E-commerce: a step-by-step guide

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An introductory guide explaining the considerations when picking a product, finding a market online and selling it successfully.

  • Benefits of ecommerce
  • Different business models and how to use them
  • Tips on how to align product-market fit
  • Options for distribution.

Step 1. Understand ecommerce

What is ecommerce?

In simple terms ecommerce is the buying and selling of products or services over the Internet.

Covid-19 has changed attitudes toward such digital transactions, and analysts suggest the pandemic has accelerated the shift to ecommerce by up to five years. Online sales in the UK are now expected to grow from initial predictions of 11% to 19% in 2020 to reach £78.9bn, up from £66.3bn in 2019.

What an ecommerce business can sell

  • Physical goods
  • Digital goods
  • Services

What are the advantages of ecommerce?

  • Lower overhead costs
  • Selling around-the-clock
  • Broad geographical reach
  • Better customer tracking
  • Greater ability to generate customer data
  • More control over inventory management
  • Lower startup costs

Types of ecommerce businesses

  • Business to Business (B2B)
  • Business to Consumer (B2C)
  • Consumer to Consumer (C2C)
  • Consumer to Business (C2B)

Step 2. Find a product to sell

Identify or create a product that solves a problem

Your product doesn’t have to be world-changing as long as there is a demand for it. There are many routes to finding the right product, including improving existing product features, finding a new market opportunity untapped by competitors, or selling an existing product but with unique product positioning and marketing.

Find product-market fit

A company’s product, customers and distribution channels need to align. If two of the three work together, you may enjoy some success but all three boxes need to be ticked if you are looking for long-term growth.

Step 3. Identify your customers

The better you know and understand your customer, the more likely you will be able to offer them a product or service that they will pay for. At this stage the focus is on getting inside the customer’s head and understanding their needs and their digital behaviours. Attitudes towards ecommerce differ across demographics and nationalities and you need to consider how this impacts your choice of product.

Customer demand and testing 

There are a number of ways to gauge customer demand before investing a lot of money and resource into the business.

  • Check the competition: Amazon and eBay should be the first port of call for B2C goods. Search for similar products to yours on the best sellers list. If you find similar products, it’s not necessarily a bad thing - the reviews may suggest ideas or highlight gaps in the market. If products are reviewed very favourably, it will be difficult to challenge them. If they are reviewed badly, it could be a good opportunity.
  • Is it trending? An easy way to find out whether your product category is currently trending is by using Google Adwords. Create a free account, input keywords related to your product and quickly see the results. You can do the same with social media platforms. Recognising a trend early can be a significant win, allowing you to establish yourself in a market.
  • Test: One way to minimise your upfront investment is by creating a Minimal Viable Product. This could be as simple as a website landing page to promote your potential product. Promote the site, analyse user data and ask interested customers to leave their email. Search ‘lean startup’ to learn more about this approach.
  • Sales channels: A good way to reach new customers is to choose sales channels where they already shop. Consider whether you could use these same channels for your proposed product, and what the cost might be.

Step 4: Source your product

There are several primary product sourcing options to consider:

  • Make it yourself
  • Have it made for you
  • Buy wholesale: Purchase inventory from a manufacturer or supplier in bulk at a discount and sell individually at a mark-up. This usually requires capital initially for storage space, inventory, and the tools and software to track orders and shipping.
  • White label: Sell a generic product, but with your brand name and packaging. The advantage of white labelling is that you know it’s a product that sells well – the disadvantage is that you will typically have to buy in bulk, so if it doesn’t sell you are stuck with unwanted stock.

Step 5: Distribute your product

Ecommerce distribution models

  • Warehouse and distribute yourself
  • Drop shipping: You don’t store or handle physical products yourself. Instead, a third party stores and ships your product. The advantage is it leaves you to concentrate on marketing and customer service but the downside is it reduces your profit margins significantly.
  • Send from manufacturer
  • Send from retailer
  • Hybrid distribution approach: Use different forms of distribution depending on the sales channel. This allows you to act as both a wholesaler and a retailer.
  • DIY products or services: This is the simplest option but the most resource heavy.
  • Work with a manufacturer or wholesaler: This can take numerous forms, such as a partnership with a small manufacturer or a partnership with a market leader such as Amazon or Alibaba.


We have pulled the resources on this page together for you to help with your independent research and business decisions. This page contains links to third party websites and resources  that we (Barclays) are not providing or recommending to you.

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