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8 ECommerce Business Expenses To Expect and Manage

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Erika Rykun | January 6, 2023

“Here's what you should expect for costs when it comes to setting up eCommerce for your business. ”
8 min read
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    The eCommerce industry is booming, further accelerated by the pandemic. It has nearly ten million online retailers worldwide, with 2.5 million in the United States. Per Insider Intelligence, U.S. online sales could hit one trillion dollars this year.

    As such, launching an eCommerce business is a rewarding venture. However, to succeed, you will need to prepare for various expenditures in order to gain traction and ensure long-term success. One such element is budgeting for your new online business.

    Getting an idea of your eCommerce expenses will help determine which eCommerce option is best for your budget. This article covers some of the basic and surprising eCommerce expenses you will want to know about before taking the leap — plus some practical ways to manage them.

    Eight eCommerce expenditures to anticipate and budget for

    The eCommerce industry is thriving because it offers business owners and customers such unique advantages that they can't find through brick-and-mortar stores.

    Is 2023 the year you stick to those resolutions and finally get your business online? Here's what to expect when you transition to or supplement with click-and-order business.

    1. Website development and maintenance costs

    Most eCommerce businesses require a website to serve as your online store. It's where you'll promote your brand, display your products and engage with your customers. However, building and maintaining a business website comes with a cost. You have to spend on hiring a web developer or design firm for:

    • Website Creation and Design: You pay a professional to create and design your website. You even spend on installing website plugins necessary to your site's functionality.

    • Platform Payments/Hosting Fees: Often, you use an established eCommerce platform. You then pay for using their services regularly, including the web hosting fee.

    Here at Helcim, you can skip these costs by tossing up an online checkout page— meaning no website design or hosting is needed. If you still want a whole website, you will need to account for these costs, but if you are looking for an easy and quick solution, you can simply create an online checkout page. This can live for free as a URL on your social media bio, on an existing website you might already have, or even on your Google listing. You can capitalize on our online checkout with inventory, shipping, and analytics features.

    2. Logistics and inventory management expenses

    Michael Nemeroff, CEO & Co-Founder of Rush Order Tees, underscores the importance of logistics and inventory. "Every entrepreneur should stay on top of their eCommerce processes. It starts with acquiring raw materials and ends with creating products. Ensure you deliver quality products on time right at the customers' doorsteps."

    Consider all business expenses involved from start to finish:

    • Product Sourcing: This comes in two forms: material acquisition or product procurement. You get the materials from your suppliers and pay them regularly. Or you buy wholesale products from retailers and sell them at a higher price.

    • Warehouse Management: This ensures the quality and safety of products in the warehouse. You incur costs for managing your inventory, like storing and tracking your stocks.

    • Actual Production: The process involves producing the goods or items to sell. However, it requires labor costs. If you already have the products, you still spend on the packaging.

    • Product Shipping: This is the final stage, ensuring products reach customers. Of course, you pay for working with couriers and shipping products to customers.

    3. Payment processing fees

    ECommerce businesses accept online payments from customers. As such, you will most likely incur fees for processing transactions.

    The transaction costs can be a monthly subscription cost, a percentage, or a flat fee. Of course, they vary from one payment gateway or processor to another, and many have extra or hidden fees on top.

    Suppose you accept invoice payments that let customers use bank transfers, credit cards, or mobile wallets for product purchases. In that case, you pay processing fees for that specific transaction type. Some payment processors might charge you extra for access, and use of tools such as invoicing or payment pages, so be sure to take that into account.

    4. Marketing and advertising costs

    Marketing and advertising are crucial to business success. Implement some strategies for promoting your products but prepare for potential expenses. Here are digital marketing strategies to consider for your eCommerce business:

    • SEO stands for search engine optimization. Its goal is to rank at the top of the search engine results page (SERP). The SEO strategy involves optimizing your website, writing keyword-integrated content, and building links. You might have a great website, but SEO lets people find you and can help position your business ahead of the competition.

    • PPC is short for pay-per-click. It's an advertising form for increasing online visibility and website traffic. However, you pay for every successful click made to your ads displayed on SERP. Some options to look into include social and Google ads.

    • Content Marketing includes online articles, images, or videos. They aim to attract and engage with your prospective customers. Remember: Content is king in the digital world.

    • Social Media Marketing involves promoting your business and products through various channels. These include Facebook, Instagram, Twitter, and LinkedIn. Social media is powerful as it's where your customers live and breathe.

