Ways eCommerce businesses can save money in their first year

, Ways eCommerce businesses can save money in their first year

With so many challenges that new businesses face in the first year of trading, this post discusses ways to make cost savings – from using automation and free resources, to considering costs such as shipping.


Although we can all agree that COVID-19 has been a complete downer for the majority of us personally, in the world of eCommerce, it has created extensive opportunities. Lockdowns and furlough arrangements have allowed entrepreneurs with business acumen the luxury of time to build their companies, or to expand on their existing eCommerce endeavours. For entrepreneurs that have never got past dreaming before, coronavirus has presented a really valuable opportunity to create something from scratch.

We’ve said it before, but setting up a company, and being successful in the long term takes careful planning, and never more so than when budgets are tight in the first year of trading. Although success isn’t guaranteed, by keeping costs to a minimum, new eCommerce businesses can have the best possible chance of success.

Plan your finances carefully

It might be an obvious thing to state, but if you haven’t planned where you are going to use your budget, it is pretty likely that you’re going to spend more than you might expect. If you’re launching your business by putting expenses on your credit card, it can be easy to get carried away – but if your business doesn’t work out, you’ll end up needing to cover those costs personally. Usually, entrepreneurs want to spend as little as necessary in the first year of their business for the best chance of success, but if you need to minimise personal risk as well, this is even more important.

Rather than rushing to get started, plan your costs. This will help you to know exactly where the money is going to go in your business, and will guide your decisions. Spend time making projections about potential income, both in a best case, and worst case scenario. Knowing your costs, as well as your expected income, will enable you to make decisions in a much more informed way.

There is a statistic that has been quoted for a couple of years that 90% of eCommerce businesses close within the first 120 days. The study found that almost a third of those surveyed saying they had run out of funds, with price and costing being blamed for 29% of failures. Plan your finances, set your budgets – and then stick to them.

Don’t rush to invest in stock or warehouse space

To avoid being like that 29% of businesses that fail due to cost implications, you’ll need to think carefully about what you’re actually going to spend your money on. Although it might be logical to think that to sell products, you need to have inventory, actually buying stock isn’t essential.

The DropShipping model has a lot of (often loud and annoying) proponents claiming they earn phenomenal amounts of money inside a month or two, and if you just listen to what they have to say – or more likely, pay them for the pleasure of taking their course – then you can too. For many of those video ads that are talking about DropShipping, they’re working with overseas suppliers, and they’re also spending a lot more than you are likely to want to.

If you can work with UK suppliers that can pack and despatch your orders, you’re much more likely to succeed – because you won’t be facing the challenges that DropShipping from overseas suppliers presents. Using the DropShipping model with UK suppliers means that you spend on inventory only after customers have paid for an order, which drastically reduces the risk of you being left with dead stock or paying for space you don’t need.

Finding UK suppliers that will work with the DropShipping model used to be tricky – especially for online sales as a new business. By utilising a DropShipping platform like Avasam, businesses can find suppliers that have already agreed to work this way, without needing to spend hours researching suppliers. When you’re ready, sign up for Avasam – your 14 day free trial will give you plenty of time to find the products that you want, and to integrate with sales channels that you want to sell on.

Once you have proven the concept of your business, you might decide to invest in stock and have your own warehouse. If this route works for your business, you might still use the DropShipping model – whether it is as a backup, to ensure that you can always fulfil orders, or to test new products before you buy stock.

Automate your business

There are plenty of automated tools that can help you to work more efficiently – such as using social media scheduling tools (so you can batch-create posts, set them and forget them) and connections between marketplaces and supplier feeds.

Placing orders with your suppliers manually can lead to mistakes, updating prices when your supplier does and sending updates to marketplaces with shipping updates just doesn’t make sense. As your business starts to grow and you have more than a few orders each day, it becomes even more crucial to automate those processes. Using a DropShipping platform like Avasam means that those connections can be set up quickly and easily, eliminating the chances that you’ll miss an order, a pricing update that means it isn’t worth selling a product any longer, or sending a shipping update that leads to a customer complaint.

Expand your network

The saying that it takes a village to raise a child is pretty well suited to starting out in business too. There are a number of services that businesses need, so whether the eCommerce business you are building today is your first or not, growing your professional network is always a good idea.

Although the idea of networking might feel uncomfortable, starting out by joining Facebook groups, expanding your LinkedIn network, and contributing to Reddit threads about eCommerce can help you ease in. Online networking isn’t the only way to find contacts that you might want to work with or that may be able to help guide you though. Your local Chamber of Commerce may have regular meetings that you can attend, and could connect you with other local entrepreneurs that may be just what you need, either for advice, or for services such as accountancy.

Use free resources

It used to be the case that nothing in life comes free. But today, there are a fantastic number of free resources that anyone can use – and we’ve talked about a number of them in our previous blog posts. Free tools can include:

Office applications – if you need to work offline, LibreOffice or OpenOffice are great alternatives to paying for a Microsoft Office license, while depending on which email provider you’re working with, you might use Google Workspace or Microsoft 365 to access Word functionality (amongst other applications) within your browser. Note that Microsoft 365 doesn’t give you a license for Office to be installed for free on your PC – it is only available in-browser.

Design tools – paying for Photoshop isn’t the only way to create great design assets for your business anymore. Gimpshop is an open source alternative, while design tools such as Canva can help people without design skills to create images, documents, and social media posts – even video – quickly using templates and drag-and-drop.

