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Four Steps in Starting an E-Commerce Business with Dem Vibes

Four Steps in Starting an E-Commerce Business with Dem Vibes

Four Steps in Starting an E-Commerce Business with Dem Vibes

Recently I had the chance to sit down with Brian Anderson, Founder of Dem Vibes, and discuss his experience starting an e-commerce business. Dem Vibes is a leading brand for high quality EDM inspired clothing. Brian started Dem Vibes in April 2015 and in less than 6 months into the top 2% of Shopify stores for growth performance and traffic. During our conversation, we explored how Brian got started with Dem Vibes and some of the advice he wish he had received when first getting off the ground. In this article, we'll look at four key take-aways from that conversation that can help entrepreneurs grow their e-commerce businesses:

Testing a Market


One of the first pieces of advice Brian offered to those starting an e-commerce business was, "the key to early success comes before you even launch your Shopify store; you need to pick a good product and define a specific niche that would be interested in that product." Certainly a fair statement to make given that a good understanding of your audience and the right product for that audience serves as the entire basis for you business. Many first-time entrepreneurs usually come to the table with a strong sense of either product or audience. They've identified something they'd love to have personally or seen others demand; or they've identified a particular group of people with a problem that is generally under-served. The challenge is marrying the two and determining whether there is a sizeable enough market to warrant building an entire business. Brian suggested three methods for testing out market demand before investing in inventory or extensive marketing:

Kickstart Your Sales
Kickstarter has emerged as a crowdfunding tool for entrepreneurs to find an alternative means of raising capital without the typical dilution associated with equity financing. Even more importantly, Kickstarter has become a platform for entrepreneurs to test the interest in a product by actually pre-selling that product and using those proceeds to fund their initial inventory. It serves as a mechanism to determine whether a larger 'business' would be viable. Although one would need to study the many nuances associated with running a successful Kickstarter campaign, it's a 'testing' channel worth considering.

Sell Before you Buy
If the 'work' involved in a Kickstarter campaign doesn't seem like a good fit for your business, you could just as easily apply the 'pre-sale' method to a traditional e-commerce website. If you can clearly communicate your shipping policies with customers, given that you are technically selling something you don't have, running a pre-sale campaign could be another way to test demand. Set up a digital advertising campaign that drives customers to the website and determine whether you can achieve a fair enough conversion rate and cost of customer acquisition before building out the full business.

Explore the Amazon
Similar to Kickstarter, in that it has many of its own nuances, Amazon is a great channel to test out the demand for products. Using tools such as CamelCamelCamel you can research product pricing information from competitors. For companies that are selling new, innovative products, you could look into Amazon's Launchpad program which offers rapid listing on Amazon, ability to market unique content to Amazon customers and boost exposure across the Amazon marketplace.

Understand the Competitive Landscape


Once you've got a solid sense for the market you're looking to target, it's critical you analyze the existing incumbents and understand how they run their businesses. What we're really looking for in this analysis, is whether there is some sort of 'gap' in the competition. This gap could be in their marketing, technology, design, etc. We're trying to identify some way to differentiate ourselves when starting an e-commerce business from others in the space. Brian suggests three things in particular to review:

How is the Competition Marketing Itself?
Understanding how your competitors are marketing themselves can often lead to uncovering huge advantages as a newcomer to the market. If your competitors are over-investing in paid and ignoring SEO, you might have found a gap you can exploit. If they're aggressive on social but don't spend anything on paid, you might have found another gap. Using tools such as SEMRush and SpyFu, you can gain insights on what's working and where the marketing dollars are flowing among your competitors.

What is the Competition's Technology Stack?
Often in established markets, existing companies are relying on older technology to power their business. The ecosystem of e-commerce platforms is growing rapidly and often the use of a newer shopping cart such as Shopify or email marketing tool such as Klavio, is enough for you to run a better company than the 'other guys'. Using a tool such as BuiltWith, you can 'peak under the hood' of your competition and see what's driving their technology.

What is the Competition's Customer Experience Like?
An often overlooked but worthwhile activity with key competitors is to go through the experience as a customer yourself. Simply making a purchase through a competitor's website will answer a number of interesting questions around how they run their business. What is their product packaging? How is their customer support? How do they use email marketing to stay in touch with clients? How aggressive are they with discounts? All of these questions can be figured out just by placing an order with a competitor and provide significant insight into planning your own business.

Determine your strategy for ROA (return on assets); High Volume vs High Order Size


One thing to consider when starting an e-commerce business is the argument over Order Size vs Order Volume. Order Size pertains to the total dollars received on a per order basis and is directly impacted by the average price per product. Order Volume pertains to the total number of repeat purchases over the lifetime of a customer. Often the higher the price of an item, the less frequently a customer is going to purchase it. Some products are inherently low frequency purchases such as mobile phones and computers while others are consumed regularly such as stationery and food. Unfortunately, there is no particular formula to calculating your prices or analyzing Size vs Volume. However, the higher the cost of acquiring a customer, the higher either the Order Size or Order Volume needs to be. Perhaps approach the analysis from the perspective of customer acquisition costs so you at least have a place to start.

Handling Fulfillment
A major consideration to make as an e-commerce company is in regards to how orders will be fulfilled. How are you going to produce your goods? Are you going to house your inventory? Are you going to package and ship your orders? There is no right or wrong way to run your e-commerce company, but you will need to consider these questions in detail. Brian suggests a few resources for each:

Sourcing Products
If you're not in the situation where you'll be manufacturing your own products, which is often the case, you'll likely be looking for suppliers to help produce the necessary goods and materials. Two online resources to consider for sourcing materials include Alibaba and Makers Row. Alibaba is a global product marketplace and a good resource for companies looking to procure low-cost, off-shore products. Maker's Row is a directory of American-based manufactures and factories great for high-quality and finely processed goods. Brian’s personal recommendation is to search for relevant industry trade shows and go to one as you might be surprised how much progress you can with a high quality domestic suppliers during one show.

Housing Inventory
Companies often choose to either house inventory within their own warehouses, find a dropshipping partner to both produce and fulfill orders or ship finished goods to a third party logistics (3PL) company who will house and ship orders. If choosing to handle inventory internally, take a look at Stitch, an inventory management platform great for small businesses. If considering a 3PL, many companies choose to work with Fulfillment by Amazon or Shipwire to both house inventory and ship orders.

Managing Shipping
Companies that choose to handle their shipping internally could consider a tool such as Shipping Easy or ShipStation. These platforms allow merchants to purchase discounted shipping, print labels and automatically notify customers of their tracking codes.

The above should provide you with some of the first few critical steps in starting an e-commerce business off-the-ground. In asking Brian as final takeaway, he said above all, "select a product space that you're super passionate about, even regardless of the business opportunity. If you don't wake up every day excited to work on your business, chances of success are very slim." Every entrepreneur's path is unique, but start from a place of passion and use the above as a roadmap to get started.