What's involved in running an online store?

So you’re making the leap into the online retail world? You’ve got your web build budget sorted, found your developer, design and user-experience team. Your inventory is ready to go and your launch and marketing plan is in the bag. But have you budgeted for ongoing costs associated with running your website? Just like a bricks-and-mortar retail store your online store will require regular, ongoing maintenance and upkeep. 

Do you know what's involved in running your website?

The most thorough way to assess your ongoing running costs is to get a list of expenses from your developer, content, marketing,  IT and logistics providers about your business, it's current and projected needs. (Oh and it's a great idea to find a business coach as well!)

Here are some ongoing costs you can expect to find on that list. 

Hosting and maintenance

All websites need to be hosted on a server somewhere in the world. Costs for this service can vary widely (anywhere between AU$2 and AU$120 per month) but as a general rule, the more you pay, the more value and service you get. Look for a website hosting service that is reliable (and you may need to rely on your developer for advice on this one).

Things that will affect choosing the right hosting service:

  • What is the main geographic location of your website?
  • How and when can you contact technical support? (Again, your developer will have lots to say on this one)
  • How fast will your pages load?
  • How much traffic do you expect the site to get?
  • Do you require e-commerce features?
  • What is the service history of the provider, have there been many disruptions to service in recent history?

In terms of maintenance, all websites need protection from spammers and hackers. You will also need someone who can apply any relevant updates to your site, undertake database back-ups and optimisation and apply new plug-ins where applicable. If you don't have the skills to complete these requirements then you will need to create an ongoing business relationship with a developer, post go-live.

Content creation: photos

It’s pretty difficult to sell products (or services) without photos, and when we talk about photos we mean high quality, professional photos. Online purchasing is all about creating a sense of trust between you and your customer. If the photos look like they’ve been taken with your smart phone or they’re out of focus, your products may look inferior and as a result you may lose sales. Also, by forming an ongoing relationship with a professional photographer they will provide advice on things like poplet images (those smaller images that enlarge to show alternate views of a product), 360 degree images and even video.

Finally, are you proficient in photo editing software? If so, then you can go ahead and prepare your images to the correct size and quality for your site's requirements. With the increasing prevalence of Retina computer screens, photos now need to be prepared for the web in a specific way to get the most out of these high quality displays. If you don't have photo editing skills or understand retina technology then you'll need to have a designer or content loader on retainer.

Content creation: text

While it may seem easy to jot down a few points about your product, Google and other search engines care a great deal about your product description. It's unusual to find online shops that don't have multiple competitors and without utilising expensive marketing programs, sometimes the only difference in being first on search returns and on page two is the language you use on your website. It can add tangible value to your bottom line to work with an experienced writer. For that job, you'll need to work with a ‘writing-for-the-web’ specialist.

Content loading

While you may initially have plans to load all your own content including product photos, product descriptions, colour swatches, size descriptions and blog articles, it is imperative you assess if you have both the skills and the time to undertake all that is required to keep an online shop humming.  By working with a specialist content loader, you can get both accuracy and efficiency in getting your products on (and off) your site.

It is not uncommon for retail websites with large turnovers to have two, three or even more, full-time staff whose sole responsibility is to load and remove products on the website. In addition, are you familiar with Content Management Systems (CMS)? Do you know what you’re doing in the back-end of your website? Mistakes can mean costly repair jobs by your developer if you alter or delete the wrong thing.

Inventory control

If you have more than about 20 or 30 items for sale on your site (including any unique item characteristics such as colours and sizes) then you'll need to keep track of your stock electronically. There is nothing more imperative for building trust with your customers than ensuring that you can actually deliver the stock you have listed for sale on your website . So you'll need to factor in time and/or resources to keep a track of your inventory coming in (stock) and going out (sales).

You can use simple software like Microsoft Excel to track inventory but as your product numbers inevitably grow you'll need to invest in a more expandable, flexible and preferably automated method for managing your inventory. Something to note here is if you plan to run a bricks-and-mortar shop in addition to your web shop, you'll need to consider this element and associated costs very carefully. And, no matter how much money you have to throw at the problem, there is always a 'human' element to inventory control. As a general rule for this cost, the more you pay, the less hours you'll have to put in to manage inventory, but do your homework before you commit to anything, inventory software can be an essential investment to your business.

Finally, if you are connecting your on and offline inventory control make sure your Content Management System is compatible with your POS (Point of Sale) software.
Distribution and logistics

Once you have a successful transaction from your site you'll need to get the product to your customer.  Packaging and delivery of the product needs to be costed into the budget, ongoing. There are a plethora of options available, including postal services, couriers and customer pick-up options, and given that many sites offer free delivery options, it is imperative you get your numbers right on this part of the sale process, get this cost wrong and you'll soon find your profit margin shrinking . Distribution and logistics management can take time and finessing as you progress. Larger volumes of sales may mean you can take advantage of  volume or trade discount, so it's good to review periodically or when you notice your sales steadily increasing.

Analytics and statistics

Do you know what an 'abandon rate' is? Or a 'referral'? Or 'form usage'? Not understanding how your customers use (or don’t use) your website can be the difference between success and failure. Your analytics specialist will help you learn the language but it can be useful to pay them for weekly, monthly, quarterly and annual reports to learn how you can improve the activity on your site.

Ongoing development

It is inevitable that over a period of time, as your business grows and changes, your website will need to be updated to reflect these changes. Your inventory will increase, meaning your categories may change, filters may need to be added and further functionality may need to be developed, and unless you can make these changes yourself, you will need to employ a developer to assist you in making those changes. Hourly rates for developers will be the most expensive of all the skills required to keep a site running, expect to pay between $120 and $160 per hour for a senior developer and up to $250 per hour for complex work (like custom, java script or database work). A great tip is to see if you can bundle your hosting, maintenance and ongoing development together as a fixed monthly retainer.

Marketing

Unless you're really lucky it is unlikely you will launch your website to a flurry of customers and sales activities. Which means you need to generate activity on your new website by rolling out a marketing plan.  

This may include activities such as:

•  periodical EDMs (Electronic Direct Mail or e-newsletters)

•  social media activity

•  social media advertising

•  Google adword campaigns

•  blogging

The wrap up

In addition to the specifics of running an online store you'll also need to allow for other business expenses (as you would with any other business), these things include insurance, accounting fees, book-keeping fees, general admin costs, telecommunication costs, utilities etc.

There’s no doubt that running an online store can be rewarding, both financially and personally, and understanding what’s involved from the outset can lead to good revenue flow, solid profit margins and a flourishing online business. You just need to be prepared and know what's involved.