PC security – keeping your PC secure is absolutely essential. AVG has long been a favourite for those that don’t want to pay to stay safe online, while Malwarebytes and Spybot can help detect and remove malware and viruses.

These aren’t the only things you’ll be able to find for free – they are just the ones we can think of off the top of our heads! If you find yourself needing a specific type of software, try searching for the name of the software followed by ‘free alternative’ or ‘open source’. Ultimately, don’t forget that Google is your friend! If you need something, ask the question – it is unlikely that you will be the first person to ask, and there are plenty of solutions out there just waiting to be found.

Finally, be sure to stay on top of reading that will help you. Blog posts are freely available and (as you no doubt already know if you’re reading this one) can offer you some real gems of information. If you do no other reading, be sure to check out our weekly posts that round up some of the most useful links for businesses that are DropShipping.

Get creative with your marketing

There are plenty of ways that you can market your business, and your products at relatively low cost. Using social media is the obvious way, since setting up social media accounts are free. Many businesses invest cash in paying for social media advertising, but this isn’t a necessity.

Growing your social media following, creating a feed that looks fabulous and using shoppable posts can help you to succeed, or you might create a Facebook group, or join them to make sales to customers that are already interested in those products – meaning that there is a much bigger chance of making sales. This isn’t the only strategy that could work though, and there are undoubtedly ways that haven’t yet been tapped to their full potential. Consider creating video posts, marketing on TikTok, or finding other opportunities – there are definitely plenty to be found.

Rather than attempting to tell you all the ways to market your business, we’ll stop here. We’ve already published plenty of ideas on our blog, and there are countless more free and inexpensive marketing ideas to be found with a quick search.

Spend time on research

Although DropShipping platforms might make it simpler to find suppliers that are willing to fulfil orders for you, that doesn’t mean that you should try and sell everything that is available on those platforms. To sell well, and to market to the type of customers that want to buy those products, you’ll need to know the products will definitely be of interest.

One of the mistakes that is commonly made by would-be entrepreneurs that end up with a failed business within three months is that they try to sell everything they can source, to everybody. But by attempting to sell too many items, you won’t be able to do a great job at marketing them – so taking the time to understand your products and your customers carefully will help to ensure your success. Once you are selling consistently, then you can start to scale your business by adding more products.

Consider shipping costs

Although UK suppliers may be able to fulfil your orders at a pretty decent cost and definitely faster than overseas suppliers (which your customers will want) you still need to consider shipping costs.

Since shipping is a cost to your business, you’ll need to consider how it is going to impact on your profit margins. Your supplier is likely to pass that cost on to you – so you need to figure out whether you’ll include the cost of shipping in the cost of your products, or if you will offer products at a lower cost and then charge for shipping separately. Customers are used to accessing free shipping on many websites, it is logical to assume that you’ll need to make that available too.

If the supplier that you are working with doesn’t offer shipping at a cost that you can absorb, then you may need to consider whether you continue to work with that supplier. There may be other suppliers that can provide the items that you need, or you may need to offer a range of shipping options. Customers that are in a hurry may be prepared to pay a little bit extra for their order, which could mean opportunities to make a little extra profit.

Be obsessive about your accounting

In business, you need to know exactly where every penny goes, and your new eCommerce business will be liable for taxes. To ensure you’re not going to end up with a fine from HMRC, you’ll need to keep your accounts carefully. Luckily, there are plenty of systems that can help you to keep your cashflow straight. QuickBooks, Xero, and Sage are the three most popular accounting tools out there, but they aren’t the only ones, so choose the best one for your business – and don’t make your decision simply based on price.

Unless you have training in accounting, keeping your accounts and completing end of year returns can get really stressful. Even though you might be tempted to skimp on using an accountant, they are a wise investment to ensure you don’t end up with a fine, but that isn’t everything an accountant will do for you. They’ll also help you to understand where you can make cost savings, and help you to identify sources of funding that may be available to you.

Many local accountants will be able to provide the services that you need at a reasonable cost, but if you need to minimise costs further, it is possible to find accounting services online through freelance websites. If you decide to take this route, bear in mind you may not be able to get as much support as you would from a local company, and you almost certainly won’t be able to visit them in person. Make your decision based on what you need, balanced with what the business can afford.

The Takeaway

The first 12 to 18 months of starting any business is a challenge. But with strong preparation, you’ll be able to give your eCommerce endeavours the best possible chance of success, and let’s face it – all that effort will be worth it when you’ve built a business that can help to support you and your family.

Choosing the right tools, getting your contacts in place and above all else, carefully planning each aspect of your business will give you the best possible chance of success. When you’re ready to source your products, sign up for Avasam – costs are low and there are thousands of products available for you to source and sell, with connections to major sales channels available too.

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Avatar for Dawn Matthews
Dawn Matthews
Dawn has worked in technical and customer supporting roles for over 20 years. Most of her career was spent in technical services at top rated UK universities, which has given her a keen eye for detail. A lucky escape led her to the field of eCommerce in 2017, and she’s never looked back. Dawn studied in the field of social sciences with the Open University, achieving an MSc in Forensic Psychology at the same time as working two jobs. She regularly applies principles of psychology from her studies to her work, and outside of her role at Avasam she is busy writing her second book. Follow Dawn on LinkedIn at www.linkedin.com/in/dawn-matthews

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