Wouldn’t you like to have an online store that makes money even when you’re sleeping? Wouldn’t you like to build an online business that appeal to people from all four corners of the globe? Isn’t it nice to set up a business system that pretty much operates on a 24/7 basis?

If you’re excited about the concepts above, you might want to consider e-commerce. E-commerce is a very specific form of making money online. The focus with e-commerce is all about selling. Unlike a blog where you can make money by showing ads or collecting emails, an e-commerce site is very straightforward. People go to that site because they’re looking for particular products, services, or digital items. Once they find what they’re interested in, they fill out a form and send you payment. Everything is done automatically. Everything is done online. You wake up with more money in your PayPal account or online bank statement than the day before. Sounds awesome, right?

Well, unfortunately, if you were to just set up an e-commerce website because of the factors I’ve outlined above, it’s too easy to screw up. It’s too easy to build the wrong e-commerce website and end up with very little to show for all that time, effort, money, and emotional energy you spent. You have to know the basics in setting up an e-commerce website. I’m not talking about a step-by-step process here. I’m talking about basic considerations that enable you to come up with this type of online revenue generation system in a methodical way. Unfortunately, doing things by the seat of your pants is a sure recipe for disaster. It really is.

Whether you have $5,000, $100,000, or $10 million, you can say goodbye to a large chunk of that money if you don’t pay attention to the following considerations.

Build your business around existing traffic, not the other way around

This is probably the most precious piece of advice I can give anybody looking to get into the e-commerce game. You have to remember that building an e-commerce site is not cheap. It’s not as cheap as setting up a blog. A blog is actually one of the cheapest ways you can make money online. You just need to be passionate about a particular subject matter, install WordPress, pay a few dollars for hosting, get a domain, and you’re good to go. It doesn’t take much money. In most cases, you only need to spend less than $200 and you’re in business. You have yourself a working blog and the main thing that determines that you will be successful or not is whether you put in the right amount of time and effort. This is not the case with e-commerce websites.

Depending on your niche, as well as your design parameters and quality targets, simply setting up the e-commerce website can set you back thousands, if not tens of thousands, of dollars. This is serious business. Unfortunately, most people who try to get into the e-commerce place try to play it the same way they would handle putting up a blog. They get all excited about a particular product category and they just slap together a website. They think that just because they are excited about a particular product category that there is going to be a huge amount of people who would automatically be interested in those products that they are offering. This is often not the case. They made the classic mistake building it and they will come. It doesn’t work that way.

Instead, you need to go to where people congregate online. Maybe these are Facebook groups, maybe these are forums, or popular blogs. Whatever the case is, go to those places and figure out what they’re looking for. Figure out what needs they have. Read them very carefully. How eager are they in paying for a solution? Don’t make the mistake of building up a website first, and then scrambling to find traffic. In that situation, you probably will end up paying too much money, wasting too much time, and settling for too little results. Instead, find the traffic and pay attention to their needs. Based on that information, start putting together the concept for an e-commerce site.

First things first, which type of e-commerce player do you want to be?

Now that you have gathered some information regarding a product or service that is in demand you know the places online where these people congregate, the next step is to figure out your identity. Which kind of e-commerce player do you want to be? There are three general ways to play the e-commerce game. You can simply put up a website and let a partner handle everything. That’s right. This partner with handle the products, returns, sales fulfillment, stocking, content feeding, you name it. These are called drop shippers. Some are more involved than others.

The big advantage of drop ship-based e-commerce website is the backend headaches are handled by a partner. You don’t have to hassle with any product fulfillment issues or even content issues. Your job remains simple. Your job is to drive traffic to your e-commerce site. The big disadvantage of drop shippers is the fact that the amount of niches covered by drop shippers are relatively small compared to the amount of niches that they don’t cover. You might be able to find tons of traffic online, but if there’s no drop shipper to hand their needs, then you’re back to where you began.

Affiliate catalog

Affiliate catalog is simply a website put up as a front for a backend solution provider. This backend solution provider is actually another website. They just give you access to their database through a “white label” arrangement. Put simply, you are able to slap on your logo and your custom branding on essentially their website. They are giving you access to their database.

The great thing about this approach to e-commerce is that you save a lot of time, effort, and energy putting up a website. These people already have the products. They already have the pages set up. Your job is to simply come up with a branded look and feel for the front end of their catalog. This system is very simple because when people go to your website and click on a product and buy something, all that fulfillment is handled by the white label backend provider. Your only job, once again, is to drive traffic.

The big downside to the affiliate catalog model is the simple fact that whatever product or services they are offering might not meet the needs of your traffic. That’s the bottom line. Keep in mind that your visitors are looking for those particular types of products, but they’re not looking for those exact same products. Do you see where I’m coming from? Maybe they don’t like the brands. Maybe they don’t like the particular solution. This really is too sad and too bad because these people are looking to buy something. The problem is you put in front of their eyeballs the things that they don’t want to buy. The good news is you only need to work doubly hard to convince them. Maybe you need to offer more content. Maybe you need to work with your white label partner to create better landing pages. Whatever the case may be, you just need to put in the time, effort, and energy to sell better.

