Selling Online: What It Is, How It Works, and How to Get Started

Thanks to the internet, anyone can sell products and services online, and plenty of people do. It has several advantages over selling out of a physical store:

• Lower operational costs: Operating a shop online means you don’t have to rent a retail outlet, with all the associated costs that come with that (rent, utilities, etc.). In many cases, selling online also requires fewer employees, leading to higher profit margins.
• Greater reach: With online stores, your business isn’t limited to any one region. You can sell to customers nationwide and even internationally.
• Scalability: When your store is hosted on a website, you don’t need to worry about the size of your parking lot or how much floor space you have, and expanding just means buying online ads that target a new demographic or region, not opening a new outlet in a different neighborhood or city.
• Easy buying process: People can make online purchases with just a few clicks. This streamlined purchasing process can attract more customers to your shop. What’s more, online stores don’t have to operate during set hours. They can stay open and make sales 24/7.

Of course, you don’t have to exclusively sell over the internet (although you can). Many brick-and-mortar store owners also operate online stores.

These days, you can sell virtually anything online, as long as it’s legal. However, not everything sells well, so it’s important to do your research.

If you have what you think is a solid idea for a store, look on popular e-commerce sites like eBay, Amazon, and Etsy to see if there seems to be a market for the product or service you have in mind. If you can tell the demand is there but no one else is doing exactly what you are (e.g., there are lots of listings for the basic class of product, but you’ve thought of a fresh twist on it), you’re in great shape.

Where can you source products from?

Just having an idea for a product isn’t enough. You also need to have an idea of where you’ll actually get your inventory from.

Below, we’ll walk you through four common ways to source products.

1. Purchase items from manufacturers or wholesalers

Manufacturers and wholesalers are both companies that provide products to merchants. Manufacturers produce goods themselves from raw materials, whereas wholesalers purchase products in bulk from manufacturers to sell.

As an e-commerce seller, you can turn to either type of company to source your products. When you do this, you can either contract with them to:

• Produce original products: If you have a vision for a product you’d like to sell, you can send a manufacturer specifications (commonly abbreviated “specs”). They’ll create the items according to your design and send them to you.

• Sell their existing stock: On the other hand, if a manufacturer or wholesaler already has products you’re interested in featuring, you can also just purchase those preexisting items in bulk and sell them from your e-commerce store.

2. Create DIY products

If you’re the crafty type, you can create your own products from scratch. This is the niche that most Etsy sellers fall into.

For instance, many DIY e-commerce sellers create their own:

• Accessories (hats, bags, etc.)
• Artwork or sculptures
• Bath products (bath bombs, etc.)
• Baked goods or candy
• Candles
• Clothing or knitwear
• Cosmetics
• Jewelry
• Pottery
• Soap

This method enables you to reduce your production costs and offer something unique and customized. However, it also requires much more effort on your part, and it also obviously requires you to have the skill needed to produce high-quality goods of some type.

If you start out DIYing all of your own products but want to scale up your store, you can also transition to buying your wares from a manufacturer. As mentioned, you’ll send them the specs for your products, and they’ll take over production and send them to you for resale.

3. Partner with dropshipping or print-on-demand companies

Working with a dropshipping supplier essentially means hiring a third party to handle everything after you make each sale, from manufacturing your products to packaging and shipping them.

This is a more hands-off method of selling than the others we’ve listed. Your job will be to maintain your online storefront (i.e., your website), create compelling product listings, and market your store, but most of the nitty-gritty work of fulfilling each order will be out of your hands.

Dropshipping is closely related to “print-on-demand,” which also involves having third-party companies manufacture (“print”) your products and ship them to your customers.

The difference is that print-on-demand companies usually work with designs that you send them (often for products like calendars, notebooks, stickers, t-shirts, etc.), whereas dropshipping companies already have predetermined inventories that you’ll have to work with.

4. Flip or refurbish products

Flipping is the process of buying products and then selling them at a higher price (often after fixing them up).

