’s quickly peep into the ‘why’ of the topic.
Why Should You Start an eCommerce Business in India?
About 696.77 million people in India have access to the internet as of May 2020, which is about 40% of the population (Source). Digitization is happening so rapidly in almost every industry that the consumers have adapted themselves as per it & formed new buying habits.
eCommerce in the past few years has transformed the way business is done in India & is growing at the speed of 36% per year.
In such a scenario, there is tremendous scope for wannabe Entrepreneurs (or wantrepreneurs as they say) to step in & make use of this opportunity.
Here are the reasons why you should start an eCommerce business in India
- Great for serious business seekers as well as side hustlers.
- Entry barrier has been significantly reduced thus, is now approachable for almost anyone.
- Has a tremendous potential of scaling up.
- Can be done on a minimum budget if you know how to do it the right way.
- Government itself is taking an initiative to go digital.
- eCommerce is not only the present, but also the future!
Now that you are all charged up, let’s understand what are the different business models in eCommerce.
What are the Types of eCommerce Business Models?
If you have already made up your mind & have a business plan ready, then you just need to find which type your business model fits in.
If you are just starting out fresh, then it doesn’t make sense to step ahead without choosing a model. So before helping you to make a decision in choosing the right eCommerce business model, let me present all the possible types in front of you first.
B2C – Business to Consumers eCommerce
Everything which we buy as a consumer, be it daily essentials or luxury items – all come under B2C products. Basically in the B2C business model, you sell things that will be used by the end-users. It is also referred to as eRetailing.
As a business model, the B2C market is huge as compared to the B2B model & a major part of the eCommerce transactions done annually come under B2C.
Here are some product categories which fall under B2C eCommerce
- Fashion & Apparel
- Kids & Toys
- Packaged food & Eatables
- Home & Kitchen
- Electronics & Appliances
All the popular marketplaces like Amazon, Flipkart, Snapdeal, Myntra, FirstCry, etc. come under B2C types. There is a reason why they become the talk of the town.
So if you think you can help people make good choices with the daily consumable goods & have high-quality products to offer, you will enjoy being a part of the B2C business model.
B2B – Business to Business eCommerce
As the name itself suggests, B2B eCommerce businesses sell products that are used by other businesses. The businesses can be the end-users of the products, but the products are generally used to again create & sell something ahead, thus the term B2B.
Though the B2B market is not as huge & popular as B2C, it is always in demand.
Following are the products which fall under B2B eCommerce
- Raw Materials
- Bulk consumer items
- Spare parts
- Printing & Packaging
Popular B2B eCommerce websites which you already must have heard of include IndiaMart, Alibaba, TradeIndia, etc.
The market for B2B products is quite different from that of B2C. Most of the deals happen in bulk & by a particular company or an organization. Thus, only if you are experienced within a specific industry and know all the ins & outs of it, it will be wise to tackle the B2B market.
Now here comes the all favourite & talked about the business model of all the ‘wantrepreneurs’. But let me tell you something. Dropshipping is not some new age ‘make money online’ gimmick. It is a solid business model which has existed for ages.
Earlier the trade was done by the media houses who showcased the products sold by the other brands with slightly hiked prices in their magazines or newspapers. If they directly received orders from their readers, they were forwarded to the brand that directly shipped the products to the reader. Magazine owners kept the ‘hiked up’ remainder as their profit.
In today’s world, magazines or newspapers are simply replaced by websites. But before making any further commentary, let me explain to you what dropshipping is in simple words.
Let’s say you want to sell fashion accessories. But you don’t own the inventory. You don’t have a budget as well as a warehouse to buy & store the inventory in bulk. You also don’t want to go through the hassles of managing the logistics & shipping the products. But you still want to sell them because you are good at selling!
So you take the following approach
- You find the supplier who sells fashion accessories & select a few products.
- You tie up with him or set up a system at an online marketplace which will enable you to forward the orders.
- Now you build your own website, list the selected products and start promoting them as if they are yours.
- Whenever someone buys the product on your online store, you don’t fulfill the order. Instead, you forward the order to the fashion accessories supplier & he fulfills it for you.
So in short, dropshipping is when you sell someone else’s products & someone else fulfils the orders for you, but you sell as if they belong to you.
But where is the profit in this? Take a look at the image below –
Let’s say a supplier charges ₹1,200 for you for a particular product including the shipping charges. You list that product for ₹3,500 on your online store. Till the people buy that product from you & pay you ₹3,500, you already should have spent around ₹500 on the other expenses (marketing, hosting, etc.).
