In the era of AI, starting an online business is easy, if you do it correctly. Starting an e-commerce business seems thrilling. Maybe you have watched some YouTube content or some Instagram reels, where creators are showing their orders or earnings. Or, you just want a career shift and ready to quit your 9-to-5 job. Whatever the reason, the first thing that might come in your mind is how much money do you need to start an E-commerce Business. Well, if I sum up for you, “start small, test small, and scale big”.
If you are going to be a first-time founder and thinking of starting an ecommerce business, then this article will help you a lot.
Money Required to Start an E-commerce Business
Choose your business model
The money you need to start the business depends on which business model you are going to go for. There are multiple ways to do the e-commerce business.
Dropshipping
If you’re hearing this word for the first time, then, let’s understand it first. In dropshipping, you don’t purchase inventory. So the inventory cost becomes zero. And, you don’t have to do legal documentation, so that cost also becomes zero. The only cost you have to pay is for a domain and a shopify store. There are some shopify apps that you can connect to your shopify store and start the dropshipping business. So, apart from shopify store charges the only cost you need to pay is for meta ads.
This is the most exciting business model as per some youtubers. But, as per my experience it is the worst business model to start with. Because, you haven’t seen the product physically. So, you will not be able to market it properly. Even if you are able to market it by copying other brands. Still, customer experience can be worse, since you have no control over product quality or shipping.
However, if you have zero experience with e-commerce. Then, just for fun, you can opt for shopify 3 month trial and can understand basics of an e-commerce store. But, this business model will just waste your time.
Reselling
Reselling business work only if you have a good amount of money to buy products in bulk. You can source products from China or from an importer, and then you can sell it online. But, in reselling business, the hardest part is getting the product at the right price. And, most founders fail at it. Even, you get the product at the right price, the supplier will ask you to buy it in bulk. And, it is not wise at all to invest so much on a product on day one.
e.g. – If there is an instagram trendy product which a store is selling at 500. And, you are sourcing it at even half price 250. Still, you will not be able to make any money. Since, in e-commerce business, shipping, packaging, gst, return and so many things will eat all your remaining 250 margin.
Handmade/custom products
If you are a creative person, then this is the best business to do. You don’t need to buy inventory, no need to do any documentation. Since, you can start this business with just an instagram page. All you need to do is just create some content around your products. And, if your reel goes viral or people love it, you can take orders from Instagram DM Initially. But, always take prepaid orders, COD will never work.
Ok, now let’s talk about the T-shirt printing business. I have seen some brands doing well in this business. This business also survives only on creativity. If you are copying someone else’s design then it will not work. To start this business you need three things. 1. High quality fabric plain T-shirts 2. Heat Press Machine 3. Stickers
There are multiple types of stickers you can use: DTF (Direct to Film), HTV (Heat Transfer Vinyl), Heat Transfer Paper, Sublimation Transfers. There are so many vendors who can provide stickers based on your design.
However, if you are not a creative person and don’t have any designs. Just discovering this business from some reels, then avoiding it. Since this is a very old business, even local shops now do custom prints.
Private label
This is the best and long-term business model. If you are thinking of starting a brand. And, don’t want to set up a manufacturing unit on day one, then this business is for you.
There are so many manufacturers out there who can design and develop products under your brand. Yes, you can ask these manufacturers to create a small batch of your product with your brand name. Then, you can list the product on your own website or marketplaces. After that, all you need to do is marketing.
But, this business model requires the most amount of money, just to start the business. Here, I am not adding marketing costs, since we are talking about starting business only. For expansion, yes you need money.
So, if you are serious about starting a brand, then this is the perfect model for you. Many supplement companies these days are running on private labelling. Just pick any health supplement around you, and you will find two sections manufactured by and marketed by.
Choose where you’re going to sell
This is an important factor, see there are multiple ways to start an ecommerce business.
Shopify/own website
If you are starting bootstrap then don’t at all go for this. Creating a shopify store is very easy these days because of AI. But, if you decide to go with shopify store then apart from creating instagram reels, you need to run meta ads. And, meta ads require lots of money. Selling on shopify only works either if you already have an audience with whom you were dealing manually via Instagram DMs. Or, you have funding on day one.
I have seen businesses getting closed after running ads on meta for a few months. Because, they don’t get the ample amount of results they were thinking. Since, meta these days work on creativity. So, you have to test creativity faster with lots of money.
I will still say, create a website of your brand, but use wordpress. Since, on shopify stores you have to pay so much compared to hosting a wordpress e-commerce site. Because, having a brand website is important these days even if you choose the second option of marketplaces.
Marketplaces
See, listing products on marketplaces is absolutely free. Marketplaces charge a fee only when you sell something through their site. There are mainly three marketplaces options.
Meesho – Meesho is the best place for resellers and manufacturers. You cannot build a brand on Meesho. Because, there is always a price war going on with every product. So, basically, it’s a race to the bottom, which works only for manufacturers.
Flipkart – Flipkart is good for brands. But, flipkart is not at all seller friendly. Many people face pickup issues with flipkart. And, if you are from a small city, then you cannot do business on flipkart.
Amazon – If you seriously want to Start an E-commerce Business, then nothing is better than Amazon. If you have a unique product which has demand on amazon then you will build your brand faster on Amazon. Amazon seller support is very helpful. Amazon offers multiple options to sell to sellers like Easy Ship, Self Ship, FBA for sellers. Will discuss it in upcoming articles.
So my final take would be if you want to start with a private label business model just go with Amazon. On Amazon, you get organic orders and you can even run Amazon ads to get orders faster.
Business registration and GST
No matter, you are selling through your own website or any e-commerce marketplaces. You need a GST Certificate. If you sell in your state then CGST and SGST applies and for selling in other states from your state IGST applies. Will explain GST in another article. For starting a business you need a GST Certificate.
