6 things to budget for when building your ecommerce business

Over the last few years, several factors have made ecommerce even more ubiquitous. A few key shifts:

  • The COVID-19 pandemic cemented online shopping habits ahead of projected timelines.
  • Supply chain issues laid bare the necessity of expanding sources for materials and products.
  • Continued growth and simplification of international commerce made online retail an increasingly beneficial option.

No matter the reason you’re opening your digital doors, there’s a lot to consider when it comes to running a successful ecommerce store. Chief among them: the cost of doing online business. While fulfillment, storage, and shipping costs are some of the more obvious expenses you might incur, you’ll also need to budget the all-in costs to start and maintain your new site.

Here are six major costs to factor in when starting up your ecommerce business:

  1. Website development
  2. Multichannel marketing
  3. Sales tax compliance costs
  4. Ecommerce software
  5. Customer service
  6. Customer research and surveys

Website development

Unless you’re adding ecommerce functionality to an existing site, the bulk of your upfront costs are likely to be in developing your online presence. The initial costs to get started are typically:

Domain name registration

Sites like GoDaddy and Hover will help you select and register your domain name for an average price of about $1–$15+ per year. Depending on how common your business name is, you may have to get creative with the URL to find an available domain name. It’s also helpful to search a few name options to figure out what kind of results you’ll be competing against.

Web hosting

This is the cost of keeping your site on the web each year. If you’re working with a site builder or ecommerce platform, you’ll likely be able to use them as your hosting service as well. You can also find third-party hosting companies if you’re creating your own site.

Shared hosting costs typically range from $3 to $40 each month, while dedicated hosting costs start around $200 per month. The type of hosting you need will depend on how your site is built and the amount of traffic you have.

Writing and design development

Design and branding are impactful parts of any business, so it may be worth paying a designer to handle visual elements, like navigation, page layout, logos, banners, and images. Design costs usually pay off: A recent study found that 83% of respondents think it’s important for businesses to have an attractive and updated website; the user experience affects how consumers feel about the company.

You may also want to hire a writer to help with site copy and online descriptions. The same study found people value descriptions and visuals equally and half of survey respondents find company blogs helpful.

Site build

There are three primary ways to build a website, each with different pros, cons, and price tags:

  • An automated online website builder — the cheapest but most inflexible option
  • A content management system (CMS) — comparatively cheap while allowing for more control
  • Custom development — expensive to build and maintain but affords the most precision

Automation tools and plug-ins frequently add to overall costs, but can also save time, reduce the need for specialized staff, and increase process efficiency. It’s critical to balance the cost/benefit, and be aware of all possible associated costs for these in order to factor them into your budget plan.

Multichannel marketing

Spending money on your site is pointless if customers don’t know how to find you. Multichannel marketing can help you cast a wider net for potential buyers. How you market your site depends on what you sell, who you sell to, and where you sell products.

Consider a combination of:

  • Direct mail
  • Email marketing
  • Out-of-home advertising
  • Event marketing
  • Social media placements
  • Search marketing

Sales tax compliance costs

Sales tax is often an afterthought for business owners, but it can have major repercussions if not handled correctly. We recommend automating the tax compliance process, but regardless of whether you use tax compliance software or a manual system, you need to make sure you:

Your ecommerce store needs to be able to handle all the complexities of sales tax compliance. By spending time setting this up correctly at the start, you'll save yourself issues later on.

Taking advantage of available tax deductions can also have a significant impact, so make sure you're caught up on all of these.

Ecommerce software

How well your business manages inventory can have a huge impact on its success or failure, but managing inventory can be overwhelming, at least at first.

Tools like order management software can help you:

  • Track the status of your orders at every step in the process.
  • Analyze inventory to improve item data management.

This can result in more automation, higher order volume, and inventory reduction.

Retail inventory management software can be a useful tool to invest in too. It gives you a centralized overview of your operations and helps to automate many processes, like order fulfillment and accounting

Customer service

No matter how well you design your website and manage orders, there will still be questions.

Implementing a customer service team comes with the costs of hiring and training staff. It also requires investing in additional software and hardware to enable customer support. Depending on the complexity of your products, it may be an investment well worth making.

But a team of people isn’t your only option. As with nearly all things ecommerce, multichannel customer service solutions can help you better meet customers’ needs. Other service options to consider include:

  • Email outreach
  • Support chat — via a bot, live, or both
  • Call centers
  • In-person customer support

Regardless of the service options you choose, it’s key to offer streamlined customer service options. Most consumers report frustration with having to repeat their issue at multiple points. This can be mitigated through creating a strong and consistent customer experience across all channels.

Customer research and surveys

Collecting, analyzing, and interpreting data allows you to understand your customers and business. Without a feedback program, interactions with customers are limited. You'll likely only deal with customers personally when they return an item or complain. Options include:

  • Offering post-purchase surveys via text or email, to show customers you value their opinion.
  • Collecting and responding to online reviews, as companies with consistently high reviews are better equipped to grow organically through referrals.
  • Monitoring public forums where customers share their experiences and opinions. Replying shows you care and are willing to take constructive feedback to heart.

While some costs related to setting up an ecommerce site are obvious, hidden costs can add up. Knowing what to expect can help you create an ecommerce site that runs smoothly and brings in sales. And if you do these things well, you might just land your company in a coveted spot as one of the best online retailers.

Recent news
Your inventory may be giving your business a sales tax obligation
Local option fuel taxes create complexity for companies complying with excise tax
A Superfund excise tax on chemicals is in effect
2023 Tax Changes blue report with orange background

Avalara Tax Changes 2024: Get your copy now

Stay ahead of 2024’s biggest tax changes with this comprehensive, compelling report covering seven industries.

Read the report

Stay up to date

Sign up for our free newsletter and stay up to date with the latest tax news.