How Do You Start an E-commerce Business in Canada?

Is Starting an Ecommerce Business a Profitable Idea?

Starting an e-commerce business is one of the most lucrative decisions you can make, but it still requires hard work, funding, and preparation. Some of the benefits the e-commerce market offers are:

1. No location limits:

An e-commerce business is an online business with no geographical limitations. You can sell your products or services to various people worldwide. With visibility reach on a global scale, it gives wider and unrestricted access to potential customers.

2. Reduced Expenses:

E-commerce reduces operational expenses such as rent, employees, designing a workspace, and managing inventory. An individual or company can open an e-commerce business in less time than it would take to set up a physical outlet. E-commerce owners can also relax in the comfort of their homes and manage their businesses effectively.

3. Lesser Purchasing Time:

The faster buying process is another benefit of an e-commerce business. With a single click on the website, buyers can order what they desire and pay within a few minutes.

Ecommerce businesses utilize the internet to sell someone products or services. Hence, one can start a business from home with low expenses. And if you don’t have any prior experience in the e-commerce sector, this guide will help you become more knowledgeable about it!

The e-commerce market has a large pool of competitors – depending on what product or service you’ll sell. It is a very versatile market using various technologies like mobile commerce, online marketing, automated data collection systems, online transactions, and many more. An e-commerce company can be used to sell various goods such as clothing, arts, music, movie, and plane tickets, as well as financial services such as stock and online banking.

Various countries are established in the e-commerce market, and many more are still emerging. Canada occupies the ninth-largest e-commerce market in the world, with 27.6 million digital users in 2021 and an expected increase to 30.5 million in the year 2025. Canada's large online population has made the country a very profitable market in recent years.

How to Set Up Your Own E-commerce Business

Here are some factors you need to consider before starting an e-commerce business.

Choose your E-commerce business model

There are four e-commerce business models:

• Business-to-business (B2B) is a business model which involves companies listing products or services they render on an online B2B platform for companies to buy. Examples of companies using the B2B model are Slack and Trello.
• Business-to-consumer (B2C) is like the B2B model, but with a different target audience. E-commerce businesses using the B2C model render services or products to consumer, like Nike and IKEA.
• Consumer-to-consumer (C2C) involves consumers selling to other consumers using e-commerce platforms. Examples of e-commerce stores using the C2C models are eBay and Craigslist. The seller may already have the products or sell products they find elsewhere.
• Consumer-to-business (C2B) involves a consumer selling to a business. An example is a freelance photographer selling photos to a stock photo agency.

Decide on a product or service to sell

Choosing a product or service to sell online is essential when launching an e-commerce business. This can be challenging because there are various options to choose from. An easy way to narrow the search when starting an e-commerce store is to focus on product trends.

As an e-commerce business owner, keeping up with product trends is necessary. The point of a business is to provide services or sell products that solve problems for customers or meet their needs. Trends often influence these problems and needs.

Understanding product trends is very important for your business. If you offer services or products that don’t provide a solution to a problem, then you are unlikely to become successful. You can keep up with the new and emerging e-commerce trends on social media, e-commerce marketplaces (like Amazon), and trend report sites (like Google Trends and TrendHunter).

Choose your delivery model

Different e-commerce businesses have different revenue models based on how they handle inventories and where they get their products.

1. Drop shipping

This involves no labor in developing, managing, or shipping products. You simply create a partnership with a dropshipper, who’s role is to source items for a customer. They handle the delivery of the goods to the customer. This removes the extra expenses of getting goods without guaranteed demand but involves low profit and huge dependency on the supplier.

2. Wholesaling and warehousing

This involves a lot of capital because you need to get the goods from a middleman or manufacturer and store them in your warehouse. This model is best for high-demand businesses but is also high-risk and dependent on sales.

3. White labelling

This involves outsourcing from manufacturers and labelling the products as your own. This model eliminates expenses for infrastructure and labor needed to make your own products. In a white label partnership, the provider or manufacturer may offer a range of customizations (design, parts, ingredients). Sourcify is an example of a medium that connects businesses to manufacturers.

4. Private labelling

This also involves outsourcing from manufacturers, but it differs from white labelling because you can directly specify the design, parts, ingredients, or offerings you need for your product. The manufacturer will then tailor that product based on your specifications.

5. Subscription-based

This involves offering an e-commerce service that is intangible, where consumers are charged a recurring fee monthly to access different services. Netflix is a great example of this.

Conduct research on your competitors

When you want to start an e-commerce business, keeping close tabs and conducting thorough research on competitors is a critical step for start-ups.

You should research your competitors periodically to keep track of them and stay informed of business updates, new trends, and products.

The main purpose of keeping track of competitors is to take note of the competitor's shortcomings, improvise on strategies, and most importantly, use and adapt their success strategy.

To research your competitors, figure out at least 2-3 of the top competitors, visit their social media pages, attend their events and conferences, and read their customers' opinions.

