How Much Does An E-commerce Website Cost?
What to consider when planning an e-commerce website
We cut our teeth on e-commerce design back in 1996 while working on an e-commerce website for Foot Locker. The project budget was approximately $500,000, which may sound expensive but was only less than 1% of $60 million in online sales. Most small to mid-size retailers don’t have the budget or the requirements of a Foot Locker, and fortunately, there are a myriad of solutions to get smaller e-commerce businesses up and running.
What determines the cost?
The difference between e-commerce budgets comes down to project scope. Some of the relevant factors include:
- Customer base: The size of your customer base determines the technology requirements, hardware and software. If you have a large customer base, you will require a website and supporting applications that can handle a lot of concurrent traffic. This dictates the technology you use and the type of network, servers and other hardware required. This in turn dictates the size and expertise of your development team.
- Supporting applications: The industry uses the term ERP (Enterprise Resource Planning) to describe a host of software that manages your inventory, shipping (“3PL”), invoicing and other back-office services. A large company may have multiple ERP solutions. Some ERP solutions can cost over $100,000 for a single annual license. Integrating those with a website can also take hundreds of hours of programming. A smaller company may rely on “out-of-the-box” or built-in inventory and back-office solutions to reduce costs.
- Marketing: Online and offline marketing is an important expense that needs to be factored into every business website. As opportunities for marketing increase, such as social media, video, mobile marketing and DRM (direct response), etc., companies’ budgets have to increase to maintain market share and drive traffic. A larger business might spend over $100,000 a month in marketing while a small business could get by on as little as $2,000 to maintain and grow their online presence.
- Features and Functionality: A large company must provide the latest, coolest, interactive features to promote their products and stay competitive. For example, perhaps they want a feature that allows customers to customize their clothing or products and see the results in real-time. Maybe they want to offer a membership club with special benefits for members. These types of features require extensive programming and therefore only larger budgets can support the design and development of these features. A smaller company, once again, has to rely on built-in features or plug-ins to enhance their user experience.
- Website Content: Most of our clients create their own website content. This includes product images, product descriptions, pricing and text content about the company, etc. A website with 10,000 products will require more effort than a small business website with only 50 products. All e-commerce software these days comes with built-in dashboards that facilitate non-technical people adding and editing products, modifying store rules, and editing text content. Even though a programmer isn’t required, it still takes time and budget to input products. If the client doesn’t have the resources for this task, usually the development agency can take this on.
I don’t have much budget. What’s the cheapest, easiest way to create an e-commerce store?
If you are on a tight budget, there are many options for low-cost e-commerce solutions. In many cases, we recommend going with a hosted solution such as Shopify (www.shopify.com). A hosted solution means that the software company owns and maintains the “back-end” code for the website. You are allowed to change the design of the site but you can’t modify most of the built-in functions or features. A hosted solution is comparable to renting an apartment. You can live in it, decorate it anyway you want and invite friends over, but you can’t start knocking down walls and removing built-in appliances. Hosted e-commerce solutions are becoming more sophisticated and feature-rich, so for many small businesses with simple requirements they can be a great solution. We generally charge $8,000 and up to plan and customize a hosted e-commerce solution. This pays for complete strategy, setup, design, coding and we include some SEO and training.
A hosted e-commerce store isn’t right for my business. What are my options?
There are hundreds of e-commerce software companies to choose from, each stating that they can do everything you need. Software can range from open-source (free customizable code) to enterprise level (licensed, customizable code scaled for large businesses and traffic — and usually very costly). A non-hosted solution means that you are going to have to pay for hosting yourself and maintain your site code and hosting environment. You will also need to carefully consider security. In our experience, an e-commerce website of this type can range from $10,000 to $100,000+ depending on the factors outlined above.
What are the next steps in deciding which company to hire?
- Make a list of requirements. Consider which features and functionality you need – be specific and prioritize.
- Prepare some information about your brand and your target customer – who they are and what appeals to them.
- Make a list of your web business goals.
- Find examples of competitors that are doing it right, as well as those that aren’t, so you can provide examples.
- Establish a budget that includes creating the website as well as handling post-launch monthly maintenance.
- Research web development companies (like ours). Look for local agencies that have in-house designers and developers.
- Provide your documents to the final candidates and request their recommendations and estimates. Ask for a formal proposal.
- Compare estimates and interview the agencies to decide on a company. Check their references.
We have developed a Client Questionnaire that asks many of the questions a web company will need to understand your requirements – you can download it here.