So from the ₹3,500, your expenditure will be ₹1,200 for the supplier & ₹500 for the expenses.
3,500 – (1,200 + 500) = 1,800
So ₹1,800 is your profit!
Isn’t it amazing?
Dropshipping is a great model for someone who is starting out & wants to test the grounds first. You can start by tying up with the local vendors, but as you progress, it will be difficult to scale up. Here, marketplaces like Aliexpress, eBay, TradeIndia, etc. will come to your rescue.
Pros of Dropshipping
- Requires least investment compared to other models
- You don’t have to worry about inventory & the shipment
- You have a scope to experiment with different products
Cons of Dropshipping
- You are liable even if the supplier does a mistake
- No control over the quality at all
- Same products are sold by other dropshippers & the margins are thin
To learn more about dropshipping in-depth, refer to this article.
Print on Demand (POD)
You definitely should have come across all the cool looking t-shirts, mugs or backpacks printed with some cheeky quotes or funky designs which make them stand out in the crowd. Well, those are the types of products you offer when you get into the Print on Demand business.
This is another lucrative business idea that is popular amongst many eCommerce enthusiasts. The best part about POD business is that you can either choose to print the products all by yourself, setting up a solid full-time business, or else simply work on the designs, get them printed by someone else & dropship the end products straight to the customers.
This business model is highly trend-driven. The sales largely depend on innovative ideas of customizable prints & the designs launched as per the latest trends.
As the POD market is a bit saturated now, you need to get highly creative in your designs & concepts. If you are able to make noise in the market with that, this model has a lot of potentials.
How does the POD business operate?
- You select the products to be sold (tshirts, hoodies, mugs, etc.)
- You make creative designs which can be printed on the products & showcase them on your website or other marketplaces.
- You promote those designs via ads or content marketing or other methods.
- Only when you receive the order, the printing work is done & the product is delivered to the customer.
So as the name suggests, you print the designs on your products only when the customer orders them. This gives you a solid opportunity to test things a lot before scaling up your campaigns. You will not end up with the stock which nobody is buying.
Following are few product ideas for you if POD appeals to you
- Phone cases
- T-shirts & Tank Tops
- Coffee Mugs
- Tote Bags
- Stationary Items
You can customize these products with the design of creative illustrations, filmy dialogues, inspirational quotes, catchy phrases, etc.
You can find a local vendor or popular online suppliers like Printrove, VendorBoat. QikInk, etc. to commence with your idea.
Pros of Dropshipping
- Easy to start with a low investment
- Inventory or machinery is not required
- You get to focus only on the ‘creative’ aspects
Cons of Dropshipping
- Market has become too much competitive
- Profit margins are thinner
- No control on the quality
From a business point of view, we can call white labelling an upgrade of dropshipping. The main difference here is that we own the inventory now.
You must have noticed various products which look too ‘generic’ & similar to other products across different brands. It is only the branding or the label on it which differs them from each other. Yes, those are the white labelled products!
The products which are made available for white labelling are generally manufactured on a mass scale. These products have either no labels or blank labels on them, thus the name ‘white labelling’.
The manufacturer then sells these products to different resellers. These resellers rebrand the product, print their own design on the labels & introduce them to the retail market.
Now even if you can sell them as your own products, the rule is that you have to mention the name of the manufacturer on the label. Your business name can be mentioned in the ‘marketed by’ section.
How can you start a white labelling business?
- Shortlist the products which you researched can work.
- Simply head to the B2B eCommerce sites like IndiaMart, Alibaba, etc.
- Place an order for the products (you need to have a registered business & require to buy them in bulk)
- Print your own label on them & rebrand the products.
- Either sell them through your own website or through the marketplaces.
Most of the popular FMCG companies & brands from other consumer industries get their products white-labelled in order to focus on marketing rather than manufacturing.
You can get anything from personal care products, fashion apparel, electronics, gym equipment, kitchen items to even furniture items for white labelling.
Pros of White Labelling
- You don’t need to manufacture the products
- Scalability & growth potential is huge for your brand
- Products can be sold on other marketplaces like Amazon, Flipkart, etc.
Cons of White Labelling
- Products are too generic
- You don’t have control over the quality
- If the product doesn’t work, you are left with a huge stock
As we saw, white labelling can be called – an upgrade of dropshipping. Similarly, private labelling can be called – an upgrade of white labelling.
