If your goal is to start Facebook or the next Google, you need a huge amount of cash upfront to get started.

If you want to run Amazon.com next, you need to invest a significant amount of money to hire engineers and web developers.

How much does it cost to start an online store and should I drop the boat or carry inventory

But if you just want to make enough money to quit your job and start a “life” business, you need a lot of money at all!

In fact, depending on your end goal, you can start an online store less than $ 6 a month.

The other day, a reader signing up for my free 6-day mini-course asked me the following question.

Your free course is quite extensive and exhausting to read. Can you give me some idea in a simple sentence how much it would cost me to start up?

It seems like a lot of money needs to be invested before you start making money! Honestly, I have no money to run this, except why I have to start making money first!

Unfortunately, not everything can be nicely summed up in one sentence!

Get my free mini course on how to run a successful ecommerce store

If you’re interested in starting an ecommerce business, I’ve put together a comprehensive package of resources it will help you running your own online store from complete zero. Be sure to grab it before leaving!

The amount of the upfront investment depends on your goal

Goals

When it comes to starting an online business, your startup costs will depend on several factors! Here is a list of some other things that you also need to consider.

  • Speed ​​of revenue – How long after launch do you expect significant money?
  • Barriers to entry – How hard do you want someone to copy your business?
  • portability – Want to be able to run a business from anywhere?
  • scalability – Do you want the business to expand quickly?

Today we will give you an estimate The 3 most popular business models of online commerce along with the startup cost involved.

Start a Dropshipping Online Store

dropship

Dropshipping is by far the best the cheapest and easiest way to start selling goods online making it prone to the business model that most new entrepreneurs gravitate to.

Without going into too much detail, dropshipping is one where an internet business owner sacrifices some profit to do so avoid carrying any inventory.

When a buyer places an order, the store owner then places a similar order with his supplier and the supplier delivers the product to the final customer, Earnings are the selling price less the price of goods sold and a small fee for delivering the goods.

Related: Dropshipping vs. Marketing Partnerships: Which Internet Business Will Make You More Money?

Cost to start

Here minimal investment you need to start an online cap and drop shop a free open source shopping platform.

If you list everything above, it turns out between $ 5.45 and $ 76.45, $ 5.45 does it sound like a lot of money?

With a free open source shopping cart, your monthly cost for a bare bones site ranges from $ 5-6, This is how my wife and I started our Bumblebee Bedding Store.

In fact, we’re still on the same open source platform as when we started in 2007, except that the web hosting account is higher due to increased traffic!

However, if you are fearless and want to get involved with any site setup, you can opt for a fully hosted platform like Shopify or Big Commerce.

The main advantage is that they take care of all the settings for you, including payment processing, security, etc. …

Here’s an idea of ​​how much it costs to run a program barebones pages on these two platforms.

  • Shopify – $ 29 per month.
  • Great store – $ 29 a month.
  • (Optional one-time cost) Buy a template for your website – $ 50- $ 200

Although drophipping costs a lot less than other online commerce business models for starters, there are several disadvantages which I will describe below.

Remark: If you want to find drug suppliers easily, consider subscribing to a service like a global brand.

Speed ​​of revenue

First of all, the revenue speed of an online drop shop is much lower compared to a store that buys supplies in advance. After all, not worrying about inventory costs or product fulfillment comes at a price.

When it comes to dropping, your wholesale price will be higherIn addition, most dropshippers also charge a small fee each time a shipping order is processed.

All these costs add up, and the end result is that profit margins will be much less.

Another thing to consider is that you are with dropshipping sale of another’s productAs a result, you will compete with many other vendors who sell exactly the same thing.

So guess what happens when you have multiple sellers of an identical item? Price tends to spiral to the bottom.

Thanks to markets like Amazon, competition is fierce, And unless the MAP (minimum advertised price) prices are strictly enforced, you will be just another retailer trying to compete in the best price.

Barriers to entry

In addition, barriers to entry will be lower, Because of the low investment and ease of setting up a website, someone else can make it very easy copy and copy exactly your shop.

Although they still have to discover who your suppliers are, sometimes discovering it can be as simple as buying in your store and seeing where the package came from.

Portability / Scalability

But the beauty of running a drop shop is the one for you the business will be truly portable and scalable, Because you have to take care of the stock, you can run a business from anywhere rented an internet connection.

That means you could be in a coffee shop or in a foreign country and that would be important.

Because you have to worry about supplies, so is your business extremely scalable, With a computer server that receives and manages orders, you only need to hire additional help as the amount of customer support increases.

Starting an online store with advanced inventory

house

Setting up an online store in a traditional way with inventory carries all the same costs as running a boat shop, except you also have to set aside money for your initial cost of goods.

Depending on what you plan to sell, it could range from hundreds to thousands of dollars, depending on minimum order quantity (MOQ) required by your supplier.

There are many ways to reduce your risk and be more intelligent about inventory management, which I can discuss in a future article, but the bottom line is you will need to throw more money in advance if you want to carry inventory.

Cost to start

Once again, are there any costs associated with starting from a free open source shopping platform.

Here are the costs if you go platform fully hosted like Shopify or Big Commerce.

