Practical Ecommerce

The real costs of starting a web store

“Opportunity is missed by most people because it is dressed in overalls and looks like work.” – Thomas Edison

Although there are many ways to get an ecommerce store off the ground, one of the most common solutions is to use one of the many popular web-based software-as-a-service solutions such as Volusion, Magento, Shopify, Bigcommerce, and 3dcart.

There are many advantages to pursuing this strategy, including the fact that you get the attention and assistance of an experienced support team, a range of integrated tools to help you boost your sales and marketing, and the confidence of knowing that you’re using a system that is also used by thousands of other merchants.

Newcomers to the world of online retail, however, can still encounter some pricey surprises. Virtually all of the major providers of ecommerce platforms make a big deal in their marketing presentations out of the relatively low monthly costs of their services, the comprehensive nature of their offerings, and the ease of setup when using their systems. Often the presentation makes it look like you can get everything that you could possibly want or need for under $100 per month.

Is that true? In my experience, it really isn’t. This isn’t to say that the actual costs are incredibly high. But they are often substantial and ongoing, and make the real costs of owning a web store much higher than advertised.

Design Costs

Virtually all of the major vendors of SaaS — software-as-a-service — ecommerce solutions make a big deal out of the many web store design templates that they make available for free with a paid subscription. Frequently these are presented in the form of a design gallery that features the templates at work in the form of the main pages of hypothetical stores.

It’s tempting to look at those templates and get excited about them — imagining that your store is going to look as good right out of the gate and without much additional work or expense.

It will not. Every store template is a combination of many, many elements and to look good as a whole those elements need to work together. Elements like logo design, product photography, banner design, typography, background and frame color, button design, navigational structure, and a host of other decisions impact each other.

The truth is that I’ve never seen a really great web store design that was entirely fabricated out-of-the-box using the raw materials from a stock template. And actually even purchasing a premium template only helps a little; often you’re still back to needing the assistance of a designer and photographer to get the really finished look that you’re after.

The companies that provide the tools can also assist you with design — for a cost. And frequently there is also a network of independent designers who can be hired to assist you in getting a finished and professional look. But this will cost you additional money and take more time than you might have predicted.

You will find that this is an ongoing cost, as well. Even a great design will be something that you will want to “freshen up” from time to time. As you become more familiar with the store’s HTML structure and page relationship you can do some of that work yourself for free, but you will often want to hire an outside design professional to do sections of the work for you.

SSL Certificates

In order to engage in the encrypted and secure transfer of data between computers over the Internet, it is necessary that you make an additional investment in purchasing and then renewing a valid SSL certificate from a trusted and established vendor such as Norton or GeoTrust.

All of the major ecommerce system providers offer a free, shared SSL to their clients, but you’re soon going to want to ditch that solution for a paid upgrade to a private SSL that you control.

The reason is that the free version will direct your customers to a URL that is somewhat different from your main web store URL. In the case of 3dcart, for example, if your web store’s URL were Ajax-systems.com, then the shared URL for secure transactions would be Ajax-systems.3dcartstores.com. Although this might not seem like such a big deal, it can be a confidence-killer for a certain portion of your site visitors.

Upgraded private SSL’s have other advantages, too, including extended validation and visual clues that that transaction is secure, which can boost conversions.

How much will this cost? You can expect to pay anywhere between $100 and $1,000 per year to meet your ongoing site security needs.

Payment Providers, Merchant Processing Costs

Not only is there the issue of site security, but there is also the related issue of being able to accept and process credit cards. Setting up your payment solution is different from just setting up a web store, and it is something that needs to be considered carefully.

At a minimum, you can (and should) offer solutions like PayPal and Checkout By Amazon. PayPal in particular is easy to set up and the integration with your new web store will be nearly effortless.

But if you want to extend on your ability to take payments from customers by accepting credit cards directly, you’re going to have to add your own fully integrated merchant account, including a payment gateway.

Setting up an account isn’t difficult, but it also isn’t easy and automatic, and it starts with completing an application and going through an evaluation period. Expect this process to take at least a few days, and it might include a phone interview or even a site visit.

You can expect to pay ongoing fees related to credit card processing every time a customer makes a payment, and you’re going to pay those same sorts of fees when using PayPal or Checkout by Amazon, as well. But there are also other fees you can expect to pay, including monthly usage fees and setup fees that are not related to the amount of money you process through the account. You can expect those monthly fees to be anywhere between $30 and $100, plus transaction fees of between 1.8 and 3 percent, depending on a range of factors.