But, before opting for GST, you need to figure out your company structure. It can be Private Limited, LLP, Partnership or Propritership. Explaining each requires a different article. But for now let’s understand it in short.
If you want to raise funds, then go for Private Limited. And, if there are two partners and both are equally ready to invest money and take all the liability that comes with business. And, if you have a rented office then go for partnership. But if you are a solopreneur who is investing money from his job or savings then simply opt for Propritership.
For Propritership, you just need your PAN Card, Aadhar Card. You opt for a GST Certificate by your name and in trade name company name appear. And you need a Principal Place of Business. Means, from where you will operate the business, it can be your home. Or, if you are not comfortable adding your home address in GST and invoices. Then, you can opt for Virtual Principal Place of Business (VPOB or VPPoB). It works on rent agreement, so you have to pay an early fee. Which can go upto 15000.
For Partnership, then you need notarized partnership deed, ID and address proofs for all partners, and proof of the principal place of business.
For Private Limited, you need to pay upto 25000. And, for it you need identity and address proofs for directors/shareholders, proof of your registered office address, and statutory incorporation documents like the MoA, AoA, and digital signatures.
So overall, the money depends on what you are selecting.
Trademark
If you have decided to go with Amazon then for Amazon Brand Registry you need a trademark. There are multiple classes in trademark and for each class trademark registration you have to pay 4500. You don’t need to register a trademark in every category first. You can simply choose a class on which your products fall under. And then, you can register the trademark. If you don’t register a trademark and try to list your products on Amazon. Then, it will get listed as Generic. Which is not good, if you are serious about your business.
Trademark also helps in many ways. Like, if your brand product is doing well, then not anyone else can list the same product under your brand name, trademark protects you from it. However, the 4500 cost is when you file a trademark by yourself, if you take help of a law firm or CA then you need to pay more than this. But, it’s quite easy to file a trademark, you can take any AI chatbot help.
Current Account Opening Charges.
You cannot do e-commerce business from your existing savings account. You need to get a good current account. Many banks do offer zero balance current accounts, if you find a good bank then you can go for it. Else, you have to maintain at least 5000-10000 MAB for most of the bank current account. Personally, I am using an SBI Current account and I need to keep 5000 MAB. So, the 5000 amount will get stuck, you cannot use it, you have to keep that also in mind.
Make sure you open a current account on your brand name. For a current account you have to provide GST and other documents to the bank. The bank will physically verify your office. Your office needs to have a GST registration board then only you can get a current account. However, this varies from bank to bank. Some banks might ask you for udyam registration, getting udyam registration is free of cost.
Product cost
Ok, this is the main part that decide how much money you need to start the business. I will suggest you to invest at least a month do the proper market research before launching any e-commerce product. Because, at the start of business you are ambitious. And, because of the business start excitement you choose the wrong product. I will create a dedicated article on product selection.
But, before that, let’s understand the basic economics of business. Suppose you are getting a product at 100 per piece. Then, don’t think you can sell it for 200-300 and can double your money. That’s not how e-commerce businesses work.
Here, I am assuming you are going to sell on Amazon. Because, if you are going to sell on your own website. Then, you have to spend so much on meta ads. And, sales are still not guaranteed.
E.g. – There is a kids toy you are getting at 100 then you will do packaging of it, that can cost 15-20. After that, you will pay Shipping + Marketplace Fee, it can be between 66-200 (EasyShip), that can be based on product weight and dimension, remember to understand volumetric weight first before you jump into e-commerce business. Also, you have to charge GST from selling price.
Note: Amazon offers Easy Ship, Self Ship and FBA options. So based on what you choose the shipping cost varies.
After that, you will pay for running marketplace ads, which can cost you 100 per day. (Getting organic orders is quite rare these days, you have to run ads. Initially you will not get orders even if you turn on ads. Because you are new and other products have reviews.)
So, overall, always sell at 5x. If you are buying at 100, sell at 499. If you are buying at 200 sell at 999. Then, only you can survive in the e-commerce business. And, don’t select the product which someone else is selling at a lower price and getting 1000+ orders. Because, you will never be able to compete with their pricing, then you don’t need to run ads, they are getting organic orders.
That’s why, don’t buy huge inventory. Initially test multiple products in the market and you will get to know which will work and which not. Start with 60 qty atleast. Keep 60 unit aside for marketing and promotion.
Summing-up.
See, there are still so many costs which i might have not mentioned and you will get to know once you start the business. If you want to start a brand, then I will suggest you go with Amazon instead. Because, you don’t want to unnecessarily spend on meta and shopify. So, if you are still thinking How Much Money Do You Need to Start an E-commerce Business, then for solo entrepreneurs, let me give you a rough idea. I am assuming you are doing white labelling business.
1. GST Registration + Bank Account = 15000+5000 (You can avoid 15000 by registering gst using your house address.)
2. Product = 50000 (It varies on how much product you are launching, i will suggest starting with only one or two.)
3. Packaging – 5000
4. Marketing + Ads = 20000
5. Extra Cash in Bank = 1,00,000 (You will understand this when you will be in e-commerce business.)
So, yes at least 2,00,000 is required to start an e-commerce brand. And, this will increase if your business starts growing then you need more inventory. So, if you are doing a job, don’t leave it, you can fuel your e-commerce business with your job. In e-commerce business you will not be profitable in 1-2 years. This business takes time, effort and money.
Yes, some of you might argue this much money is not required. Yes, maybe if you are creative then you can build hype around your business from Instagram and then your marketing cost can go down.
And, you can sell on a meesho like platform and even start with 5000-10000. But, return and margin like issues will kill your business faster. So, don’t jump into this business just because you saw someone else order numbers. This business asks for patience.