10 major expenses every new eCommerce business needs to gear up for



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As business activities move to the internet, eCommerce is becoming the new way of doing business that every entrepreneur should think about. Similar to the traditional ways of doing business, online-based commercial activities also comes with a series of expenses that you should be prepared for. One of the expenses is getting eCommerce insurance. Find out the 10 major expenses that every eCommerce business must prepare for below. 

Building and Hosting eCommerce Website

To do business online, you will need an eCommerce website for the business. The website will be your store where customers can shop and also interact with you. However, today’s eCommerce shoppers want robust websites with intuitive features that you cannot easily achieve with free web-building tools.

Creating a good eCommerce website requires that you hire a web design professional, pay for a domain name, hosting, SSL certification and platform for processing online payments. These often do not come cheap.

Licensing and Permits

The fact that you are running an online business does not exempt you from obtaining the stipulated business licenses and permits. Depending on the city or state where you are based, you will require a general business permit to sell on the website. eCommerce businesses may also require Doing Business As (DBA) license and other professional permits as required by your state or city.

Shipping

Whenever you are operating an online business that deals in the sale of tangible products or goods, you will need to ship them to customers on demand. Partnering up with a reputed shipping company for bulk discounts is the only way to offer “free shipping” to your customers.

Inventory Management

In the course of doing business, you can expect a significant shrinkage of inventory. That usually arises when goods are damaged, stolen or misplaced in the process of delivery. One way to curb such losses is through the use of inventory management software to keep track of products in transit.

eCommerce Insurance

Some may think that since eCommerce businesses do not run on physical spaces, there is no need for insurance. However, that is not true. There are lots of risks involved in conducting online business that could quickly push you out of business if you do not have a proper insurance plan to cover them. eCommerce insurance is essential to every online-based business. 

There are various types of insurance policies for eCommerce establishments to choose from based on the type of business activities and the scope of operations. The most important types of insurance include general liability insurance and product liability insurance. In case you will be operating in areas prone to natural disasters, it would also be advisable to consider getting business interruption insurance.

Marketing and Advertisements

Whether a regional or a multinational eCommerce platform, marketing and advertising usually cost a lot. There are various marketing alternatives including blogs, SEO, emails, social media among others. Nevertheless, you can expect a significant expenditure on marketing and advertising.

Maintenance of Equipment and Assets

Regardless of the specific activities that you will be involved in, you need a wide range of equipment and assets to successfully run the business. The essentials may include computers, printing machines, telephones, cars or trucks, and others. These will require regular professional maintenance, repairs, and replacements that also come at a cost.

Cybersecurity

Cases of cyberattacks like hacking and malware infections on small web-based businesses are becoming quite common today.  The consequences can be massive, including the closure of your business. To avoid such threats, you should invest in more enhanced cybersecurity solutions.

Refunds and Returns

One of the main features of online shopping that most customers look out for today is the provision for free returns. Currently, it is estimated that 20% of eCommerce purchases end up in returns, which means you will have to spend more to restock or even dispose of the products and keep funds to cover the shipping fees.

Utilities

To smoothly run an eCommerce establishment, you need 24/7 internet connectivity, power, and other utilities. In case you are dealing with activities like production, the cost of utilities will go much higher. These are critical expenses that you must properly plan for before launching your eCommerce business.

Generally, there is a lot that you should expect when starting an online business apart from just the costs of building and hosting eCommerce website, licensing and permits, inventory management, refunds, asset maintenance, eCommerce insurance and the other expenses discussed above. For success, you should develop a proper and detailed business plan that takes into account, all the above and other expected expenses.