    5. Customer service and support costs

    Every eCommerce business should have reliable customer service/support in place. The goal is to assist customers and meet their needs. Here is the core business support functions you should plan to include for your online business.

    • Customer Service: Without hiring specific customer service representatives as you scale or take your business online, the backlog can quickly pile up, leaving your customers frustrated. If you want to be successful, hire staff and train them to assist customers by answering questions, processing requests, or handling complaints.

    • Product Support: Representatives provide customers with product support. For instance, they provide technical assistance to end users of technology. However, you must pay and employ these agents as well.

    • Billing and Collections: Jarret Austin, owner of Bankruptcy Canada Inc., emphasized the need to establish this department. "The goal isn't only to collect payments from customers. You should also help them rise above their financial struggles. Give them options to avoid escalating to delinquency and bankruptcy." This gives you the ability to empower your customers and get paid for outstanding balances.

    6. Compliance costs, taxes, and insurance

    Ben Michael, Practicing Lawyer and Founder of Michael & Associates stressed the importance of running a business within the bounds of the law. "You should follow local, state, and federal tax laws and other regulatory requirements. Doing so helps you avoid legal ramifications, hefty penalties, and even business closure."

    Below are the costs involved in running an eCommerce business:

    • Business Licensing: Acquire a valid business permit to become a legitimate eCommerce enterprise. Secure a legal certificate for a minimum of $300 as per Become.

    • Tax Obligations: Stay on top of your tax responsibilities: pay your business taxes! If it helps, hire a tax professional to help you with tax reporting and filing.

    • PCI compliance: This is not an outright fee in itself, but there are costs associated with maintaining the requisites to meet the standards for Payment Card Industry (PCI) Security Standards. There are fines for breaching these security standards set in place to protect your customer's credit card data, but there are also consequences to your business and reputation, such as data breaches and fraudulent transactions resulting in chargebacks. P.S. Some payment processors will charge this as an extra fee on your merchant statement.

    • Business Insurance: It's best to get business insurance for your protection. A few examples are general liability, worker's compensation, and commercial property insurance. When you are processing payments online, some payment processors may offer chargeback protection on your credit card transactions.

    7. Professional fees

    If you are setting up a new business via eCommerce or in-person, you may require various professionals fundamental to your operation. However, again, you must fairly compensate them for their services. Below are some experts you might need for your online business:

    • Lawyers - to deal with legal matters
    • Accountants - to handle your business finances
    • Bookkeepers - to record all financial transactions
    • Tax specialists - to handle your tax filing
    • Consultants - to help your business grow

    Kyle Zien, Director of Growth Marketing at Felix, works with several professionals. "Take the initiative to entrust certain business functions to the experts. They can help optimize them and even scale your business. However, pay them properly and provide them with the utmost support."

    Other miscellaneous expenses

    There will always be miscellaneous expenses that might arise in the course of running your eCommerce business. However, here are some ongoing costs you should have already anticipated and budgeted.

    • Employee Salaries: Employees ensure your day-to-day operations. One of the benefits of eCommerce, however, is that you don't need to pay as many employees since all your product and payment is hosted online. You may still require staff for the product, inventory, and shipping, as well as other elements of the business, though, of course.

    • Utility Bills: You might not have a physical store for your online business. However, you should still pay for your internet connection and computer maintenance/repair.

    • Cybersecurity Expenses: You must protect your business from phishing, malware, and password attacks. However, there will be additional expenses for this. If you don't use a PCI-compliant payment processor, you will need to complete and renew it. This may include investing in software and hardware and security measures to protect your customer payment information.

    • Other miscellaneous and emergency costs. You don't want to run your ship too tight so that you can't afford to plug a leak that might spring up. Even if all goes smoothly and you account for everything, it is nice to put away a little rainy day fund or invest in updates in the future by accounting for a little extra every month.

    Stay on top of your eCommerce expenditures

    Managing expenses is a vital aspect of running a successful eCommerce business. The goal is obviously to spend less than you earn in your company; however, preparation can help you anticipate a good chunk of your expenditures so you can weather those unexpected costs.

    Understanding and tracking your expenses is key to making those informed decisions, understanding where to allocate financial resources, and maintaining your cash flow. With effective management, you'll stay on top of your expenditures and achieve your eCommerce goals.

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