Last updated on February 7th, 2024 at 06:42 am
Launching an online retail business can be an exciting venture that puts you in front of a global audience.
However, building an ecommerce store requires careful planning and budgeting.
Costs can range from a few hundred pounds to tens of thousands depending on your product, inventory needs, platform choices and more.
This guide examines the key costs shop owners face when starting an online store in the UK.
From e-commerce software and web hosting fees to purchasing inventory, setting up shipping logistics, and running marketing campaigns, myriad expenses are involved.
Understanding typical costs for each component can help entrepreneurs forecast, fundraise and financially plan their online stores effectively.
Weighing options like off-the-shelf platforms vs custom development, buying inventory upfront vs dropshipping, and paid ads vs organic marketing can impact budgets.
By reviewing potential costs across essential categories like domain setup, inventory, shipping, marketing, and business operations, UK ecommerce entrepreneurs can devise lean startup budgets or well-funded plans.
Examining average figures for each cost element also enables data-driven assessments of various options and platforms.
This lays the groundwork for building a financially viable online store poised for long-term success. Careful planning and cost consideration from the start helps set the stage.
How Much Does it Cost to Start an Online Store in the UK?
E-commerce Platform Costs
One of the first key costs faced when starting an online store is choosing and implementing an ecommerce platform.
Popular SaaS (software-as-a-service) options like Shopify, WooCommerce, and BigCommerce involve monthly subscription plans, transaction fees, and potential web hosting costs depending on platform.
Monthly Subscription Plans
Most ecommerce platforms offer tiered monthly plans based on features needed, typically ranging from:
- Basic: £20-50 per month
- Mid-Tier: £60-100 per month
- Advanced: £200-300+ per month
For example:
- Shopify offers basic shops from £26/month, mid-level from £71/month, and advanced from £266/month.
- WooCommerce basic plans start around £36/month, mid-tier from £73/month, and advanced from £133+/month through web hosts.
- BigCommerce starts at £28/month for basic, £68/month for mid-tier, and £235+/month for advanced plans.
Lower cost basic plans limit product listings, bandwidth, and integrations while higher tiers offer more features and flexibility.
Transaction Fees
Transactions are typically processed through platforms for 2-3% of order value plus fixed fees per transaction.
For instance:
- Shopify Payments charges 2.4% + £0.20 per online transaction and 2.9% + £0.20 for in-person transactions.
- WooCommerce PayPal charges 2.9% + £0.30 per transaction.
- BigCommerce charges 2.9% + £0.30 per transaction.
These fees can add up quickly. A £1000/month in sales would incur ~£29 in transaction fees on a 2.9% model.
Potential Web Hosting
Self-hosted platforms like WooCommerce often require paying for hosting on top of the eCommerce platform fees while Shopify and BigCommerce include hosting. Expect £5-15+/month for managed hosting otherwise.
So tallying monthly platform costs can start from £20-50/month for limited stores and range up to several hundred pounds monthly for mature shops processing significant transaction volumes.
Domain and Website Costs
In addition to the core ecommerce platform, online merchants need to budget for their domain name and any costs involved in customizing the design and setup of their site.
Domain Registration/Renewal
Registering a domain typically costs £8-15 per year from registrars like GoDaddy, Namecheap, 123Reg etc. Renewal fees apply annually.
Securing the perfect domain for your brand is worth the investment.
Site Design and Customization
Off-the-shelf platforms offer templates to customize colors, fonts, and layouts. However, a custom-designed site can cost:
- Bespoke site design: £2000 – £5000+
- Custom theme development: £1000 – £3000+
This provides a more unique look aligned to branding.
Content and Copy
Professionally written product descriptions, policies and content can cost:
- Per page content writing: £90 – £150
- Full site content package: £1000 – £3000+
Quality copy provides a better user experience.
Photos and Media
Stock photos cost ~£25 per image. Professional product photos or videos can run:
- Basic product photoshoot: £200 – £500
- Multi-angle shoot with models: £1000+
- Product video: £2000 – £5000
Great visuals convey brand quality.
Integrating Platform with Web Design
If pursuing a custom site, developers will need to integrate the ecommerce platform, so additional fees apply. Plan £1000 – £3000+ to integrate the backend with a unique frontend site design.
The domain, design, content, images, and integration involved in setting up a website and online store requires allocating a portion of the budget beyond just the ecommerce software platform itself. The level of investment in a customized branded experience depends on the business goals.
Inventory Costs
Purchasing and managing inventory represents one of the most significant costs of running an online retail business.
Entrepreneurs must determine their inventory strategy and invest in those initial stock levels plus ongoing replenishment.
Initial Inventory Purchase
Upfront costs to source and purchase opening inventory include:
- Cost of goods – Wholesale prices from suppliers and manufacturers generally range from 25-85% off retail pricing depending on product category, order volumes, etc. Budget higher unit costs for lower order volumes.
- First order minimums – Many suppliers require £500-£1000+ minimums for first orders especially when dropshipping.
- Freight – Products often ship via ocean, air, or truck freight. Budget 10-20% of order value for freight costs.
- Duties/taxes – Import duties range from 0-25% depending on product category, country of origin, and commercial agreements.
