Start an Online Store Without Inventory [3 Low-Risk Business Models]

By Pro Web Design

2021-08-31 03:27:24

Traditionally, launching an online store meant buying inventory upfront, investing in warehouse space, and handling shipping, service, and logistics. That level of investment is risky, particularly for new sellers who don’t have the capital to get up and running.

These days, new platforms and business models allow prospective sellers to launch and grow an ecommerce store without ever dealing with inventory, which greatly reduces the amount of risks and upfront costs involved in the process.

In fact, more and more stores are using low-risk business models such as dropshipping, 3PL, and print-on-demand.

In this article, we’re going to show you how to create an online store without inventory, one step at a time.

Let’s dive right in.

Step #1: Select a Business Model

Select a Business Model

If you’re wanting to start your first ecommerce business, you’ve probably looked into various business models. Here are some options for starting an online store without inventory, along with some pros and cons that come with each.

Dropshipping

Dropshipping is popular with ecommerce brands as it removes many of the risks and startup costs associated with launching a retail store. The idea is, store owners purchase products from a third-party seller, who then ships the product directly to the customer. Ecommerce sellers don’t handle products directly, eliminating the need for warehouse space and allowing them to save time otherwise spent on fulfillment and inventory management.

Pros:

  • Low barrier-to-entry
  • No inventory management
  • Change up your inventory with minimal risk
  • Potential source of passive income
  • More time for marketing/other tasks

Cons:

  • Super competitive
  • Lower profit margins (mainly fees from dropshipping companies)
  • No control over your supply chain
  • Little control over the customer experience/product quality

Print-on-Demand

Print-on-demand is an ecommerce business model that works in a way that means you don’t hold any inventory.

All you do is create designs to put onto white-label products (like t-shirts, mugs, books, etc.) and work with a print-on-demand supplier who will fulfill orders for your products on a per-item basis.

You don’t pay anything until a product is bought, after which the print-on-demand company will handle everything; from printing, packaging, and shipping the product out to the customer.

Print on Demand companies such as Printful (Printful Review) and Printify have printing warehouses in various locations worldwide so you can have your products printed and shipped locally to the customer.

So if you’re an artist, writer, designer, or entrepreneur looking to sell physical products then print-on-demand could be a great option for you.

Pros:

  • Unlike other no-inventory models (such as dropshipping) the shipping times with POD are much less as you can work with global printing companies
  • You can create products very quickly and have them online ready to sell in no time at all
  • Your product suppliers handle all the shipping and fulfillment so don’t have to worry about any of that
  • As the risks and investment are so low you can easily test out various designs and niches to see what works best. You only ever pay if someone buys one of your products
  • It can become a great source of passive income (after you put the initial work into it)

Cons:

  • You need to create (or get) designs to sell on your Print on Demand products. Which can be hard for less creative people
  • The profit margins are lower than other business models as you’ll be sharing the revenue with the Print on Demand companies that you work with
  • You also can only customize the products so much. Different POD companies offer different products but you essentially have to use the products they have in their range

All in all, it’s fairly risk-free, efficient, and fun, with tons of niche markets that you can capitalize on. For this reason, we think it’s a great model to create your first online store. Still, many of the tips that we’ll tackle below are still good practice for most online stores.

3PL

If you do have room in your budget to invest in inventory, another option is 3PL (third-party logistics). The 3PL model is a bit different from dropshipping or print-on-demand in that it does require store owners to purchase inventory before they can sell it.

But, unlike the traditional ecommerce model, store owners outsource warehousing and fulfillment to a third-party provider.

Pros:

  • Someone else handles time-consuming admin tasks
  • You don’t need to invest in warehouse space
  • Shipping and fulfillment are handled by experienced pros

Cons:

  • You do need to spend money upfront to get started
  • You lose some control over your inventory and service experience
  • Introduces risks — labor strikes, turnover, natural disasters — that can increase transportation lead times
  • You’ll need to manage inventory from afar

Step #2: Getting Started with Your Online Store

Getting Started with Your Online Store

Researching & Choosing Your Niche

Before setting up your online store, you need to specify which niche you’ll be positioning your products in.

