How to Start an Online Retail Business With a Tiny Budget

If you have ever wondered how to start an online retail store, this guide is for you! Anyone can start an online business, and it can even be affordable.

Let’s face it, starting a physical storefront can be pretty expensive. Between monthly rent, utilities, inventory, and employees for extra help, even a small shop can cost more than $30,000 to launch. These steep startup costs for a brick-and-mortar business don’t make financial sense for everyone.

Just because you may not be able to afford to launch a retail space doesn’t mean you need to let it crush your entrepreneurial spirit!

Instead, turn your attention online, where the costs of starting and operating a retail business are a small fraction of physical stores. An online retail store is so cost-effective that you can start one even with the tiniest of budgets.

Four Types of Online Retail Stores You Can Open

Whether you want to work with e-commerce website builders or set up a shop through an already established website like Amazon, these are some of your options. 

1. Online Retail Store

A boutique is a smaller store that sells specialized or niche products for a specific clientele. For example, a boutique could carry formal wedding attire or glitzy gowns for pageants. There are even boutiques for fashionable pets.

Boutiques tend to do well in the online retail space because of the narrow market they serve. Instead of competing with mega online retailers like Zappos or Zulily, boutiques offer their customers select products like lingerie, jewelry, wedding gowns, or baby gear.

Once you select a niche for your boutique, there are several ways you can find vendors and suppliers. Your initial inventory budget will help determine your best buying options to ‘fill’ your store. But, even if you’re working on a very tight budget, you can explore the possibility of dropshipping partnerships where you won’t be billed for products until a customer makes a purchase.

Setting Up Shop: Once you’ve decided where and how to source your boutique inventory, it’s time to get your store up and running. There are several low-cost e-commerce platforms to consider. One of the most popular is Shopify, an all-in-one e-commerce solution.

With your monthly Shopify membership, you receive everything you need to be a successful boutique owner, including a fully customizable storefront, payment processing, inventory management, and marketing tools.

If dropshipping sounds appealing, be sure to read Christina Gillick’s story and learn how she started a successful jewelry business using this method.

2. Amazon FBA

Amazon is the world’s largest online retailer, with almost $386 Billion in net sales in 2020 alone. You can get a slice of that multi-billion-dollar pie when you sign up to sell via Amazon FBA.

Fulfillment By Amazon, commonly called FBA, is a program that lets you sell on the largest e-retailer without having to worry about housing inventory, picking, packing, shipping, or customer service concerns. You just need to focus on finding inventory, listing items for sale, and sending them to Amazon. That’s it! Once you hand off your inventory to Amazon, they take care of the rest.

This can include either finding a manufacturer and producing products yourself or reselling products that are already made.

Scouting Inventory for FBA

For the budget-conscious online entrepreneur, Amazon FBA is a great platform to start earning without a lot of upfront expenses. A popular way to get started selling on FBA is by scouting sale and clearance items at your local stores and selling them for a profit on Amazon.

This process, called retail arbitrage, allows you to purchase bargain-priced items that fit within your budget. Once your first wave of products sells, you can use the profits to scout and buy even more items as you continue to grow your Amazon storefront.

Want to find out more about Amazon’s FBA program? Check out Tracy’s story and how she’s earning $1,200 a month with this program!

3. Etsy Shop

You don’t have to be a handmade artist to run a profitable online retail shop on Etsy. While many shoppers head to Etsy to find one-of-a-kind creations, it’s also a popular marketplace for unique vintage finds and art supplies!

This e-commerce platform involves minimal setup, and they offer the added benefit of advertising your store (for an extra fee, of course). For some people, this can be easier than going through a website builder.

Of course, you can certainly take your crafting hobby full-time as an Etsy seller. But if you enjoy frequenting thrift stores and flea markets, you can also flip your vintage finds for profit on Etsy!

And because it’s free to open your shop, it couldn’t be more affordable to get started. You only pay small fees when listing an item and after an item sells.

How To Get Started On Etsy

Whether you decide to turn a thrift store hobby into a vintage boutique or opt to sell art supplies to crafters worldwide, there are some things to remember about starting a retail business with Etsy.

To start, treat your virtual storefront as if it were a brick-and-mortar business. This means keeping inventory on hand that is cohesive! If you source your art supplies wholesale, keep items in stock that go together, like sticking with a specific art form or craft, i.e., sculpting, knitting, scrapbooking, quilting, etc.

And when it comes to listing your products for sale, remember to take great pictures and keyword optimize your listings! Etsy is very keyword-driven. Potential customers will search for what they’re looking for, and Etsy may or may not display your products in search results depending on how well your storefront and listings match a query. The better you optimize your listings, the more ‘foot traffic’ your storefront will receive.

When in doubt, turn to the Etsy Seller Handbook for advice and inspiration to help you successfully run your shop. You can also check out Melanie’s success story and tips for being successful on Etsy.

4. Social Selling

Although starting an online retail business is a lot more budget-friendly and far less labor-intensive than setting up a shop in person, it can still be an overwhelming process for beginners.

If you’re feeling unsure about navigating website ownership or aren’t keen on the idea of inventory management, you might want to consider social selling.

Direct sales meet online boutique; social selling is a way for entrepreneurs to start an online business with added support. It also happens to be an excellent way to get into retail for the budget-savvy seller.