The trick to making this viable is to know where to look for products that are selling at a discount, either because they need someone to fix them up or simply because the seller doesn’t realize how valuable they are.

People often look for deals in the following places:

• Thrift stores
• Flea markets
• Garage sales
• Online marketplaces (e.g., eBay, Facebook Marketplace, etc.)

Naturally, if you have used items that are already lying around in your house collecting dust, you can also refurbish those and list them in your store. This is often how people get into flipping, and they only start looking for products elsewhere discovering that they enjoy it and want to keep doing it in the long term.

There are many different e-commerce channels you can use. We’ve listed the main ones below:

Selling through your own e-commerce website

Creating your own e-commerce website gives you full control over the presentation of your online store, including its design and branding, content, and navigational structure.

With this method, you can freely interact with your customers and collect in-depth data on their behavior (such as their browsing history and most visited pages). For this reason, operating your own website is arguably the best option if you want selling online to be a long-term side hustle or your new career.

However, keeping a website up and running also comes with costs. This includes domain registration and web hosting fees. You may also have to do more marketing on your own, since people won’t be able to find your store by searching on sites that are already popular, like Amazon, eBay, and Etsy.

Check out the following table, which compares some of the most popular e-commerce platforms out there.

Major E-commerce Platforms

Overall, the cost of creating and maintaining your own website can vary widely depending on its complexity and the size of your business. It’s possible to build a site for under $100, but it’s also more than possible to spend $10,000 or even more. Be sure to budget carefully beforehand.

Note that aside from the platform’s own fees, you may have to pay additional transaction fees for any third-party payment providers you use, such as PayPal or Stripe. Always remember to read the fine print before you sign up for any e-commerce platform.

Selling via an online marketplace

Selling on online marketplaces is cheaper and easier than creating your own e-commerce website. Whether you want to start selling on Etsy, eBay, or another site, you just have to create an account with them and follow their guidelines to get started. The process is usually fairly straightforward, and you can begin selling in no time.

The catch is that these platforms will usually charge a fee whenever you make a sale, and some of them may even charge additional listing, referral, or transaction fees. Additionally, it’s more difficult to add customized features and build a memorable brand on them.

In addition to the general-purpose marketplaces we’ve already listed, there are also several niche marketplaces that accept narrower ranges of products. Below are some of the most popular marketplaces:

Major Online Marketplaces

Picking the right items to sell and a suitable platform to host your store is important, but there are a few other crucial things that will affect your business. These include:

What payment processor to use

Depending on the sales channel you choose, you may need to integrate a payment processor, such as PayPal, Stripe, or Square, with your online shop.

When you pick a processor, look into the following:

• Fee structure: Check which fees the service charges and what they are. Common fees include startup fees, transaction fees, monthly/annual fees, chargeback fees, refund fees, PCI compliance fees, and termination fees.
• Accepted payment methods: You could lose customers if your payment processor doesn’t support their preferred payment method. Ideally, your processor will support credit and debit cards, mobile payments, and bank transfer.
• International payment support: If you have customers overseas, be sure to use a payment processor that supports international transactions.
• Buy now, pay later (BNPL) services: Some customers prefer to pay for their purchases in small installments over time instead of making the full payment upfront. These payments are typically interest-free. If you plan on selling fairly expensive products and you think your target market might not be able to afford to pay for them all at once, look for a processor that offers this feature.

Note that some e-commerce platforms have their own partnerships with payment processors to streamline things for merchants and spare them from having to consider all of this themselves. For instance, Shopify Payments allows you to accept all major payment methods without having to work with a third-party payment processor at all.

How to fulfill your orders

“Fulfillment” is the process of packaging and shipping deliveries to customers. Unless you only sell digital products, you’ll have to figure out how to handle this.