Bandwidth – The Hidden Cost of Success

This one might really sneak up on you. Software-as-a-Service providers are selling bandwidth as much as they are selling everything else. In fact, after you get out of the first few pricing tiers in most ecommerce programs, the only thing that you’re paying more to get is additional bandwidth.

With a small business just starting out, 5 GB to 10 GB of bandwidth is going to be just fine. You’re not going to have so much traffic that this is going to present much of a problem for you or your web store. But as you grow you will find that bandwidth is something that you’re thinking about all the time. You never seem to have enough of it.

How big a deal is this? Consider the fact that Volusion’s Pro Plan offers 10 GB of data and costs $75/month. The Premium Plan, in turn, offers 35 GB of data but costs $135/month. Once your web store gets going, you will find that it is actually quite easy to need more than 10 GB of bandwidth to meet your ongoing needs.

The day that happens your basic subscription fees will jump by $60 per month as you switch from the Pro Plan to the Premium Plan. That’s an 80 percent cost increase based just on rising bandwidth needs.

At my web store, Stardust Memorials, we use over 100 GB of bandwidth per month, every month, and I’m on an enterprise-level plan with 3dcart. We’re getting close to needing to upgrade yet again to the next service level due to nothing other than our increasing bandwidth needs.

We’re currently paying several hundred dollars every month for our plan. When we started out we were paying around $35 per month for our service. Most of those increases were due to nothing more than ongoing and growing bandwidth needs.

Other

We pay for lots of other things, too, on a monthly basis. In some cases we pay for services that are included in our basic ecommerce package, but for one reason or another, we prefer the version that we can get from an outside vendor.

For example, 3dcart offers a newsletter-marketing tool, integrated email tools, CRM tools, live chat tools, order-processing tools, and a version of a product feed management system. They’re not bad tools, and might work fine for you and meet your needs well.

In our case, we have found that we prefer to use outside solutions in each instance. In the case of newsletter marketing, we prefer Constant Contact. In the case of email, we prefer Gmail. In the case of live chat, we prefer Olark. In the case of a CRM, we prefer Freshdesk. In the case of order management, we prefer ShipStation. In the case of managing product feeds, we prefer GoDataFeed.

With the exception of Gmail, there is a monthly cost associated with each of these tools. And even Google Apps for Business has a cost associated with it, if you want to go down that road. None of the fees are very high, but collectively they add a few hundred dollars every month.

Conclusion

The cost of owning and operating a successful web store is much more than just taking a free trial and then paying $30 a month for a service package. This is important to consider when you’re starting out down the long road to creating your ecommerce dynasty. The good news is that, if you’re successful, the costs are much lower than they would be if you invested in a traditional retail storefront in your hometown. But they are real costs, nonetheless.

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Comments ( 15 )

  1. Yelena from SureDone March 30, 2014 Reply

    Great advice for new and existing eCommerce start ups.

    I would also add the cost of getting traffic as another considerable expense in launching your own web store. Optimizing for search engines, creating content or running PPC ads is vital to gaining momentum.

    I will be sharing this blog with our customers!

  2. Jordan Lindberg March 31, 2014 Reply

    Hi Yelena! Thanks for sharing the info! Like you say, people often fail to consider the substantial cost of marketing and promoting their website. In fact, I was going to do a followup column next month on that very topic. I think that sometimes folks have an unreasonable expectation about how fast they can get solid organic search results for their site, or even about the value of high-ranking organic results, these days. Good point!

  3. Robert March 31, 2014 Reply

    Jordan – Thanks for pointing out ShipStation!

    • Karl Pawlewicz April 23, 2014 Reply

      Jordan – another ‘thank you’ for mentioning Olark. Glad you find the platform helpful!

  4. Bill Rowland April 1, 2014 Reply

    All your points are valid, but I suggest looking at not from a cost perspective but a revenue perspective. It’s easy to focus on cost, but what will the extra bandwidth and services bring? Hopefully if you’re able to convert well and offer a good product then any business owner wouldn’t mind having those increased costs.

  5. Jordan Lindberg April 1, 2014 Reply

    Hi Bill, I agree with you. These are investments which, like any other investment, are worth it, if they pay off, and I don’t spend too much time fretting over those costs myself.

    Actually my point wasn’t so much that the return-on-investment was poor or unreasonable but that — for many who are just starting out in ecommerce — the costs involved can be a surprise. SaaS vendors are quick to advertise the low-cost of introductory pricing for their services and it is easy to conclude that your total cost is going to be in that “under $100 per month” range. As you know, that isn’t true.