Take Cabi, for example. When you sign up as a Stylist with Cabi, you pay a startup cost to launch your very own fashion business. This seasonal fee gives you samples from the fall or spring collection, marketing materials, your own customizable online boutique, and access to an online ‘office.’ Plus, because you’re part of a major brand, you get plenty of training, support, and mentoring to help you succeed, no matter what your goals are as a merchandiser.

Another company to check out is SimplyFun. They sell award-winning educational games and toys for children. With SimplyFun, you pay a small startup fee to get started and can sell via your website, email marketing, Facebook, and more. It’s an excellent opportunity for parents and educators!

What makes social retail businesses, like Cabi and SimplyFun, different is the emphasis placed on providing personalized services and high-quality products. There are a growing number of direct sales companies that embrace this approach to online selling giving budget-conscious entrepreneurs a chance to focus on what they love while building their business. To see what it’s really like running a direct sales business, check out this interview with three different Cabi Stylists.

Frequently Asked Questions About Starting an Online Store

Below are some questions people often ask about starting an e-commerce store. If you don’t see your question in this list, please leave it in the comments. 

What is SEO, and how important is it for a small business?

As a business owner, you should be at least familiar with SEO. SEO stands for search engine optimization.

This refers to how your store ranks on search engines. For example, if you sell personalized coffee cups, it will bring more people to your online store if they Google “personalized coffee cups” and your website shows up on the first page. 

SEO is only important if you have an independent website or a Shopify store. If you sell through Etsy or Amazon, your individual page won’t show up on Google as easily, so SEO isn’t as important. 

If your site appears on the first page of Google, it could mean more e-commerce business because people will be more likely to buy when they are specifically searching for the products you sell.

Some things that will affect your SEO rankings include your domain name and whether your website uses keywords that people use when searching for your products. For example, more people will search for “personalized coffee mugs” than “totally awesome coffee drinking cups.” 

When you post blogs on your website, you have a chance to rank for those blogs. Write about things like “how to wash a personalized coffee mug,” and you could rank for that question as well. 

Looking at Google Trends is another way to find out what people are looking for. Then, you can describe your products in a way that will be exactly what they are looking for.

Should I participate in influencer marketing? 

Some online influencers have millions of followers, and it might be tempting to pay them to promote your products to their audiences. Before you decide whether to spend this money, small business owners should examine whether their products match the target audiences of the online influencers. 

For example, an online retailer that sells sunglasses to a Gen Z audience will be more likely to recover a higher return on investment (ROI) than if they sold walkers or canes. 

One of the key parts of social media marketing is audience statistics. Every social media channel – Twitter, Facebook, Instagram, Pinterest, or TikTok – has information about the followers of that account. Ask for this information before you hire an influencer to ensure that their followers will be interested in your products. 

What are payment gateways?

To set up and run your retail store from your website, you need to know about payment gateways. These mechanisms will read and transfer payment information from the customer to the merchant’s bank account. 

Some of the most well-known examples of payment gateways include PayPal, Stripe, and Square. Each payment gateway comes with a different fee for the use of its service. 

Here is a clearer example of how a payment gateway works. The customer clicks your website and adds products to their online cart. They check out and pay with a credit card. The payment gateway accepts the payment, processes it, verifies that the funds are available on the credit card, and then accepts the payment. Then, the payment gateway will deposit the money into your bank account. 

Payment gateways protect online retailers because they assume the risk, and all you have to do is set up the codes to work with them. 

Is it profitable to have an online store?

There are many things to consider when you are trying to decide whether something is profitable or not. The easiest way to determine profitability is to subtract the expenses from your income. If the number is positive, it is probably a profitable venture. 

Some of the most common expenses associated with an online retail store include: 

• Permits
• Facebook Ads
• Licenses
• Payment Gateway Fees
• Online Retailer Fees (such as Etsy) 
• Third-Party Ads (like Etsy or Amazon ads) 
• Shipping Costs 
• Manufacturing Costs 
• Hosting Fees (if using your own website)
• Freelance or Employee Paychecks

Even after adding up all the expenses associated with setting up and running an online retail shop, it can be very profitable. This is especially true if you find a niche that no one else is filling and solve a problem a lot of people have. 

Is it a good idea to open an online store?

This is a question you should think about before you go through all the effort to set it up. It is a good idea to open an online store if you have the time and money to invest in it in the beginning. It takes quite a bit of time to get it all started before you begin making a profit. 

You should also make sure you do your research first. What kind of products will you sell? Are these products that people need? Who is your target audience? Is this target audience one that enjoys shopping online? 

Once you answer these questions and know you have a viable business idea, get started and go after your entrepreneur dreams! 

Start an Online Retail Business Without Breaking the Bank

It’s no secret that retail is big business! But as more and more shoppers head online to buy everything from clothes to furniture and even everyday household items, the e-commerce industry has exploded to more than a trillion dollars annually.

This is good news for would-be entrepreneurs who want to cash in on a retail business without the major expenses of a brick-and-mortar store. With the many popular marketplaces and social selling platforms, you too can set up shop as an online retailer without going over budget!

Would you like to start a home-based business, but you’re not sure where to start?

Grab our FREE Simplified Business Plan Template, which will walk you through the questions and steps you need to take to get your business off the ground!

Originally published April 4, 2017. Content updated June 2022.