Your niche refers to the specific market that you’ll be selling to. You can specify your niche based on a combination of aesthetics (e.g. cutesy or minimalist), type of product (e.g. t-shirts, home decor), or theme (e.g. wellness, witty one-liners).

Although you can always expand or narrow down your niche later, this will form the foundation of your branding.

When it comes to choosing your niche, it’s best to have a balanced approach — consider what you’re naturally drawn to as well as what will be profitable. Which products and industries are you already passionate about? This will make you more motivated to keep researching and creating new designs.

It also gives you plenty of instant insider knowledge since you’ll already have an idea of online resources for that niche, from top social media accounts to exciting updates. You can try listing down five of your favorite niches based on this.

Next, you’ll boil it down to one specific niche by examining the existing demand for each niche that you listed. There are multiple ways to do this:

  • Analyze what potential competitors are doing so you’ll know how you can stand out from the crowd
  • Use keyword research tools like Ahrefs and SEMrush to check whether a lot of people are searching for products in your niche
  • Visit print-on-demand marketplaces like Etsy, Merch by Amazon, or Redbubble and look at which designs draw in a lot of customers
  • Check out Google Trends or read up on news related to the niche to get a big picture of what people are interested in

By thoroughly doing this for each niche that you listed, you’ll be able to pinpoint which niche has the most potential opportunities for you.

Understanding Your Target Audience

Once you’ve settled on a niche, you can go one step further by understanding your target audience.

Before building your store, it’s ideal to have a good understanding of who you’re selling to, from their needs and desires to their pain points. You must know enough to be able to build a thorough customer profile. This includes basic information such as their gender, age, and income level along with psychological characteristics such as their hobbies and values.

Of course, you won’t be imagining this from scratch.

Doing research online gives you more than enough material to work with. A few ideas for starting your search:

  • Check out your competitors’ social media pages. Who follows them? Who engages most frequently with their posts?
  • Read reviews of similar products. Look for common themes — what do people like? What did they feel was missing from a particular product? What pain points did they mention in their review?
  • Visit forums and online communities where your target audience is likely to hang out. Examples include subreddits, LinkedIn or Facebook Groups, or Twitter threads — places where people speak freely about topics related to your product/niche
  • Conduct surveys and interviews. Ask people within your target market about related products that they’ve purchased, how they find products and research different options, what channels they use, and what’s missing from the current market. The list doesn’t end there but this should help you figure out what to sell and how to reach the right audience
  • Do market research to spot big-picture trends. Finally, you’ll also want to zoom out and get a better sense of what’s trending within your niche. Collecting real-world data will help you build a much more realistic customer profile, and you’ll also get surprising insights along the way

Choosing Products to Sell

If you’re using the dropship model, you might try using some of the following methods to identify which products to add to your store:

  • Browse other online stores in your niche. If you’re selling home decor products, look at what kinds of items other shops are offering — are any brands or items especially hot right now?
  • Head over to Google Trends or Wish.com. Both sites can help you find out what products people are searching for, allowing you to capitalize on emerging trends before everyone else gets in on the action
  • Check out crowdfunding sites, too. Another idea is looking at sites like Kickstarter for inspiration. Look at which campaigns/products are getting the most traction to get an idea of what might do well in your store
  • Join dropshipping communities. Look for online groups within your niche — whether that’s fashion, beauty, home & garden, whatever. You can join these groups on Instagram, Facebook, Reddit, etc. to learn more about in-demand products

If you’re going the print-on-demand route, you might sell items like:

Print-on-demand is an effective business model for creators (think bloggers, podcasters, YouTubers, etc.) with a built-in fanbase. Here, choosing what to sell has more to do with understanding your audience. For example, if you’re offering shirts and tote bags, you’ll want to consider the fabrics, fit, and style your audience prefers. Look at the other brands they follow,

Print-on-demand also allows more “traditional” ecommerce brands to customize products with their name or an original design. In this case, you’ll want to research what types of items are trending in general, similar to how you might approach selecting dropshipping products.

