How to start an online retail business

This year, there are 2.7 to 3.5 million online stores in the US. That’s a lot of digital shops and online selling going on.

But here’s the twist… a huge percentage of these online stores won’t survive. Some crash because they picked the wrong business model. Others because their supply chain is a total nightmare.

A recent Forbes article even suggested up to 90% of online stores fail in the first 180 days. Yeah… it’s that unforgiving.

But we’re not here to scare you. We’re here because, done right, you could have a profitable online store. You could even be the next Sara Blakely, founder of Spanx and self-made billionaire who started online before building a global brand. Or Andy Dunn of Bonobos - the guy who shook up menswear with an online-first model.

Starting an online store sounds easy. Click a button, upload a product, and boom, you’re an instant CEO, right? If only But the truth is, it takes more than an Epos Now website builder and some decent product photos.

Wondering what it actually takes? This guide will walk you, step by step, through starting an online retail business without losing your mind, or the shirt off your back.

Step 1: Figure out who you’re selling to

Your target audience is the group of people most likely to buy what you’re selling.

Knowing who they are makes every decision easier as you build your online store. It tells you where to reach customers, what kind of content will grab their attention, and how to create an experience that turns casual visitors into buyers.

An online store built with a clear audience in mind usually does better than one trying to appeal to everyone.

So, what are we talking about when we say “audience”? Stuff like:

• Who they are: age, job, income, that sort of thing. We call this their demographics, FYI.
• Where they live: city, state, or maybe “anywhere with good Wi-Fi.”
• What makes them tick: hobbies, habits, things they’re into.

Take all this info and put it together into a buyer persona (a data-backed profile of your ideal customer). This'll guide how you design your site, write product descriptions, and create ads.

How to find your audience by knowing your niche

If your market is packed with competitors, screaming louder won’t help. You need to find a corner of the world that’s yours. That’s your niche.

A niche is a smaller segment of a market defined by specific needs. For example, “running shoes” is a niche within footwear. “Trail running shoes” is an even smaller, more focused niche for people who need a particular type of running shoe. You can get even more specific: waterproof trail running shoes, or waterproof trail running shoes for snowy conditions.

The smaller and more specific your niche, the more your audience will love you. They’ll feel like you’re speaking just to them. That’s how you turn an online store into a place people actually want to buy from, your little corner of internet shopping heaven.

Step 2: Hunt down products to sell

If you already know your audience, you’re basically already winning half the battle.

Throw in the internet, market research, social media, friends, workmates, and suddenly you’ve got a full-on product detective squad.

Here’s how to know which items are likely to sell:

• Talk to fans and hobbyists. Find out what they’re loving, what frustrates them, and what products have them excited.
• Lean on your own passions. Chances are, if you geek out over something, there’s a niche audience out there who will too.
• Watch trends like a hawk. Predicting the “next big thing” can put you way ahead of the game.
• Check the big marketplaces. Look at what’s been selling well for years—it’s a strong clue that people keep coming back for it.

Once you’ve got some solid ideas, it’s time to actually get your hands on the products. There are a few ways to do it:

• Make it yourself: Got a skill like woodworking, illustration, or some crafty magic? Handmade products can attract people hunting for unique or luxury items.
• Buy from wholesalers: Grab inventory from wholesalers to have full control over what you sell and keep a steady stock.
• Work with manufacturers: Get original items made or create private-label products.
• Use supplier networks: Platforms like Collective let you find popular products from trusted suppliers and even handle fulfillment for you.

You essentially want to find products your audience can’t resist, get them in a way that actually works for your business, and get ready to make some sales.

Step 3: Work out your business model

 Before you go wild adding products and designing your site, you need to figure out how you’re actually going to make money. Sounds basic, but this step will save you headaches later (and maybe a few gray hairs).

Here’s the rundown of the main ways people run online stores:

• Own inventory: You buy products upfront, store them yourself, and ship them out when someone orders. Full control, full responsibility.
• Dropshipping: You don’t touch the stock. When a customer orders, your supplier ships it for you. Low upfront cost, but less control and tighter margins.
• Marketplace seller: Think Amazon, Etsy, or eBay. You’re listing your products on someone else’s platform. Built-in traffic, but a cut goes to the marketplace.
• Hybrid: Mix and match. Keep some stock yourself, dropship the rest, and maybe throw a few products on a marketplace. It’s flexible, but you’ll need good systems to keep track of everything.

