The Online Retail Business Model

The retail business model is slightly more challenging to start than an advertising based business model, but I suspect it isn't anything you can't handle. The reason it's a little more difficult is because, in addition to a web site, you also need shopping cart software (so people can shop) and an online merchant account (so people can pay you by credit card).

The good news is those things aren't really very complicated. There's a section on each coming up so you can learn a little bit more about them. Now let's move on to general retail business information.

The first step when you decide to open a retail business on the Internet is deciding what you are going to sell, keeping in mind what we talked about earlier regarding passion and carving out a niche.

It can be something you purchase and resell, it can be something you make, or it can even be something you create. For example, rather than giving away this guide for free we could instead charge $20 for it and sell it on a retail web site.

Here are some other important things to keep in mind when deciding on a product.

Margins: Basically the difference between what you purchase a product for and what you sell it for. Margins are very important. If you can purchase a product for $9 wholesale but can only sell it for $10 online, your margin is only $1 per product. Think about that for a second. To make even $400 a month you'd have to sell 400 of these products. And that's not even counting money you'd have to spend on advertising, your server, packaging materials, etc.

But, if you can purchase a product for $3 and sell it for $12 (a $9 difference), then we're getting somewhere. Selling those same 400 products would result in gross income of $3,600 ($9 per item x 400 items).