Published on January 23, 2025 How Much Will It Cost to Start an Online Store?
However, having an online store is quite fulfilling and could generate high returns. Therefore, you must understand the various costs in order to guarantee your success. The costs of starting up an online business vary widely depending on the product types you intend to sell, the complexities in the store, and your business goals. By understanding the different expenses, you would be ready to plan and budget appropriately for your online shop, giving it the best chance of succeeding.
Key Factors that Influence the Cost of Starting an Online Store
There are various key elements in opening an online store, each of which is associated with different costs. Overall, these can be categorized under product costs, website development and design, marketing, operational expenses, and legal or administrative fees.
1. Product Costs
Suppose I wish to develop an online store selling physical goods since I must pay for the production of the items, as well as rent space to keep the items in stock and potentially ship them. When it comes to online businesses, the cost of production commonly takes on a larger proportion and differentiates itself from the other expenses.
Bulk buying can lower costs but incurs additional storage and logistics costs. Dropshipping eliminates the need for terminal inventory but increases unit prices due to an added middleman.
Producing unique or handmade crafts can be expensive due to materials, production time, and labor. Fragile or larger goods, shipping, and packaging also increase costs. These factors make selling such goods unprofitable.
2. Costs Associated with Website Development and Hosting
After you have obtained your products the next thing is to begin the process of building your online shop. Your website will be the main selling point of your business and have to bear features of accessibility, professionalism, and should be able to accept and process payments. This can be done in several ways, and each of them has some attached cost implications.
Website Builder/Platform: When thinking about how to make an online store, there are two possible approaches: using an online website builder which often has an integrated store, such as Ozcart, WooCommerce, Wix, or Squarespace, or developing the website from scratch. There isn’t any coding needed with website builders and prices range from $29 per month up to $299 per month. You can generally choose from various website themes to suit your business needs and website design. Secondly, a web developer can create a new website for a relatively higher price which starts from $2000 to $10000 depending on the layout and compilation.
SSL Certificate: An e-commerce without a secure sockets layer does not exist, thankfully, some of the hosting platforms do provide free SSL Certificates while others don’t. Custom hosting will require the purchase of one, and the costs range from $50 to $200 with an expiration of 12 months. This is necessary to ensure secure transactions.
3. Payment Processing Fees
To collect Internet payments, contact payment processors like PayPal, Stripe, Payoneer, and Square. Transaction fees, including a percentage of the sale and a fixed amount, are charged by these processors. As of 2025, for domestic cards, in the U.S., Stripe charges around 2.9% + 30¢ per transaction, and in Australia, 1.7% + A$0.30, subject to change. PayPal’s fee for the U.S. is very similar, while for Australia it is higher at 2.6% + A$0.30. Some processors require a payment gateway, so consider these fees in your pricing strategy to cover costs.
4. Marketing and Advertising
Navigating more traffic to your online store is vital; however, to achieve that effective marketing strategies have to be applied to reach the target group. There are many ways to market the online store, and each of them has a certain cost.
- Paid Advertising: Google Ads and Facebook Ads differ concerning the competition and effectiveness of the advertisement. On average, for small businesses, it would be something like $200 per month to $1000.
- Social Media Marketing: Advertising products through social media channels, including Instagram, Facebook, and Pinterest is favorable in the low budget category. However, finding the right social media managers is still costly and it ranges from $500 to $2,500 monthly depending on the particular promotions.
5. Operational Expenses
Besides the fundamental setting up of the online store, there will always be ongoing operational costs. Running operations are vital for keeping a business alive each day.
Shipping and Fulfillment: If you are shipping out your items, postage, packaging supplies, and shipping software can add up. Shipping cost will vary depending on how large and heavy your products are and also which shipping carrier you choose. Some owners of an online store decide to ship the orders themselves or hire third-party providers such as Fulfillment by Amazon (FBA) who will charge you $2-$5 per unit for fulfillment.
Inventory Management: Regardless of your dropshipping model or if you manage your own stock, you will need a tool to keep a record of the stock levels, orders, and shipments. Some e-commerce platforms have basic features for inventory management, but it may require additional, paid software for more complex needs, costing from $20 up to $200 per month.
6. Legal and Administrative Costs
It is also important that you cover all aspects of the set legal and regulatory rules of your online store. Legal costs that one can be forced to pay in order to open an online store are registration of the business, license or permit, consultation with an attorney or an accountant.
Business Registration and Licenses
- Businesses must be registered and authorized with necessary permits or licenses.
- Costs vary based on region, typically between $50 and $500.
- Special permits may be required for certain businesses, like sales tax permits.
Background Checks
- New hires and suppliers may need background checks to meet legal and ethical requirements.
- Prices vary, typically between $10 and $100 each.
Legal Fees
- Companies should consult lawyers concerning local laws, licenses, agreements, terms of service, and privacy policies.
- Legal services cost between $99 per hour to $495 per hour.
7. Customer Service Tools
Offering a good customer experience is something that many online stores should strive to do. All the online store owners apply customer service software in order to handle different customer inquiries, concerns, and if requests for returns or refunds.
Helpdesk Software: A basic help desk software solution will set you anywhere between $20 and $200 per month based on need. This will permit you to deal with clients’ questions, ticket assistance, and live chat.
Returns Management: Returns and exchanges are an essential function for companies’ customer service approach. Return cost is different for each company depending on how they deal with it, whether they outsource their fulfillment or do it themselves.
After analysing trends across high-earning firms and speaking with startup consultants, there is a range that is recommended to spend on normal expenditures in your first year:
- Operations: 10% to 15%
- Product: 28% to 36%
- Shipping: 8% to 12%
- Online: 9% to 10%
- Marketing: 7% to 12%
- Team: 14% to 30%
Remember: It is always important to understand that setting up a successful business is not a sprint it is a marathon. Don’t measure the success of your new business by your first-year profitability. Allow yourself 18 to 24 months to get off the ground.
Accepting that your first year of business may be less lucrative is critical for both financial planning and emotional preparedness. Many founders get paid last in their first year since the whole company’s revenue is reinvested. That’s very natural.
Spend the first year of your online store’s operation testing, and reinvesting your sales into your business in accordance with the budget limitations outlined above.
How to get money to start a business?
- Personal savings
- Financial support from friends and family
- Personal loan
- Merchant cash advance
- Crowdfunding
- Venture capital
- Business credit cards
What if an unexpected event like a pandemic or recession occurs? So for such a situation, it is always good to set some cash aside as a reserve for any unexpected situation. Most new entrepreneurs rely on their savings to start a business which is why their early sales are usually reinvested in the business to cover their actual cost.
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Owning an online store requires some initial expenses as well as recurring costs and these can be anywhere between a few hundred up to thousands of dollars. The total cost will depend on two aspects like the type of goods that you intend to make for sale and the type of store you put out to the public to sell these products. To avoid possible pitfalls and optimize your chances of success, proper planning should be done, a reasonable budget should be set and an understanding of what it is to sustain an e-commerce store should be achieved. Realizing these costs and implementing the right systems will make it easier for you to steer your online store to success.
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Ozcart serves a diverse clientele, including brick-and-mortar store owners moving online, dropshipping companies, government agencies, digital product sellers (such as software and eBooks), established ecommerce stores operating from homes or farms, and entrepreneurs testing new ecommerce ideas.
As a hosted online shopping cart solution, Ozcart offers country-specific features. It’s designed to be user-friendly both for business owners and their customers. Our goal is to help you convert more visitors into buyers, whether you’re focusing on your local market or exporting globally.
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