Step 4: Pick the perfect sales platform

Your ecommerce platform is where you list products, update your site, process orders - it's how you run your own website. Some of the most popular platforms out there are:

• Shopify
• WooCommerce
• BigCommerce

When comparing platforms for your ecommerce website, make sure it actually fits what you need.

Most platforms come with an online store builder. This is basic, drag-and-drop technology that lets you create and design your branded storefront. You want this to be extremely easy to use and have a ton of design options. After all, no one's expecting you to be a coder.

The website builder is just one piece of the puzzle. A good ecommerce platform should also let you:

• Host your website
• Analyze data and see what your customers are actually doing
• Manage shipping and orders
• Run marketing campaigns
• Sell in physical stores too, if that’s your thing

Even if you don’t need all of that right now, picking a platform that does more means you won’t have to deal with the nightmare of switching later. Your platform should grow with you.

Step 5: Nail your online business' brand

Branding is your whole identity. It’s the vibe that runs through your photos, your copy, even the way you talk to customers.

Here’s what to think about when pulling your brand together:

• Your mission and values: What do you stand for? What makes you different? Are you promising luxury, affordability, sustainability, or just the best damn products on the internet? Whatever it is, your values shape how your online store looks, sounds, and feels.
• Your online store name: Your name is often the first thing people see, so make it memorable. Use your own name, go bold with something totally abstract, or keep it literal and straight-to-the-point (And yes, there are domain name generators that can throw ideas at you when your brain’s fried).
• Your logo: Think of your logo as the shorthand for your brand. It’ll pop up everywhere. Keep it simple, recognizable, and something you won’t cringe at in five years.
• Photos that tell a story: Great photos show how your products fit into someone’s life. Lifestyle shots make people think, I need that. The good news is that you don’t need a £5k camera anymore. A smartphone works fine.

You don't need your brand to be perfect, but you do need it to be consistent. When setting up an ecommerce business make sure, as a business owner, that you know exactly how you want it to look and feel to potential customers.

Step 6: Get your biz officially registered

Here’s the unsexy truth: depending on where you live, what you’re selling, and how you plan to run your store, you might need to do a bit of admin.

Why bother? Well, for two reasons:

1) It keeps your personal assets safe

2) It makes you look legit in the eyes of customers.

Basically, it says: I’m not just winging this, I’m running a real business.

Sometimes, if you’re just a sole proprietor selling under your own name, you don’t even need to register. But if you’re planning to grow, here’s what might land on your to-do list:

• Business licenses/permits: Check with your city or county. Some areas want you to have a business license or a home business permit, even if you’re online-only.
• Tax ID number: So you can pay your federal and state taxes (fun, I know).
• Trademarks: If you don’t want someone else snatching your brilliant business name.
• Tax-exempt status: Only relevant if you’re a nonprofit (so probably not if you’re selling pet hoodies for profit).

Choosing your business structure

Here’s where it gets a bit “choose your own adventure”:

• Sole proprietorship: The easiest option. Great if it’s just you, but be warned, your personal and business assets aren’t separate. If your online store owes money, it’s technically you that owes money.
• Partnership: Two or more people running the show. You’ll want a clear agreement so nobody’s arguing over who gets the last slice of profit pie.
• LLC (Limited Liability Company): A super popular choice for small businesses. It separates your personal and business assets, which is basically financial bubble wrap for you.
• Corporation: Overkill for most small stores, but if you plan on raising serious investor cash or going public, this is your lane.

Not the most glamorous step, but it’s the one that makes your online store feel less like a side hustle and more like the real deal.

Step 7: Set up payment processing

You’ve got the products, the store’s looking sharp, now comes figuring out how people are going to give you money. Payment processing makes it easy and safe for existing customers to make online purchases.

First up, you’ll want to compare payment providers. Think of it like shopping around for a good phone plan: you want the right mix of features without getting stung by hidden fees.

Here’s what to keep an eye on:

• Payment methods: People love options. Credit cards, PayPal, Apple Pay, Shop Pay. If you don’t have them, you’ll lose sales.
• Multi-currency sales: If you’re going international, make sure your online store can show prices in a customer’s local currency.
• Transaction fees: They vary a lot, so pick a provider whose fees won’t eat into your margins.
• Security features: Protect both you and your customers.

Most ecommerce platforms come with built-in checkouts. Checkout design is where you either keep people hooked or lose them at the last hurdle with abandoned carts.