  6. Jordan Lindberg April 1, 2014 Reply

    Hey, Robert, no problem. We love ShipStation!

  7. David Callaway April 2, 2014 Reply

    Hey Jordan,

    Great article — valuable things to keep in mind for anyone thinking of starting an online store. I work for Bigcommerce, and wanted to address a few of your points:

    SSL: We definitely recommend switching to your own SSL certificate once the cost becomes feasible, but we have plenty of successful clients who continue to use our shared SSL and still see high conversion rates through checkout. Maintaining your own domain on checkout and getting some of those trustmarks you mentioned are important for scaling a business, but I think getting your own SSL can be deferred for quite a while if needed.

    Payments: As you mentioned, we recommend that all our clients offer PayPal plus other payment options. But we don’t necessarily think you need to go right to your own merchant account and traditional payment gateway. Newer, all-in-one payment solutions like Stripe and Simplify Commerce work really well for the majority of our clients. They’re easy to set up and usually don’t have setup fees, monthly fees or termination fees: Just a simple transaction fee. As a business grows, a merchant account and traditional gateway might make sense because you have more latitude to negotiate rates.

    Bandwidth: I can’t speak for other SaaS e-commerce platforms, but Bigcommerce doesn’t charge for bandwidth on any of our plans. As you mentioned, we found that it became a major hassle for our clients and could force them into a plan they may not have needed at the time, just to get the additional bandwidth. Instead, we’re trying to base our pricing on the features needed as a business grows.

    In general, we’ve found that if you’re just starting out, it’s best to choose a lower-priced plan that might not be as feature-rich, then upgrade as your business grows and you need access to those richer features. That way you can keep costs as low as possible until you can afford to invest a little more each month. For instance, we’ve found that once clients get to where they’re making $2,000 in sales each month, upgrading to get our Abandoned Cart Saver feature usually pays for the upgrade and then some.

  8. Jordan Lindberg April 2, 2014 Reply

    Thanks for these comments, David! Excellent notes …. I’ve been using Stripe myself and really love it. I agree with you that one great strategy is to start with something like Stripe knowing that the transaction fees are higher than you will want to pay as you grow, but it really gets you going — which is the critical part. You can come back and negotiate with a processor later based on your demonstrated sales volume, which is a way to get a better rate.

    The fact that BigCommerce doesn’t charge for bandwidth is HUGE and a strong competitive advantage for you guys. I work with a development and integration team at eFulfillment Service that loves BigCommerce, by the way. From the research that I’ve done, your team is in that top group of available technical selling solutions on the market these days, and your pricing model is really cool.

  9. carolyn harrington April 2, 2014 Reply

    Hi Jordan

    Great article that covers the majority of costs. I would also put in a monthly fees for maintaining your site.

    Lastly, I would put in an analytics platform cost as well. The analytics in the backend of shopping carts are extremely limited and inaccurate.

    Thanks for the article.

  10. Jordan Lindberg April 3, 2014 Reply

    Hi Carolyn,

    Analytics is a great topic … the standard free platform is Google Analytics + Google Webmaster Tools, which I find works for what I need it to do. Like you say, the built-in analytics tools are not always so great.

    I don’t have actually that much experience with the larger paid analytics tools like Clicky, Webtrends and IBM Coremetrics. My sense is that for small retailers, Google Analytics has more than enough horsepower for what you need.

    I do use Moz and SpyFu quite a bit, which is something like an analytics engine, though it is used for SEO and competitive intelligence purposes more than anything else.

  11. Angela Guzman April 4, 2014 Reply

    Hi Jordan, thanks again for mentioning GoDataFeed!

  12. JS Beminder April 11, 2014 Reply

    I’m using PayStand. I like the ability to post products to my Facebook, Twitter and Pinterest accounts. Have you had any experience with PayStand?

  13. Jordan Lindberg April 11, 2014 Reply

    PayStand is one of those cool companies that appears to be doing everything right … I’m glad you brought them up because it almost seems to good to be true … it’s a very robust all-in-one sort of system that I think might be the model for future ecommerce platforms. It’s worth checking out!

  14. Sharon Moore July 22, 2014 Reply

    This article is really an eye-opener into the true cost of a website start-up, and the ongoing expenses associated with same.

    Thanks for sharing your experience and knowledge. I will keep your article for future reference in my favorites.

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