More than 2 billion people buy goods and services at ecommerce stores every year, accounting for $4.9 trillion in annual sales worldwide.
Ecommerce stores are expected to have a 25% share of all retail sales globally by 2025.
So, how much can you make with an ecommerce store?
Ecommerce stores can make $12,000 monthly profit within one year of inception. The key factors that determine an ecommerce store’s profitability is the product or service niche, the type of ecommerce store, and its business model.
Ecommerce is the virtual equivalent of the retail industry, so there’s much more than just a store, a seller, and a buyer. As an entrepreneur, you can tap into one or more of the lucrative facets of ecommerce stores. Read on to know how you can make a steady monthly profit from your ecommerce store.
How Ecommerce Stores Can Make $12,000 Monthly Profit
Like every major industry, ecommerce stores have innumerable stories of abject failures and unprecedented successes.
But it’s unwise to pay much heed to either extreme. Also, there are some runaway hits that don’t survive the momentum in the long run, so I’ll leave them aside.
I’m sharing with you two case studies to substantiate why and how you can make around $12,000 monthly profit in less than a year.
Of course, you can aim for much more, but I’ll be conservative with my estimates.
The first case study is Beardbrand.
- Founded in 2012, the company rolled out its first products in 2013.
- In less than 12 months, Beardbrand clocked a monthly revenue of $120,000.
- If I consider a nominal 10% net profit, Beardbrand made a cool $12,000 a month.
- Note that Beardbrand was an almost unknown brand and ecommerce store in 2013.
- Cut to 2019, Beardbrand clocked an average of $20,000 in sales revenue every day.
- Today, the brand has 215,000 Instagram followers and ~2 million YouTube subscribers.
Beardbrand tapped into a community interested in grooming products and transformed into an ecommerce empire.
Second case study is MixedMade
Similarly, MixedMade, the second case study, showed how a niche, whether products or services, doesn’t always have to be out of the world.
- MixedMade’s first product was Spicy Honey.
- The startup infused raw wildflower honey with chili flakes.
- MixedMade sold $170,000 worth of hot sauce in just 10 months.
- I’ll again use the nominal 10% net profit margin estimate.
- MixedMade turned in an average monthly profit of nearly $2,000.
That sum may not seem much, but it was almost a decade ago, and the brand was an unknown startup. Today, MixedMade is known as Bushwick Kitchen, a phenomenally successful brand.
There are many similar success stories of ecommerce stores, including:
- Beer Cartel
- Finch Goods
- Hello Matcha
- Common Projects
- Diamond Candles
- Traveler Collective
- Dollar Shave Club
- Black Milk Clothing
- National Parks Depot
While Bushwick Kitchen capitalized on initial press coverage and public relations, Beardbrand and National Parks Depot rode on the power of the enthusiastic communities online.
Similarly, Traveler Collective harnessed the potential of user-generated content.
As you can observe, each of these ecommerce stores found a niche and utilized a rewarding way to drive their sales. Sometimes, the niche can be as straightforward as the green tea line of Hello Matcha. Likewise, the niche may be outdoor gear, as is the case for National Parks Depot.
The Fundamentals for Ecommerce Stores To Make Monthly Profit
Not too long ago, ecommerce was essentially online retail. Presently, it’s an industry comprising many sectors and niches, including but not limited to the following:
- Online stores
- Online sellers
- Affiliate networks
- Digital advertising
- Content marketing
- Search engine optimization
- Social media management, etc.
Ecommerce stores aren’t homogeneous. So, a specific business plan or financial estimate won’t work for everyone. Also, the dynamics are different for startups and entrepreneurs exploring the various sectors and niches within the ecommerce industry. Let me elaborate on these elements.
#1 Ecommerce Stores and Online Marketplaces
Broadly, you can divide ecommerce stores into a few groups, such as:
- Large online marketplaces: Amazon, eBay, etc.
- Popular ecommerce companies: Etsy, Shopify, etc.
- Big box ecommerce stores: Walmart, Best Buy, etc.
- Ecommerce stores of brands: Nike, Walgreens, etc.
