4 Unexpected Pitfalls to Setting Up an Online Store

4 Unexpected Pitfalls to Setting Up an Online Store

One of my goals the last two years was to explore possible side hustles ideas to generate some (relatively) passive income. This was not to replace my existing job (which I enjoy), but rather because I like learning and exploring new things.

Last year (2017) turned out to be focused on researching, brainstorming and figuring out how best to use my existing skills and where I would need to learn new things for a successful side hustle. In the end, I decided on three initial areas of focus (turns out ideas weren’t the hard part really). 

One, a niche site focused on content, SEO and advertising. That site, treadnut, all about treadmills, is up and running, but still needs more work to integrate the ads and add more content. 

Second, I decided to re-launch my author site and write more books. That is a lot easier to type out than actually do! Some of the groundwork on the website redesign was done last year, but the actual writing and re-launch will be the focus later this year. 

The third idea and the focus of today’s post was to explore an ecommerce store with a physical products. That effort is now live at Kick & Cadence, a store selling t-shirts and other merchandise aimed at runners, a group I know pretty well.

There are now a lot of products, plug-ins and platforms that can make getting a store up and running online much easier than it was ten or even five years ago. That’s not to say it’s simple and painless and anyone should do it. There are a lot of decisions to be made and a lot of pitfalls that can potentially cost you a lot of time, money, customers, or all of the above.

 

The Platform

Let’s assume you’ve picked the product or service that you’re going to sell. The next step is deciding where (your website provider) and how (fulfilling orders) you are going to sell it online. Services like Shopify, Woocommerce, Magento, and BigCommerce have made it possible to get a store online without programming experience and with little tech knowledge. That’s not to say you can go in cold. I’d argue you need to be pretty web savvy to set-up and  use any of the shopping cart services effectively.

For me, with physical products planned, the choice quickly came down to Shopify versus Woocommerce. Both offered pros and cons. Making a very broad generalization, Shopify is like Apple, it’s mostly a closed system and Woocommerce is more like Android, open and accessible, for better or worse.

Shopify is an all-in-one solution. You get hosting, themes, support, some third-party plug-ins for a monthly cost. This is probably the fastest way to get a store up and running for a novice. You’ll just pay a bit of a premium. Shopify offers 3 pricing tiers, the cheapest is $29 dollars a month for your own domain.

Woocommerce is a plug-in for WordPress. Its big advantage is that it is free. You purchase hosting on your own, install WordPress (most hosts will do this for you) and add Woocommerce. You still have the monthly hosting fee, but it is likely going to be less than Shopify.

Now, with that discount comes less hand holding. Through plug-ins and extensions, it is comparable to Shopify and can probably make it do more, but if you run into problems or issues, you are going to have to go looking for answers yourself. There is a vibrant community out there but it’s up to you to navigate it.

I ended up going with Woocommerce because I was familiar with WordPress, confident I could hack through any tech issues, and wanted to keep costs low. That’s not to say costs were non-existent. My biggest expense was paying $99 for a coupon/discounting add-on that comes standard with Shopify. If the store grows, I’ll also likely have to pay-up as I grow out of some of the freebie plug-ins. That would actually be a good problem to confront.

 

Accounting

Keeping track of receipts, costs and, hopefully revenue, in a separate business checking account is almost a no-brainer when making a serious start at a business. I went with Capital One Spark Business. It offers no monthly fees, no minimum deposit requirements and unlimited free transactions.

The other thing to consider is how you want to structure your business. This will affect your taxes and any personal liability you might have. An S corp makes a lot of sense for most small business given the liability protections it provides and some tax benefits.

The simplest structure is a sole proprietorship. You are the owner and operator and responsible for liabilities. Business expenses and income are included with your own personal taxes.

Given I am just starting (and I don’t expect my shirts to catch fire or poison anyone), I opted for just the sole proprietorship to keep the paper work simpler and keep costs down. It was more than $500 dollars to incorporate in Massachusetts, plus a recurring $500 dollars each year. That was without any additional legal fees for a lawyer or agent to help you with the filing.

 

Taxes and Shipping

Is there a more dread word in retail than taxes? It’s definitely not the best part of starting a business. Just the opposite.

If you’re selling a physical product you are going to have to collect sales tax in at least one state, the state where you are located (unless it’s one of the 5 states without sales tax). If you are working with a drop shipper that has warehouses in other states (called a nexus in tax lingo), you will need to consider if you have to collect taxes in those states, as well. 

If you determine you need to collect taxes in a state, you will need to register in those states to collect sales tax and you are then responsible to reporting and filing with those states. 

You will also need to set up your shopping platform to accurately collect and itemize those taxes during the checkout process.

Woocommerce allows you to set all of this up, but it is probably the most complicated part (not the interface, just understanding when and how much to collect).

The other alternative is to use a plug-in. The most popular one appears to be TaxJar (it’s also a great source of tax information), but, as slick and time-saving as it appears, there are fees associated with using it. Another cost to consider if you are trying to keep to a budget.

 

Physical Address

Have you ever noticed the address at the bottom of many promotional emails or newsletters? It’s there for a reason. It’s the law in the U.S. The CAN-SPAM Act of 2003 requires that any business sending promotional emails, among other requirements, must have a physical location cited in the email. The fines are big, too, so the risk of just pleading ignorance and leaving it off didn’t seem like a good strategy.

I don’t expect a lot of physical mail, so I ended up going with a virtual mailbox. For $10 a month, I get an Boston address I can use on any newsletters or promotional emails (I’ll also use it with my author site). Any mail gets scanned and sent to my email and I have an additional option to ship the actual letter or package on to my house.

That seemed like a fair price to pay for peace of mind and staying on the right side of the law.

 

In the end, it took about 45 days (this was part-time work in the evening/weekends) to get the Kick & Cadence up and running. I learned a lot about shopping platforms, dropshipping, printing, taxes, payment gateways, shipping and spam law. You will too if you decide to take the plunge into online retailing. Nothing guarantees success, but I hope this gives you a leg-up on some of the decisions you’ll need to make as a potential store owner.

 

MIKE'S WINDOW

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