Here’s what you can add:

• Accelerated checkout: Options like Shop Pay mean fewer clicks = faster sales.
• Installment payments: Great if you’re selling higher-ticket items. Customers love spreading payments out.
• Customer accounts: Let people save their details so buying again is just one click.
• Required info: Only ask for what you need. Nobody wants to fill out a form that feels longer than a mortgage application.
• Promo codes & gift cards: People love a discount. Make sure your system can handle them.
• Upsells: Sneak in a “you might also like” suggestion at checkout.

Step 8: Hit that launch button

This usually means switching your site from private (aka hidden behind that “coming soon” password wall) to public. Suddenly, the world can see what you’ve been working on.

Your store will never feel 100% perfect (Seriously, even the big brands are constantly tweaking stuff behind the scenes). But don’t let perfection hold you back. Launching, whether it’s a grand opening or just a quiet “soft launch”, is the best way to get real feedback. Actual shoppers clicking around your site will show you way more about what’s working (and what’s breaking) than endless test runs ever could.

You’ll quickly learn:

• Is your checkout smooth, or does it make people rage quit?
• Do customers understand your navigation, or are they getting lost?
• Are people actually buying, or just window shopping?

From this point on, your online store’s a living, breathing project.

Step 9: Shout about your products (aka marketing)

Your store is live - woohoo! But if no one knows it exists, you won’t sell a thing. That’s why your marketing strategy is just as important as your product photos (maybe more, honestly).

Here are the main tools in your kit:

Social media marketing:

TikTok, Instagram, Facebook—wherever your audience hangs out, that’s where you should be posting. Don’t just push products either; mix in stories, behind-the-scenes, and stuff that makes people stop scrolling.

Influencer marketing:

Love it or hate it, it works. Partnering with the right influencer can get your brand in front of thousands of new eyeballs overnight. Just make sure their audience matches yours (A fitness influencer probably won’t help you sell cupcakes… unless they’re protein cupcakes).

Paid ads:

Want traffic fast? Google Ads and social ads can put you right in front of people already looking for what you sell. Yes, they cost money—but they can pay off big if you run them smartly.

SEO (search engine optimization):

By optimizing your store for search engines like Google, you make sure people actually find you when they type in “best trail running shoes” or “cute mugs for gifts”. Sprinkle keywords throughout your product descriptions, blogs, and meta tags so you rank higher over time. Many small online sellers outsource this job!

Step 10: Keep tabs on your stock

Nothing kills the shopping vibe faster than a customer adding something to their cart only to find out it’s out of stock. That’s why inventory management should always be on your radar.

A solid POS system tracks your stock levels in real-time, syncs sales across all your channels (website, pop-ups, even in-person markets), and saves you from living in spreadsheet hell.

Here’s why it matters:

• You’ll always know what’s selling fast (so you can restock before the panic sets in).
• You’ll avoid overselling products you don’t actually have at your online retail clothing business.
• You’ll spot dead stock gathering dust, so you can discount it or bundle it before it eats your storage space.

Plus, many point of sale systems connect directly with your ecommerce platform, so your online and offline sales play nicely together.

Common pitfalls and how to avoid them

Here's what not to do:

Underestimating costs (platform, marketing, inventory)

It’s not just the platform fee. Think marketing spend, inventory, shipping, and unexpected emergencies. Always budget extra because surprise bills will show up.

Choosing an oversaturated niche without differentiation

Selling the same phone cases as everyone else? Good luck. Find your angle (quirky designs, better quality, niche audience), something that makes you stand out.

Neglecting mobile optimization

Most people shop on their phones. If your site looks clunky on mobile, you’ve lost them. Test everything on a small screen before launch.

Poor product descriptions / weak branding

"Blue shirt” just won’t cut it. Write descriptions that sell the product and build branding that feels consistent. People buy stories, not just stuff.

Ignoring legal compliance, taxes, returns

Boring, yes. But skipping this can shut your online store down faster than a bad review. Get your licenses, tax setup, and returns policy sorted early.

Overreliance on one marketing channel

Instagram could change its algorithm tomorrow, and there goes your traffic. Spread your efforts across SEO, ads, email, and socials so you’re not left stranded.

Final thoughts

That's it from us. Our complete guide on how to start an online retail business.

Follow these ten steps and avoid the common mistakes and we just know you'll nail your online store.

Need a hand getting it all set up? Our team at Epos Now has you covered. From website builders that make launching easy, to a retail POS system that keeps your stock in check, to PCI-compliant payment processing and integrations galore, we’ve got the tools to help. 

And, if you don’t want to run a physical store, we also have lots of hardware like receipt printers and a POS cash register.

We hope that you love being an online business owner! Good luck and happy selling.