Selling your own products

Personally speaking, this is the way to go with e-commerce. However, you need to really cut your teeth on how to sell e-commerce products and services online for quite some time to get to this stage. Once you’re able to do this, then you’re pretty much near the top of the e-commerce food chain. Selling your own products gives you a tremendous amount of control over the things that you’re going to be selling. You also have a big voice in putting together the landing page that people would read before they buy the product. This gives you a higher chance in selling the right product in the right way.

The big disadvantage with selling your own product is that you really have to know what you’re doing. You have to have paid your dues. Like I said, you should have cut your teeth on affiliate marketing and the whole concept of selling stuff online. Jumping to this particular model in the beginning is probably a one-way ticket to losing a lot of money. This is reserved for people who know what they’re doing. The good news is that different people learn at different rates. Some people might take years to get to this stage. You might be that special person that took only a few months. Whatever the case is, you need to learn enough skills to even think of this particular option.

How will you be promoting your e-commerce site?

Again with promotions, just like the actual site itself, there are two ways to do this. You can do it directly or indirectly as an affiliate. Direct traffic means that you yourself or your employees, or outsourced support will be driving traffic to your own site. The other approach would be to get in touch with seasoned marketers and have them drag traffic to your site. If that traffic converts, you pay them a commission. This is the classic affiliate marketing model.

Regardless of what you do, create an email list first

Regardless of which way you choose to go forward with your e-commerce site, create an email list first. The reason should be self-evident. However, just in case you’re unclear on the concept, you need to create an email list because you are able to turn what would otherwise have been temporary traffic into a semi-permanent pool of potential buyers. Not only is this a great way of resurrecting “past traffic” to go to your website, but you’re also working with highly-targeted traffic. The people who would join your mailing list are interested in a specific topic. They’re interested in something that is closely related to your e-commerce site. Also, this relationship tends to be content-focused. Meaning, these people are more likely to take actions on your promotional links if you wrap those links with some sort of content.

This content focus gives you a tremendous amount of control regarding the marketing messages you send to your list. You can also use your list as some sort of “laboratory.” Pay attention to the consumption patterns of your list members. This is a great way to gather customer intelligence. You can figure out which products to push. You can also figure out which ways to speak to the needs of the people interested in your product.

It’s easier to promote your website once you have an active list. This is why it’s important to get the list going first before you get your e-commerce website up. The more of a lead time you have, the bigger your list becomes and this enables you to send out the marketing message once the site goes up. You are guaranteed some level of traffic.

How do you get people on your list?

Give away freebies to get people to join your list. These are forms of digital bribes. You can also offer an auto-responder tutorial system that spans several days. Whatever the case is, you need to give some sort of value for people to join your list.

What do you do once people are on your list?

Run several experiments regarding product offerings. Ask certain questions that test your niche knowledge. Maybe you are unclear regarding certain concepts in your niche that people may not be all that interested in. Maybe you are assuming that people are not interested in a particular type of product when it turns out that there’s a huge need for it. Do you see where I’m coming from?

There of course many ways to do this. There is no one-size-fits-all solution. What’s important is that you send this content, so you can get the kind of feedback and information you need to put your e-commerce site on the right footing. I suggest that you build your list first before you create the website. In fact, the website should be a reflection and the recipient of all the customer intelligence you get from your list.

Reverse engineer your competitors’ e-commerce sites

Now that you have built a list and you’re getting high-quality information from your list members, the next step is to do some reverse engineering. The good news is that regardless of your niche, there will always be other people and businesses who have started before you. A lot of people would think that this is a bad thing. Personally, I think that this is an amazing thing. It’s good news. Why? They have screwed up in the past. They have run into hurdles and they have somehow or someway solved those. If you look at it from this perspective, you are basically looking at your competitors as people who have done your homework for you.

Pay attention to the things that they’re doing right and take note of the things that they are doing wrong. Build on the things that they have done properly and look for ways to solve their shortcomings.

Do a soft launch and use it to fine-tune paid traffic

The essence of reverse engineering is to figure out some sort of industry standard as far as the type of e-commerce site you’re building. Maybe there’s a certain look and feel. Maybe there’s some sort of brand positioning. Pick up on these things and apply these to your e-commerce site. Once you put up the site, of a soft launch and use paid traffic to fine-tune it.

Why paid traffic? Well, you need a lot of traffic in the beginning to quickly test your design. Is it working? Is there room for improvement? Using organic traffic will take too long. Once you’ve run traffic experiments, also make sure you actively tweak that traffic for maximum conversion. Buy and ad, tweak for performance making variations to certain parts of the ad. See if these variations produce an incremental improvement. Keep repeating this process until your ads convert at a fairly predictable level. Once you’ve figured out the “conversion special sauce” scale things up by buying up more ad inventory. If the conversion rate holds up, then you know you have a solid website.

Don’t forget: Keep building that list

We don’t know whether your e-commerce website will ultimately become successful. Sometimes in the online world, things that look really promising at first might peter out later out. The good news is that as long as you’re building up your mailing list you will always win. Why? That mailing list is an asset because these people are thoroughly interested in a particular niche or product. You can then message that list later on when you put up a new website or when you’re pushing affiliate sites.