The global E-commerce market is expected to reach $5.55 trillion in 2022. The number is expected to scale in the coming years, with borderless eCommerce becoming a profitable option for online retailers.
With the changing industry and customer demands, there’s a great demand for professional E-commerce distribution businesses to handle the supply chain demand and deliver an excellent customer experience.
But how to start your E-commerce distribution business?
What are the challenges you might face with the E-commerce distribution business?
Let’s find out.
Table of Content
What is E-commerce Distribution?
An e-commerce distribution channel is a path through which goods and services flow from producers to consumers. The primary goal of a distribution channel is to make services and goods available to consumers most efficiently and effectively.
E-commerce distribution is done using relevant E-commerce channels like online marketplaces, direct sales, and third-party retailers.
The purchasing and selling of goods are done over the public network, and the supply chain process is handled using different strategies to ensure that the product reaches the customers within the estimated time.
E-commerce distribution businesses need to handle the packaging, inventory, warehouse management, transportation, marketing, and other segments of E-commerce transit.
With the rise in online sales, E-commerce businesses need to meet customers’ expectations, build customers’ loyalty, and achieve E-commerce distribution results.
You can set up a tailored distribution process based on your E-commerce business type. You can either focus on selling solely to individuals, in bulk, or with a combination.
How Does It Work?
Operating an E-commerce distribution business, you must set a minimum limit below which you won’t sell your products to your clients. The customers can place the order from the E-commerce website, and you start the shipment process.
The products should be available in your inventory and stored safely in your warehouse. You should set up a smooth transportation process to ensure the products reach your customers on time.
The eCommerce distribution should focus on delivering an excellent experience to meet customer expectations.
Main elements of the E-commerce distribution process
Different vital elements combine to set up an ecommerce business distribution network. Have a look:
- Online E-commerce portal
- Storage or distribution centers
- Transportation and shipment
- Customer support
These are the necessary elements to ensure you unlock the true business potential for your business ecommerce customers. You must get these basic points right to streamline your E-commerce distribution operations.
Now that you have sorted the basics, let’s understand how to start a professional E-commerce distribution business.
How to Start an E-commerce Distribution Business?
Starting an E-commerce distribution business takes more than registering with the state’s governing authorities. Here are the top steps you must follow.
Step 1: Effective planning
Planning your E-commerce distribution business can set a strong foundation for your business success and ensure you streamline your business operations to achieve your business goals.
You must plan a few basic segments of your E-commerce distribution business, like:
- Who is your target audience?
- What are the operational and startup costs?
- What’s your profit, and what will be your product prices?
Multiple ecommerce distribution starts from their home office with a limited storage space to control the startup cost and increase effectiveness.
Once your office space is set up, you must check your inventory. Depending on your products, wholesale costs, and the minimum order requirements.
Opting for a dropshipping method can help eliminate the need for a large inventory, but it can lose control over your transportation and customer experience.
Plan different business aspects of your E-commerce distribution business like marketing, financing, payroll, inventory, shipment, etc.
You can also create a business plan booklet to help and guide your workforce to follow a dedicated path for unlocking your vision and mission.
Step 2: Form a legal entity
Once the business plan is ready, you must create your E-commerce distribution business into a legal entity. The common business structures are a partnership, sole proprietorship, limited liability company, and corporation.
You can establish a legal business entity like an LLC or corporation to protect you from being held liable if your E-commerce distribution business is sued. The basic structure ensures you follow the rules and protocols the governing authority sets for effective business operations.
Step 3: Manage your taxation
You must register for different state and federal taxes before you execute your E-commerce distribution. You can apply for an EIN to start with the tax registration process.
Go to the IRS website to get your free EIN and understand the special benefits of having EIN for your LLC business structure type.
Depending on your business type, you can select how your E-commerce distribution business should be taxed.
Hire financial professionals or consultants from different experts in the industry to resolve your tax problems and issues to streamline your business process and management.
Step 4: Set up a bank account
Create a dedicated business bank and credit account to separate your finances from your business transactions.
You can also avail of a higher credit line once you operate using a business bank account. It can also help you with personal asset protection and ensure you don’t max personal and business accounts.
You can make your tax filing easier and avail the best interest rates to scale your E-commerce distribution business.
Also, learn more about opening a net 30 account where you can establish and build business credit to increase your cash flow. With a dedicated net 30 account, you can buy goods and repay the amount within 30 days.
It can help you streamline your distribution channels and ensure you don’t face financial challenges to slow your business growth.
Apart from net 30 accounts, you can apply for business credit cards to increase your trust with financial institutions. Building a company’s credit history can be useful for you to raise funds in the future for business growth.
Step 5: Acquire necessary permits and licenses
Failure to acquire licenses and permits can result in hefty fines and cause your business to shut down. You must consult with the state’s governing authorities to understand the basic requirements of procuring the required E-commerce distribution operating license.
You can bypass the legal troubles, be eligible for business loans, and manage large-scale distribution consignments.