The concept of private labelling is pretty simple. You ideate a product. You add value to the already existing concept in terms of creative design, functionality enhancement or the material with which it is made. This product idea is unique now.
So you hire a manufacturer & get the product made on larger scale. Variants, packaging, etc. everything is decided by you. In the end, the manufacturer gets paid just for the production. But the product will now be sold under your brand.
Private labelling is a pretty solid business plan especially for someone who is serious about getting into eCommerce for the long term. It not only allows you to stay unique from the other dropshippers & white labellers but also makes you take control of the quality of your products.
The best part of private labelling is that you become the producer of your own products without having to own manufacturing machinery or assembly lines.
Doesn’t matter whether you step your foot into the world of eCommerce through dropshipping or white labelling. You should definitely aim to up your game by getting into private labelling.
How to start with private labelling?
- Identify the most in demand products & find the market gap (what they lack, what people are complaining about, etc.)
- Add a value to the product like – a unique design or an added utility. Ideate and conceptualize the product design.
- Either find the local manufacturer or go to websites like IndiaMart, Alibaba, Thomasnet, etc. & find a manufacturer who is producing similar products.
- Hire him & get the products manufactured on the best possible scale (they will let you know the minimum quantity they can produce per batch)
- Get the products packaged & branded as per your needs.
- List them on the marketplaces like Amazon or launch them on your own store & start selling.
You have to be extra careful while approaching the private label business as there are more legalities & contracts involved as compared to other business models. Also, you have to take extra efforts in doing product research because if you get the wrong product manufactured, you are going to have a stock of thousands.
Pros of Private Labelling –
- Your products are unique so you don’t have much competition.
- You have higher margins as compared to dropshipping and white labelling.
- You have full control of the quality & design.
Cons of Private Labelling –
- Minimum order requirement is huge which leads to higher initial investment.
- If the product doesn’t get sold, you have a huge dead stock left.
- People have a hard time trusting the private labelled products compared to the branded ones.
Selling on Marketplaces (Amazon FBA)
Though the title says ‘Selling on Marketplaces’, I am going to talk about Amazon FBA. Let me tell you why.
Amazon is said to be the biggest search engine for eCommerce. Like Google is for searching the websites, Youtube is for searching the videos, likewise, Amazon is for searching the products.
From this, we can understand how huge this marketplace is. Also, another good news is that only 45% of products sold on Amazon are fulfilled by Amazon itself. The remaining 55% of the products are sold by the merchants. Yes, someone just like you and me. And here is the opportunity for us.
So there are 2 ways when it comes to selling things on Amazon.
- Fulfilled By Merchant (FBM)
- Fulfilled by Amazon (FBA)
Now there is not much of a difference in terms of business models, but when it comes to the way things function, the difference is significant.
In both cases, you own the products yourself. But when it comes to FBM, it is you who have to stock, manage & ship the products when an order is received. When it comes to FBA, you can store the products in Amazon’s warehouse & it is them who does all the logistics management, packaging & shipping for you once you receive an order.
Now for someone like us, who might not have a warehouse & employees to handle all the things, it makes sense to avail of the opportunities provided by Amazon FBA.
How to start selling through Amazon FBA?
- Choose the pricing plan to get started with FBA.
- Provide all your documents, tax registrations, current bank account details right.
- Finalize the products you need to sell on Amazon & source them from the respective suppliers.
- Send the products to Amazon’s warehouse to be stocked.
- Get familiar with Amazon’s Seller Central account & list your products there.
- Optimize your listing for the search.
- Make use of sponsored product ads to get your product discovered.
The type of products you will be selling on Amazon is going to be different from what you can do on your own online store. The reason being that there is no scope of demand generation on Amazon which you can do through your own store by creating content & running social media ads. You need to focus on demand fulfilment here.
Pros of Amazon FBA
- Amazon takes care of your shipping & logistics & provides 24/7 support for you.
- Amazon also takes care of the returns & refunds.
- Things like quicker delivery & larger space available to store your products, something you couldn’t get anywhere else.
Cons of Amazon FBA
- FBA is actually not cheap to start. It is quite expensive for the beginners.
- When it comes to Amazon, just because of their policies, their return rates are high.
- There are a lot of rules & requirements from Amazon when it comes to sending products to their warehouses. There is a lot of preparation needed every time you send your inventory to the store.
How to Choose the Best eCommerce Business Model for Yourself?
Now that you have gone through all the necessary details which are important to know, this blog post will not do any justice if I don’t help you to make the right choice.