Understand your target audience

Buyer personas comprehensively describe someone who stands in for your target audience. It helps you understand your target audience, so you can better tailor your products and services to meet their needs and desires.

The best way to develop buyer personas is to get to know them through conducting surveys and focus groups, using questionnaires polls, and utilizing social media Q&A functions.

Your e-commerce business plan

As with any business start-up, you need to develop your e-commerce business plan. Be concise, know your audience, and research your competitors. Here is an example of an e-commerce business template for reference.

• Brand name
• Company Type
• Business description
• Market analysis
• Company organization
• Products or services provided
• Financial outlook

How to Fund Your E-commerce Business

After deciding to start your e-commerce business, funding is the next big step.

Most seed e-commerce businesses don't require significant capital, but the funds you need will depend on your revenue expectations and business model.

There are different options, such as loans, e-commerce grants, crowdfunding, bootstrapping, angel investors, family funding, and many more.

Two examples of sites where you can apply for crowdfunding are Kickstarter and Indiegogo.

Before applying for e-commerce loans, having well-detailed and accurate knowledge about how to apply and where you can apply is paramount, so we’ve created a helpful guide on small business loans in Canada. If you’re thinking about applying for a grant, you can read our valuable guide on small business grants.

How to Build Your E-commerce Website

Your e-commerce venture will not exist without a website. You can create one using multiple options, including e-commerce platforms, building your own, or using a content management system. To start building your website, you need to take the following steps:

Choose a legal status and register your business

There are three legal statuses in Canada:

1. Sole proprietorship
2. Partnership
3. Corporation

Choose the business structure you want and register your e-commerce business. You need your physical address, business incorporation, domain name, and business name to register. Designing a logo and trademarking it is a huge bonus point for your e-commerce business. It will increase the credibility of your business, encouraging collaborations, affiliate marketing and it will help you secure funding.

Build your online store

There are different e-commerce platforms you can use to launch your e-commerce business and sell your products or services:

1. Shopify
2. Wix
3. BigCommerce
4. ShopWired

Consider CMS software

A content management system helps you publish content for your e-commerce store with ease. It cuts down on the cost of a content team and gives different people in an organization access to their work. An example of a popular CMS system is WordPress.

How will you take payments?

Setting up a payment system makes it easier for buyers to pay for your products, and an integrated payment system can positively affect any business. Some of the widely used popular payment facilitators are:

1. PayPal
2. Skrill
3. Venmo

Consider third-party logistics (3PL)

Order fulfilment providers have been on the rise since 2020, helping e-commerce business owners handle some of their tasks like managing stock, orders, delivery of goods, and product warehousing. Third-party logistics is a credible way to lessen your workload and focus on things that will drive revenue!

Examples of third-party logistics are:

• ShipBob
• SkypeHype
• ShipWire

How to Advertise Your E-commerce Website

There are various marketing techniques you can implement that are effective, cost friendly and accessible. Utilize these tips to increase your conversions, engagement, and brand awareness.

• Social media: it’s essential that you make use of social media as an e-commerce business owner. While posting is important, you need to be strategic about what you do and what channels you use. Each social media channel has their own benefits, and we strongly encourage you to use the ‘shop’ function on Instagram and TikTok.
• Influencer marketing: if you can budget it, you could pay for influencers in your industry to endorse your products. Consumers are more likely to purchase something based on a recommendation.
• PPC (pay-per-click): this digital marketing technique is not simple, and you should first understand it before diving headfirst. PPC is a fine art, and you can use vendors like Google Adwords to display targeted adverts that promote conversions and generate traffic to your site.
• SEO (search engine optimization): SEO is something that takes time to understand. In a nutshell, it is ensuring your website is optimized and ‘hygienic’ so it can rank higher in Google or other search engines. User don’t usually look on the 6th or 30th page on a search engine, and an effective SEO strategy helps your brand climb up the ranks to the first page. You can extract keywords to help your content rank better from SEO tools like Google or Ahrefs.

Starting an E-commerce Business Is Not Your Only Option

Starting a business is exciting, but there are other options you can consider. Instead of starting your own e-commerce store, you can buy an existing e-commerce business to avoid going through the stress and risk of starting your business from scratch.

Starting an e-commerce business from scratch can be stressful yet rewarding when it kicks off, but the truth is most start-ups fail. There is tough competition due to the large influx in the e-commerce market. An existing e-commerce business has overcome most of the hurdles of a new start-up and you’ll buy an established business with the manufacturing, business ideology, and market audience set up, and you can start making profits immediately!

Discover some e-commerce businesses for sale in Canada and if you’d like more advice and tips on buying a business, you can read our dedicated buying guide.

Starting an e-commerce business can be overwhelming, with many ups and downs. But it can become rewarding with consistency, dedication and applying appropriate strategies. Feel free to contact us for further questions, support, or guidance on starting your e-commerce business.

Good luck!