- Small to medium online stores: Beardbrand, Fugoo, etc.
As an aspiring ecommerce startup and entrepreneur, you must select the type of online store you want to develop. Some companies explore multiple avenues, so you can tap into a global or nationwide marketplace while running your official and independent online store.
These avenues obviously don’t have the same financial returns. All online marketplaces and the ecommerce companies offering turnkey platforms charge fees or commissions. Such fees aren’t in the equation if you have an independent ecommerce store.
However, creating an independent online store isn’t as easy or lucrative for everyone as the plug-and-play option offered by giant marketplaces and ecommerce companies. The online or global marketplaces offer a massive potential audience from the get-go, albeit at a cost.
Hence, your financial calculations or estimated monthly profit must factor in these costs.
Take the example of Amazon’s charges for ecommerce stores or online sellers:
- Amazon’s Individual plan levies a $0.99 charge per unit sold.
- Its Professional plan charges $39.99 a month, regardless of the sales figure.
- Plus, Amazon has referral fees of 8% to 15% for every unit you sell on the site.
- Sellers using the Fulfillment by Amazon service must pay additional fees.
- Also, there are optional storage fees and other paid services, such as advertising, etc.
Let me briefly highlight the monthly costs and other fees of selling on Shopify.
|Shopify Plan||Monthly Cost||Transaction Fee||Other Payments Fee|
|Lite||$9||2.9% + 30 cents||2%|
|Basic||$29||2.9% + 30 cents||2%|
|Shopify||$79||2.6% + 30 cents||1%|
|Advanced||$299||2.4% + 30 cents||0.5%|
*Shopify Plus monthly charges and transaction fees are based on sales volume and revenue.
Therefore, your net monthly profit for your ecommerce store will depend on your gross operating margins and all these costs involved. You must also account for all the other essential services you’ll need, which I discuss below.
#2 Manufacturers, Wholesalers, and Distributors
Ecommerce hasn’t replaced the traditional ecosystem, whether supply chain or logistics. T
here are manufacturers selling directly online, but many also go through the conventional avenue of wholesalers and distributors.
And there are the usual logistics, i.e., warehousing, shipping, etc.
Your monthly profit and how you can maximize it as an ecommerce store fundamentally rests on the part of the spectrum you’re in. If you’re a manufacturer, you can sell your goods through a marketplace like Amazon or an ecommerce company, such as Shopify.
Also, you can create an online store from scratch and sell exclusively through the official site or across platforms.
Apart from the larger players, you may explore a few ecommerce stores or platforms catering to different niches.
For instance, you can sell handmade items on Poshmark.
A manufacturer doesn’t need to be a big organization with patented products. You can sell anything of value online.
Having said that, many ecommerce stores harness the potential of dealing with manufacturers or wholesalers.
Bulk purchase is still the simplest and most effective bargaining chip. And when you secure an enormous markdown, your selling price can have a significant operating profit.
#3 Online Sellers and Dropshipping Opportunities
Suppose you aren’t a manufacturer but want to venture into the ecommerce business. One way to do that is as an online seller, the digital or virtual equivalent of a brick and mortar retailer. As an online seller, you can take up as much or as little responsibility for fulfillment.
You can get into contracts with manufacturers or wholesalers. In some cases, you may need to deal with distributors if regional or local players are involved. Nevertheless, your ecommerce store becomes the online seller of the goods you choose, and you’re responsible for fulfillment.
Alternatively, you can have contracts with the manufacturers or wholesalers and use platforms like Amazon for fulfillment. So, you can use their infrastructure and other services to take care of everything from storage to delivery. Your ecommerce store’s priority is sales and monthly profit.
A third scenario involves dropshipping. Suppose you don’t have contracts with manufacturers or wholesalers, and there’s no infrastructure for packaging, warehousing, etc. In such cases, your ecommerce store sells the product, but the dropshipping company does everything else.
You don’t handle the products at any stage of the entire process. The dropshipper is responsible for all logistics, including delivery. You’ll have a cost for the product and the associated services, and your ecommerce store can decide the selling price after accounting for your operating profit.