You know the scope of every business model, how they work, what is the potential, etc. And let me tell you this. Every business model has that tremendous opportunity to take your entrepreneurial journey to the next level.
You cannot go wrong with any of them. So while choosing the right business model for yourself, it all comes down to how much are you prepared from your side?
Here are the following things you should consider to choose the best eCommerce business model for yourself & the recommendations from my side accordingly –
Do you already own the products?
If yes, then it is a no brainer. You simply have to get started. The best approach will be to have your own online store hosted on a platform like Shopify, WordPress or Magento & also list your products on other marketplaces like Amazon, Flipkart or Etsy (of course depending on your niche) for more exposure.
If not, then dropshipping is the best model for you to start & test things out. Later on, you can slowly shift towards white labelled or private labelled products.
What’s your budget?
This is the easiest parameter to decide. If you have a minimal budget to start but still want to taste the world of eCommerce, then dropshipping or POD is the way to go. Both the business models will not make you spend a fortune & still can bring in good results.
If budget is not your concern then I will recommend you to start with the white labelling. You can do the same through your own store as well as through Amazon FBA for more exposure. Only if you have the data to validate the product idea, you should step up to private labelling.
Where is your inclination?
All things said and done, if you don’t enjoy truly working on what you’re doing, you will not be able to take it far. And success lies only in the longer games. Thus, it is important to consider where your inclination lies.
If you are a creative person who is into graphic designing or branding, then you will truly enjoy your work in POD. If you like the ‘business’ part of the eCommerce world more, then private labelling combined with Amazon FBA might be the thing for you. For all the people out there for whom marketing excites more than anything, dropshipping & white labelling will require your expertise more than anything.
The path I recommend
If you are sorted & have already made up your mind. All the best! You can jump to the next section to find out how to make a business plan for your eCommerce store.
But if you are still confused, do not worry. We will find a way for you.
So here is the path which I recommend for you –
- Start your own dropshipping store. Build your brand first. Test different products & find the winning ones. Make some profits to invest ahead.
- Once you shortlist the winning products, order them in bulk & get them white labeled.
- Again test the products and find the market gap in order to improve the product & generate new product ideas.
- Once you have the idea & a solution, invest the money in private labelling & get your own products manufactured.
- Now launch your original products on your store in BANG! Also spread your wings by getting listed on marketplaces like Amazon now.
- If things go pretty well, you might even think of starting your own manufacturing later!
Are things getting clearer for you now? I hope so, yes! So let’s move on to the next section & talk about the business plan.
How to Create a Business Plan for eCommerce?
There goes an old saying, “If you fail to plan, you plan to fail.”
This also applies in our situation. Especially when the battlefield is new.
Having a detailed business plan for your eCommerce store will not only be handy for the legal registration process later but will also help you gain a clearer picture of how you will tackle things and what you want to accomplish. It will demystify the whats, whens, wheres, whos, whys and hows of your plan.
You don’t have to be an MBA or a business professional to make a business plan. All you need to do is to study & include the following points
- Executive Summary
- Business Model (B2C, B2B, dropshipping, etc.)
- Market Research & Analysis (stress on product research & audience insights)
- Logistics & Operations Plan
- Human Resources (if any)
- Startup & Operational Cost
- Financial Resources
- Sales Forecast & Potential Revenue
- Marketing Plan
- Beta Testing Strategy
You can take the help of any template or worksheets available online to draft your business plan. It can also be a simple one-page plan.
Once you get it done, I know what’s going on in your mind & I am going to cover it below.
How Much Investment Do You Require to Start an eCommerce Business in India?
Here is the question you must be waiting for to get answered since you landed on this blog post. And I know you will seriously hate me if I throw these 2 words in front of you. “It Depends!”
But how much ever you hate me, it truly depends, It depends on
- How much are you willing to invest?
- What business model have you decided to choose?
- What products have you selected to sell?
- Which platform are you going to use?
- What marketing channels are you going to use?
- How much budget are you willing to spend on the marketing campaigns?
Do you see? “It depends” is not a vague answer.
But anyway. I don’t want to make you leave from this post disappointed. So I have decided to include a table that will at least give you an idea of how much budget you should keep handy while commencing with a particular business model.
|Business Model||Approximate Budget|
|Dropshipping or POD||₹50,000 – ₹70,000|
|White Labelling||₹1 lac to 2 lacs|
|Private Labelling||Min. ₹2 lacs to ₹3 lacs|
|Amazon FBA||₹2 lacs to ₹3 lacs|
Note – The budget given above is just a rough estimation to give you an idea of how much minimum you should have handy. The actual investment required can hugely vary depending on various scenarios.