Step 6: E-commerce distribution business insurance
Just as with permits and licenses, you also need business insurance to operate lawfully and safely. Business insurance can protect your company’s financial well-being if your business faces losses.
You can choose different insurance policies for your business to avoid business risks. If you’re unsure which type of risk you want to safeguard, you can opt for general liability insurance.
It’s the most common business cover to help you run your business operations with no worries. You can also opt for Workers’ Compensation Insurance to protect your employees from accidental or other damages.
Step 7: Acquire all the basic resources
Now that your business foundation is set, it’s time to step up in the distribution industry and meet customer demands.
But you need essential E-commerce distribution business resources to ensure customer satisfaction and deliver an excellent experience to your business customers.
You must ensure sufficient inventory to handle the demand in the market. Based on your order minimum requirements, target market, and the type of products, you must finalize the minimum barrier inventory in your warehouse.
You must have strong tie-ups with the manufacturers who can provide you with the best rates and help you streamline your distribution network.
Create a solid ecosystem to handle inventory management and minimize friction.
A professional E-commerce website provides you the platform to increase your business presence, connect with clients, and increase your business revenue.
Hire professional website developers who can handle your E-commerce website and integrate the best marketing strategies to channel your target audience towards your website.
Use paid and organic marketing techniques to convert your prospects into leads and long-term customers. Remain transparent with your prices to increase your business effectiveness and ensure you stand out from the rest.
Once you increase your distribution network and expand your operations from your home office, you need to hire the best workforce to handle different operations of your E-commerce business network.
Train your employees to deliver their best results to enhance your business productivity. Streamline your operations and scale your E-commerce business to achieve desired business outcomes.
Purchase the required heavy vehicles to transport the consignments to your customers. Ensure you don’t invest a lot in purchasing vehicles which can shrink your funds and restrict your investment options.
Analyze your business requirements and customer demand and finalize your vehicle investment options to make informed business decisions.
Choosing the right technology to streamline your E-commerce distribution business is highly important.
You must integrate a professional inventory management system, warehouse management, employee management, and a dedicated route planner like Upper to automate your business operations and build customer loyalty.
Handle different marketing channels, online marketplace, and digital transformation using a dedicated CRM and stand out from other small businesses.
Many distributors outsource their online management and delivery operations tasks, but they increase their shipping costs, compromise their customer data, and risk their supply chains.
There are multiple challenges you might face that you should overcome.
Some Major Challenges of E-commerce Distribution
Different challenges of E-commerce distribution can disrupt your business operations and restrict your growth. We have filtered the top challenges you should avoid.
1. Inventory management
Keeping an inventory check can be time-consuming and hectic. Focus on automating the inventory management process and ensure a professional software provides your well-vetted details about your inventory.
Keep your inventory up-to-date to enhance your business productivity and never run out of stock.
2. Delivery complexities
It’s hard to rely on manual route planning and ensure on-time product bulk delivery to your clients. You can increase your overhead costs, lose your potential customers, or hinder overall user experience.
Focus on integrating a professional route planner to streamline your delivery operations and ensure on-time deliveries. Our team has selected the ideal route planner for your E-commerce distribution business.
How Can Upper Help You Get the Desired Start?
Upper Route Planner is an end-to-end route planning and optimization software which can help you streamline your delivery operations and manage your delivery workforce effectively.
Once the order is placed by your customers, you create tailored and optimized routes to reduce fuel costs and ensure maximum profitability with the delivery process.
The software helps you deal with the rise in demand for E-commerce distribution orders without increasing the operational cost of handling increased deliveries.
The optimization algorithm of the software simplifies the route planning and optimization process to ensure on-time deliveries for your wholesale orders.
Access the FREE trial to streamline your E-commerce distribution delivery business and boost your revenue and profit.
Choose Upper for Your E-commerce Deliveries
Take advantage of Upper Route Planner and reduce your route planning time for your multi-stop deliveries. Create a delivery schedule in advance by directly importing your CSV file.
Based on the product pricing and the size of the orders, you can set your prices. Many businesses in the distribution industry price their products close to 5% to 40%, with 20% being the average.
With the increased demand, E-commerce distribution can make great profits in the coming years. The industry can offer small-scale businesses a chance to earn over $35,000. Once the business scale expands, the earnings can also rise up.
Setting up a solid business foundation is important. You must ensure you follow different marketing strategies and streamline your business operations to become a profitable business. Analyze your competitors or different ecommerce store, audience, and industry trends to adapt and change your business ecosystem or distribution center for desired business outcomes.
Launching an E-commerce distribution business and scaling it to new heights is not simple; you require improvements, consistency, creativity, and dedication to strengthening your position in the industry.
Now that you know the steps to start and scale your E-commerce distribution business, you can choose a professional route planner to ensure on-time deliveries for your wholesale E-commerce orders.
Integrate Upper Route Planner and handle the complexities during the execution of your distribution delivery operations and streamline your route planning process.
Try the FREE trial to experience the same.