Example first order inventory costs:
| Product | Unit Cost | Order Quantity | Order Cost | Freight | Duties | Total |
|---|---|---|---|---|---|---|
| Ceramic mugs | £2 | 500 units | £1000 | £150 | £100 | £1250 |
Ongoing Inventory Replenishment
As products sell, stores must continually reorder stock. Budget for:
- Cost of goods – Reorder at wholesale unit pricing
- Economy order minimums – Lower minimums apply to reorders
- Freight – May benefit from volume discounts
- Storage – Monthly warehouse rental if not dropshipping
Ongoing inventory costs vary greatly by product mix, sales volumes, and reorder frequency. Budget conservatively during startup phase.
Inventory Management System
An inventory management system or plugin helps efficiently track and sync stock levels across channels to minimize overselling. Budget £50-£100/month for a system.
The inventory investment required varies widely but typically constitutes one of the largest upfront and ongoing costs for online retailers. Careful planning of the sourcing, purchasing, and inventory management strategies is key to controlling these expenses.
Shipping Costs
Offering a good shipping experience is essential for any online store. Merchants must weigh options for fulfillment and delivery to balance customer satisfaction with manageable costs. Key shipping expenses include:
Shipping Supplies
Supplies like mailers, boxes, bubble wrap and tape cost ~£1-5 per order depending on products. Branded packaging can help create a premium unboxing experience.
Order Fulfillment Fees
Third party logistics (3PL) providers can handle warehousing and fulfillment with fees based on services required:
- Pick and pack fees: £1-3 per order
- Warehousing fees: £0.10-£1 per cubic foot per month
- Fulfillment fees: 5-15% of order value
Fulfilling orders in-house reduces fees but requires staffing.
Postage Costs
Work with carriers like Royal Mail, DPD, Hermes for discounted shipping rates. Typical domestic shipping costs:
| Package Weight | Royal Mail | DPD | Hermes |
|---|---|---|---|
| 0-1 kg | £3-£5 | £3-£6 | £2-£5 |
| 1-2 kg | £5-£8 | £6-£8 | £3-£6 |
International shipping costs more – budget £10-£20+ to common destinations.
Shipping Method Configuration
Most ecommerce platforms integrate with carriers to easily configure methods, rates and labels. Expect one-time setup fees of ~£100 per carrier integrated.
Returns Management
Offering free returns and managing logistics adds overhead. Budget 15-30% for return volume and associated processing costs.
Shipping and fulfillment involves weighing various options based on volumes and product types to strike the right cost balance. But investing in good delivery experiences tends to pay off in customer loyalty.
Marketing and Advertising Costs
While building and setting up an exceptional online store front is critical, aggressive marketing and customer acquisition strategies also require significant budget to drive sales.
Digital Advertising
Paid search, social, and display ads help gain visibility. Budget at least £100-500 per month to test and learn cost-effective channels. Most UK stores allocate 10-25% of revenue to paid ads long term.
| Channel | Avg. CPC/CPM | Monthly Budget |
|---|---|---|
| Google Shopping | £1-5 | £100-300 |
| Facebook/Instagram | £5-20 | £200-500 |
| Display/Banner Ads | £10-50 | £300-1000 |
Influencer Marketing
Gifting free product to relevant influencers who feature and link to your store can drive conversions. Budget £100-5000+ depending on influencer follower count and campaign structure.
Email Marketing Platform
Tools like Mailchimp, Constant Contact, Aweber allow creating and automating email campaigns and newsletters. Budget £10-50 per month for standard plans.
PR Outreach
Seeking earned media placements and partnerships lands free exposure. DIY or £1000-3000 per month for an agency.
Social Media Content
Creating social content, engagement, and management for Instagram, Facebook, TikTok, etc. Usually done in-house or with an agency from £500-1500 monthly.
SEO Optimization
Optimizing for organic search takes time but pays dividends long-term. Budget £1000-5000 for an initial optimization and setup from an agency.
Marketing costs can quickly run in the thousands but arecritical for sustaining visibility and sales. Take a data-driven approach starting with small tests, optimizing ROI and gradually scaling budgets.
Key Takeaways
Starting an Online Store in the UK – Cost Considerations
- Ecommerce platform – £20-300+/month depending on features
- Domain – £8-15 per year
- Website design – £1000-5000+ for custom site
- Inventory – £500-5000+ upfront for initial stock
- Shipping – £1-5 per order for packaging and postage
- Marketing – £100-5000+ monthly for advertising, influencers, content
Controlling Costs
- Start with a lean MVP approach, basic plan
- Dropship inventory to avoid upfront purchases
- Use affordable shipping carriers like Royal Mail, Hermes
- Focus on organic marketing like SEO, email, social
- Scale up slowly as revenues grow
Invest for the Long Term
- Build branded custom site aligned to positioning
- Carry enough inventory to prevent stockouts
- Offer premium packaging, quick shipping times
- Allot 10-25% of revenue for marketing
- Hire help as needed to support growth
Wrap!
Launching a successful online store requires careful financial planning, budgeting and decision making.
While startup costs can initially be kept low, investing in the right foundations pays off.
Ecommerce entrepreneurs should budget at least £1000-5000+ to cover core upfront platform, inventory, shipping, marketing, and website costs.
Additional operating expenses add over time as sales grow. Taking a lean startup approach first helps validate the business model.
The biggest cost considerations are investing in a customized branded website aligned to positioning, purchasing enough quality inventory to meet demand without overstocking, configuring reliable shipping solutions, and allocating sufficient marketing spend to drive traction.
Finding the right balance between controlling costs and making strategic investments for long term viability is key. The best outcomes flow from building a unique valuable brand experience rather than racing to be the cheapest online seller.
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