Here are three main ways that e-commerce sellers fulfill orders:

• In-house fulfillment: This method is the most laborious of the three, as you’ll have to handle everything on your own, ranging from managing your inventory to warehousing (i.e., storing products) to arranging pickup and actually sending your products out in the mail. This method is suitable if you deal with relatively low volumes of orders (e.g., if you sell expensive handcrafted goods in small quantities), but impractical if your store is large and sees a lot of business.
• Third-party logistics: Third-party logistics (or 3PL) is the practice of outsourcing your fulfillment process to a service provider. This method is suitable if you want to maintain some control over your inventory but expect to handle more sales than you can realistically process by yourself.
• Dropshipping: We’ve already mentioned dropshipping, the most hands-off method of order fulfillment. With this, you forward the details for each order to a supplier, who will pack and ship the product to the customer for you. You won’t keep any inventory on hand yourself. This is the easiest method, but it can also get expensive to pay suppliers to do all of that, and you’ll be giving up a fair amount of control.

On a related note, it’s worth considering if you want to offer free shipping when customers meet certain conditions, such as spending a certain amount on a single order. This strategy can encourage customers to buy, but it carries the obvious downside that you’ll sometimes have to shoulder the cost of shipping yourself. Be sure to crunch the numbers and make sure your strategy is economically viable.

How to market your store and products

If you want to be a successful e-commerce seller, you need to market your products. You can (and should) spread the word about your shop via multiple channels. Major forms of digital marketing include:

• SEO / content marketing (publishing a blog that’s affiliated with your store)
• Email marketing
• Social media marketing (posting on Facebook, Instagram, etc.)
• Paid ads

Your job as a marketer also doesn’t stop when potential customers land on your store. To get them to actually take the plunge and make a purchase—and, hopefully, to recommend your store to others—you should also focus on:

• Creating compelling product descriptions (with relevant SEO keywords)
• Adding high-quality pictures of your products
• Promoting your shop on your social media accounts
• Offering great customer service (and asking for reviews from satisfied customers)

It’s good to do all of that regardless of what channel you’re selling through, of course, but it’s especially crucial on highly competitive marketplaces like eBay, where thousands of other stores are just a couple of clicks away.

If you’re just starting out on your e-commerce journey, follow these tips and tricks to make sure your store is a success:

Create a comprehensive business plan before you begin

A solid plan is the foundation of any successful online business. It will serve as a guide for managing your store at every stage.

At minimum, your business plan should include the following information:

• What will distinguish your store from its competitors
• What your goals are (measured in monthly or annual sales, revenue, etc.)
• Your target market
• Analysis of your main competitors
• What type of store you’ll create, and how and where you’ll host it
• Your e-commerce fulfillment strategy
• Your marketing strategy
• Your financial plan and budget

Laying out this information will give your business structure and establish concrete metrics and goals. It will also make it easier to pitch your store to outside investors, if that’s something you’re interested in.

Optimize your website for your users

A crucial part of attracting customers is having a user-friendly website. Its design should be inviting, and the website as a whole should be easy to navigate. This includes having a quick load time and a simple and painless checkout process.

As you grow your business, remember to optimize your site periodically to continually improve your customers’ overall shopping experience.

Sync your shop to Facebook and Instagram

Some e-commerce websites, such as Shopify, BigCommerce, and Wix, allow you to sync your website to your Instagram and Facebook business pages.

Doing so will help your online store gain exposure to a wider audience. Check out the Meta Business Help Center page for the full list of e-commerce websites with this feature.

Note that even if you’re selling on a platform that you can’t integrate with Facebook and Instagram, it’s still worth creating a page for your business on both of them. As mentioned, social media is a valuable marketing channel, and as an online seller, there’s no reason not to take advantage of it.

Consider registering your business as an LLC

You don’t need to formally register your store as a business to sell online. However, it’s worth at least looking into registering it as a limited liability company (LLC). This will put up a clear firewall between your own finances and your store’s, which will simplify your life when tax season rolls around. It will also protect your personal assets in the unlikely event that someone sues your business (or it falls on hard times and you have to declare bankruptcy).

You don’t necessarily have to register your store as an LLC right away; it’s fine to keep that in your back pocket and look into it once you’ve met with some success and are considering expanding. Don’t hesitate to consult with an attorney if you’re unsure about this option.