How to Register Your eCommerce Business?
With great business ideas, come great legal responsibility. As you must have got up till now that even though ‘starting something online’ might seem like an informal task, starting an eCommerce business definitely is not. It is a serious business.
So once you have everything planned, it is time to bring it on paper. You will require to do the following things to get your eCommerce business legally registered –
- Prepare a Business plan for your eCommerce idea (not compulsory)
- Form a LLP or a Pvt. Ltd. Company (You can opt to function as a sole proprietor which will not need any registration as such, but it is not recommended if you are serious about it.)
- Open a current bank account (linked with company’s or personal PAN)
- Get registered for GST, Shop Act, MSME & other necessary licences under ‘eCommerce’ section.
- Get approved by payment gateway service providers to start collecting payments online.
- If you are going for Amazon FBA, then look for the additional documents asked by them.
Registering an eCommerce business is like registering any other business. There are no other special requirements as such.
To know more about how to register your eCommerce business in India, go through our previously posted article here in which we have covered all the processes in detail.
Step by Step Process to Launch Your Store
After going through all the theories above, let’s come to practicality now. You decided on the business model. You are also aware of how to go with the registration. But the real deal is here. How you execute things practically.
So in this part of the blog, I have listed down all the step by step things you will need to do in order to actually get things done. Because action is where the result is obtained!
Step by step process to launch your eCommerce store
- Choose a niche, or if possible, a micro niche. (In India around 1,06,086 websites are launched daily from which 25% are the niche sites.) – source.
- Spend maximum time on product research. If you get this wrong, everything will be a disaster ahead.
- Finalize your product catalogue & decide on how you will source them. Connect with the suppliers and work networking.
- Decide your brand name, a tagline & create a logo for your brand.
- Get all the legal registrations done.
- Book your domain name & acquire the social media usernames (before anyone else does it)
- Choose where you will be hosting your store. You can choose from Shopify, WordPress + WooCommerce, BigCommerce or Magento.
- Get your website built & upload all the content as well as the product data to your online store.
- Connect your store with the payment gateway which you chose.
- Launch your store by making it live!
- If you have opted to go with other marketplaces like Amazon, then don’t forget to study their policies & then sign up with them.
How to Attract Customers to Your eCommerce Store?
Launching the store is not the end of the process. Perhaps it is the beginning. The real game begins after that. A fair game of bringing in the customers to your store!
If I have your attention till this point & I have guided you till here, how will I leave you without shedding some light on the marketing part? So don’t worry. You are going to have a clear picture that will give you hope & inspire you to start your own eCommerce business soon.
How to bring sales for your eCommerce store?
- Offer Cash on Delivery – (In India about 75% of eCommerce transactions happen with cash on delivery method) – source.
- Work on personal branding. People are not going to form a connection with the logo or your brand name solely. They are going to connect with the ‘human’ behind the brand.
- If your products are unique & require demand generation, Facebook Ads is the way to begin. Run Facebook conversion ads, test different products & optimize as you progress.
- If your products are something which people search already & doesn’t require introduction, you can focus on demand fulfillment by running Google Shopping Ads (you need to upload your products on the Google Merchant Center first)
- You can reach out to influencers & ask them to give your store a shout out.
- If you have hosted your store on your own website, then optimize your website for relevant search terms & make it load quicker
- If your store is hosted on marketplaces like Amazon, then you need to focus on optimizing your listing & competitive pricing. You can also make use of the sponsored product ad campaigns available in Amazon.
- You can create content like blog posts, videos & encourage people to join your community & email list.
- You can offer attention grabbing deals & discounts from time to time.
Start Your eCommerce Business Now
As I promised, did I leave any stone unturned? Let us once revise what all we covered.
- Why to start an eCommerce business in India?
- What are different types of eCommerce business models?
- How to choose the best model?
- How much investment will it require?
- Step by step process to launch your store
- How to attract customers to your store?
So now you are equipped with almost all the information that is required to start an eCommerce business in India. But remember one thing. It is not an easy game.
You might not get the expected results in the first go. But as for any other business, in the eCommerce world, if you keep up with these two things – Innovation & Consistency, you might get the key to your desired entrepreneurial success.
Let me know in the comment section about which eCommerce business model you decided to choose & why.
Also if you have any more questions, simply shoot me an email here – firstname.lastname@example.org & I will do my best to answer them as soon as possible.