Step #3: Choosing Your Platform

Choosing Your Ecommerce Platform

You don’t actually have to create your own store to start selling with print-on-demand. You can often just list your products on platforms like RedBubble and Zazzle, and utilize their existing audience to try and generate sales for your items.

That’s all well and good, but if you want to increase your profits and create your own brand, the best option is to create your own online store.

With all of the ecommerce platforms and print-on-demand marketplaces out there, it can be tricky to choose which one to build your store on. Below is a roundup of the top platforms for online stores.

Shopify

Who Shopify is for: People who want to get up and running ASAP and/or have limited website design experience.

Shopify (Shopify Review) is the top choice for many ecommerce entrepreneurs. This full-fledged platform comes with everything you need to build and run an online store, from thousands of theme templates to multiple payment channels. Shopify is so easy to use that you can get your online store up and running in as fast as a few hours — no coding needed.

They also have more than 4,000 apps in their app store, including a multi-language store translator, integration with Google and Facebook ads, and SEO image optimizers. If you’re selling your products on other channels such as Amazon and Etsy, there’s likely to be an app that can coordinate your inventory.

The main benefit of Shopify is that it makes your workflow much smoother because of how much it automates many key business processes. On the other hand, it’s the most expensive out of the platforms listed here. Aside from your monthly subscription, you can rack up costs fast as you keep on adding more apps and specialized features.

WooCommerce

Who WooCommerce is for: People planning on running their online store through WordPress. It’s a bit more technical than something like Shopify or BigCommerce and you’ll need to vet third-party apps yourself.

Although Shopify is among the most well-known ecommerce platforms, more online stores actually use WooCommerce. Out of the top 1 million ecommerce sites, 28% use WooCommerce, while only 19% use Shopify.

The difference between the two is that WooCommerce isn’t a standalone platform. Instead, it’s a plug-in that runs on WordPress websites.

Unlike Shopify, WooCommerce is also free and open-source. You’ll still have to pay for your WordPress website’s hosting and security, but you can turn it into an online store with no extra charges using WooCommerce. For added features such as integrations with Google Analytics and HubSpot, you can check out the WooCommerce extensions store, which offers both free and paid apps.

Using WooCommerce may help you save money while still having access to top-notch features. The downside is that there’s much more legwork involved. You’ll have to set it up yourself on your WordPress site’s back-end, and it’ll take you longer to get your store up and running.

Etsy

Who Etsy is for: People who want to sell online but don’t want to build and manage their own website. Etsy is a marketplace, not an ecommerce platform, so you’ll need to follow platform guidelines for product listings and will be subject to additional fees.

While Shopify and Woocommerce both enable you to build your own website, Etsy is an online marketplace where you simply create a page for your store then start selling from there.

From there, potential customers can find your store under Etsy’s categories or through Etsy’s search engine. Since Etsy can direct customers to your store based on what they’re searching for, there’s less pressure for you to go all-out with marketing.

Assuming that you’re only using Etsy’s basic features, you won’t have to pay a monthly subscription either. Fees are charged per listing and for sale transactions instead.

The tradeoff is that you won’t have as much control over your store and you’ll have to play by Etsy’s rules. You also have limited design options since your store will only appear as a page on Etsy. However, Etsy also has a website builder called Etsy Pattern, where you can build a website with its own domain.

Step #4: Creating a Branding & Marketing Strategy

Creating a Branding and Marketing Strategy

Just because you build it, doesn’t mean people will come on their own. You need to develop a branding and marking strategy to increase the traffic to your online store, generate sales, and build a community of loyal customers.

Branding

Since you already have your niche, target audience, and main platform in mind, you can move on to establishing your branding.

Here are some questions that you’ll have to tackle:

  • What is your unique value proposition?
  • Which problem is your business trying to solve, and why does that matter for your target audience?
  • What is the “why” behind your online business? Beyond earning money, why does this business exist?
  • How would you describe your business? Try to nail down five adjectives that best sum up who you are and what you do
  • What personality do you want to convey, and what kind of tone will you use for your messaging? Are you going for a professional, authoritative tone? Or more of a cool vibe?
  • What’s your company story?