  • Shopify – $ 29 per month.
  • Great store – $ 29 a month.
  • (Optional one-time cost) Buy a template for your website – $ 50- $ 200

As for the initial inventory, I usually recommend that you be ready to invest at least $ 1,000, But this dollar amount depends on your supply strategy.

If you use domestic suppliers, it can be only $ 100, But if you are importing from China, I recommend about 1kn.

Speed ​​of revenue

The main advantage of carrying supplies over Dropship is that you will make a significant amount of money much fasterAs with everything in life, the greater the risk carries the greater the reward, which is why my wife and I decided to carry our inventory when we first started.

Poor we had to risk more money (about $ 630), we managed to make money $ 100,000 in earnings after only a year of business. And unlike dropshipping profit margins are much higher and you have more control over shipping costs and delivery times.

Barriers to entry

Carrying your own inventory has other benefits. Since you have to secure suppliers to supply original goods and you have to buy them in bulk, the barriers to entry are much greater than drophipping.

Because you have control over delivery and branding, a lot difficult to copy your idea for an online store.

Not only will they have to copy your website, but they will also need to find your suppliers (which is much more difficult as you deliver the products yourself) and be prepared to make more money in advance.

Not saying that it would be impossible to copy your business idea, but in general significantly less likely because of the increased risk involved in advance.

Scalability / portability

The rest is that you have to find a place store your goods and you have to take care of that shipping your productHowever, there are many ways to bypass physical inventory storage.

For example, you can use a 3PL (third party logistics company), 3PL is basically a warehouse that will store and ship goods on your behalf for a small fee.

In addition, many store owners who sell both on Amazon and their own online store use it Fill multiple Amazon channels ship orders as well.

But when it comes to inventory management, there will be an increase in headache as opposed to dropping ships and struggling to measure shortfalls compared to increasing profitability.

There are also cash flow issues associated with paying for advanced inventory that you also need to consider. For example, we routinely invest hundreds of thousands of dollars in inventories every year the poor see returns only months later.

Related: 3 Ways to Sell Products Online Without Stock, Shipping or Filling

Selling on Amazon with FBA

Selling on Amazon

Selling your goods on Amazon is likely the fastest way to make money sale of physical products via the Internet. Compared to running your own online store, Amazon has ENORMOUS built into the market for customers who are ready to buy your products right away.

In fact, when I first started selling on Amazon, I just lost a few products and made $ 3,000 in the first month doing almost zero. Isa. The market is so huge!

There are now many different ways to sell on Amazon that are beyond the scope of this post. But in the end, Amazon will charge you a lot of money for the privilege of selling on their platform.

Cost to start

Here are the costs to sell on Amazon as a professional reseller.

  • Amazon account of professional sellers – $ 39 per month. This is required to list your own private products online
  • Amazon reseller fee – 15% of your income
  • Amazon FBA Fee – Amazon sales and fulfillment costs depend on your product. But as a rough guideline, I would like to capture the extra 10-15%

One thing means it is Amazon fees are extremely high, And if you consider FBA fees, you could be paying Amazon 25-30% your revenue just to sell on your platform.

As a result, you have to sell high margin goods, If you want to sell private labeled goods, I’d be willing to invest at least $ 1,000 in the initial list. You can get around with less, but it has to be much slower.

Speed ​​of revenue

The main advantage of selling on Amazon is that you will make money a significant amount of money much faster than any other ecommerce business model.

They have a large audience, and especially during the holidays, it looks like anything you throw will be sold. There were actually several students in my class make 6 figures in less than a year on the platform. Here are some examples.

Barriers to entry

The main downside to selling on Amazon is this one all sales are transparent to all other sellers.

For example, if you use a tool like Jungle Scout, you can find out about that how much money a particular product made in the last 30 days

As a result, if you sell a popular product on Amazon, it only takes a while until copycats arrive and flood the market with similar or similar products.

Amazon is a cut throat platform and you need to be constantly on your toes and keeping track of entries.

In addition, because you own the channel, Amazon may prohibit you, change your policies, or raise your sales fees at any time.

Here are some posts written on the subject.

Scalability / portability

Thanks to the FBA, Amazon takes care of storing your goods, shipping them to the end customer and handling returns. As a result, sales on Amazon are very scalable.

And you’re done spend less on customer support because Amazon keeps most of it for you. In fact, the only thing that limits you is your cash flow and your ability to keep Amazon warehouses full of goods.

Once your product source flow is collected, the sky is the limit.

Decisions, Decisions

When it comes to starting an online store, come on more to consider than just how much it costs to start. You also need to consider your ultimate goals and how much you are willing to take risks to make money as soon as possible.

After starting my own online store, selling on Amazon and helping many others launch their own dropshipping stores, I can honestly say that there are advantages and disadvantages of each option.

What is important is understanding what you want from it, risk tolerance and what you want your end game to be especially if your goal is improve your lifestyle.

Related: Private Brand vs Retail Arbitrage vs Dropshipping vs Wholesale – 8 Comparable Ecommerce Business Models

Want to know more?

Create a profitable online storeDid you enjoy this article? If this is the case, you are more likely to enroll in my fully completed course on how to create a profitable online store.

My course offers over 100+ hours of video and includes live hours where you can ask me questions directly.

If you want to learn everything there is to know about ecommerce, be sure to check it out!

photo credit: Anders V OBJECTIVE

Ready to start an online business seriously?

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