One risk of dropshipping is a lack of control, especially on product quality. Since you’re selling an item, your ecommerce store is liable for returns and refunds. While a dropshipping program may have support services, you don’t get to do any hands-on quality check of the products.
That said, the entire operation is pretty straightforward. Suppose you choose a product that has a net margin of $10 for your ecommerce business. Since you’re only working on selling, your objective is the number of units you wish to hit for a desired monthly profit.
A $10 net margin requires you to sell 1,000 units for a $10,000 monthly profit. However, such a product is likely to have a base of repeat customers, so you can build on your past successes. Besides, your ecommerce store isn’t going to sell only one product in a category or price point.
#4 Affiliates, Digital Advertisers, and Content Marketers
Regardless of the type of ecommerce store you conceive, your business and monthly profit will require a multipronged advertising and marketing strategy. The most common tactics used by almost all online sellers include the following:
- Affiliate programs
- Digital advertising
- Content marketing
None of the three is free, so your financial calculations should factor in the potential costs. Such costs are usually reasonable.
But if your financial plan doesn’t account for these unavoidable expenses, the overall costs of operating an ecommerce store can threaten your monthly profit.
Take affiliate programs as an example. Affiliate marketing is among the most popular ways to generate a passive income.
Generally, affiliate commissions can range from less than 5% to 30%.
However, 10% to 20% is the standard in many cases.
Also, many affiliate programs have a fixed rate as commission. These arrangements depend on the type of product, service, and campaign. Amazon, for example, has distinct commission rates for its various products. Here are a few rates:
- Games: 20%
- Beauty: 10%
- Music: 5%
- Books: 4.5%
- Fashion: 4%
- Furniture: 3%
- Television: 2%
Like affiliate programs, digital advertising and content marketing have recurring costs.
You may go for pay-per-click advertising, use text and video content, and explore other opportunities. All such campaigns should feature in the operating costs to secure a net monthly profit.
In other words, you can select a $200 price tag for a product you source at $150 through a dropshipping program.
That gives you a $50 operating margin.
This $50 has to account for all your ecommerce store expenses, including the following:
- Ecommerce platform cost
- Referral or commissions
- Online transaction charges
- Applicable service fees
- Online advertising costs
- Content development, etc.
Let me reasonably hypothesize a total cost of $25 per unit that is worth $200 when you sell on an ecommerce store.
That leaves you with $25 or 50% of your operating margin in this example.
So, you should sell 480 units to secure a monthly profit of $12,000.
Now consider the same scenario as a manufacturer.
If you’re the manufacturer, that $150 cost for dropshipping already includes an operating profit.
You must pay for shipping and fulfillment, of course.
But the ecommerce store’s $25 margin is a surplus to the pre-existing gross profit.
Say your gross profit as the manufacturer is $50 for the wholesale price of $150.
Add that to the profit of $25 as the ecommerce store owner.
Now you have an operating profit of more than $50 after accounting for taxes, which means you have to sell 240 units for the same net gain.
#5 SEO, SEM, and Social Media Marketing Campaigns
Ecommerce stores should know their target audience.
So, as an ecommerce entrepreneur, you must choose the products that will resonate with the community you’re trying to pursue. As you secure that, you need a comprehensive business plan, including financial estimates.
Weigh your options regarding the types of ecommerce stores and platforms. Work on the pricing depending on your role, i.e., a manufacturer and seller, dealing with a wholesaler, or online store working with a dropshipper, etc. Finally, plan the entire branding campaign.
The secret to a rewarding and steady monthly profit with an ecommerce store is a combination of the following factors:
- Reasonable pricing
- Reliably high quality
- Sustained branding
While digital advertising and affiliate programs contribute to branding, your ecommerce store will also need search engine optimization and social media marketing. You can hire an SEO expert for such requirements and factor that cost into your operating margin or gross monthly profit.
Ecommerce stores making monthly profit boils down to securing the net operating margin, which is why I’ve explained the various costs you must bear in mind. Also, you must invest in essential branding, advertising, and marketing to sustain a steadily increasing monthly profit.