You can formulate a paragraph answering all of these in around five sentences. This will serve as your guide when you’re creating your business name, logo, website, and other branding materials. Regardless of the platform that you’re using, your online store must have a cohesive identity.

Marketing

Marketing is the lifeblood of your online store.

No matter how great your products are, marketing has a massive impact on your sales and long-term success.

Since marketing is always evolving, it can be hard to know where to start. Rather than haphazardly applying different strategies, it’s better to come up with a systematic approach.

Obviously, marketing an online store is a multi-faceted strategy involving many different channels and types of content — but here’s a general outline for how you might approach this:

  • Decide on a realistic, measurable goal. For example, you might want to sell 300 t-shirts within your first three months
  • List down the marketing channels that you’ll focus on. Because you’re still starting out, it’s advisable to focus on only two at a time. The right combination of marketing channels also depends on your specific brand, so you’ll have to do some testing to figure out which channels yield the best results
  • Brainstorm which campaigns you can implement for each marketing channel and how you’ll determine success. What are your goals for each channel? How will you track your results?

You can then implement your marketing plan while constantly keeping your eye on the data and making adjustments as needed.

Marketing Channels

Your initial marketing plan might involve the following:

Content & SEO

If your online store is running on its own website, then ramping up your content and SEO efforts is crucial.

At the very least, your website should look good, with visually appealing product photos and comprehensive FAQ sections that explain the ordering process clearly and provide detailed product descriptions so people know exactly what they’ll get.

Your entire website should also be optimized for SEO, with every product page and description containing relevant keywords.

Beyond getting your product pages in order, it might be worthwhile to start a blog. It’s essential to create a content marketing strategy, and also to have plenty of content ideas to get your blog going.

Social Media

For print-on-demand businesses, visual platforms like Instagram, Pinterest, and TikTok are ideal for showcasing new designs in front of existing fans and attracting new ones.

More traditional ecommerce stores using dropshipping also benefit from these channels though you might follow a slightly different approach. In this case, you might include shoppable tags and collections, collaborate with the brands featured in your store, and use remarketing ads to bring back past customers when you have new items in stock.

Additionally, make sure you consider what users expect from different social media platforms. Instagram users often have online shopping on the brain when they scroll through their feed, so they may be ready to order directly from the platform when they discover something they love.

Pinterest is more about discovery or gathering ideas, while TikTok is more about capturing audiences’ attention with entertaining content. YouTube, on the other hand, is ideal for showing people how a product is used — either through tutorials or reviews.

There are plenty of online tools such as t-shirt and book mockup generators that make creating designs for social media campaigns a breeze. Sites like Canva and Placeit are also great options.

Paid Ads

While both content and social media campaigns are technically free (though both involve a significant time investment), you can boost traffic to your online store with paid ads. Your choices here include paid social (Instagram, Facebook Twitter, Pinterest, TikTok, YouTube) as well as Google Shopping (search) and Display Ads (remarketing on other websites).

If you’re planning to be active on Instagram, you can start with Instagram ads. Since these ads target users based on their demographics, lifestyle, and the accounts they follow, you can quickly get your designs in front of hundreds of people right away.

Beyond these marketing channels, there are many more that you can try out, from email newsletters to partnering with influencers.

However, when you’re still in the initial phase of your online business, the channels above are likely to give you the greatest benefits right away while keeping your costs down. As your business grows, you’ll be able to execute more complex marketing strategies across multiple platforms.

Conclusion

In the end, it’s important to understand that even these “no-inventory” business models require a lot of time and effort to grow into a reliable source of income.

Dropshipping, print-on-demand, and working with 3PL suppliers are all viable options to launch an online store with minimal risk and reduced startup costs. However, you’ll want to carefully weigh the pros, cons, and fine print of each option before you commit.

With a thorough marketing plan, strong branding, and a data-driven product strategy, building a thriving online store — with little upfront investment — is well within reach.

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