The initial thought before starting an eCommerce business usually is “How much money do I have to spend to create my dreamed online store?”. Understanding the cost upfront is crucial to plan your resources and calculating the risks properly. What’s more, knowing the cost of establishing the store is not all. Equally important is to know how expensive it will be to maintain the website.
That’s why the aim of this article is to provide you with essential information about building an ecommerce website and costs. We’ll cover the expenses related to setting up an online store as well as ongoing costs that are necessary to keep it running.
How much does an eCommerce website cost?
It is worth explaining the term TCO at the start. TCO stands for “total cost of ownership”; it is the combined cost of buying the eCommerce platform and its costs related to operating it (usually over 3-5 years). TCO analysis reveals the cost differences between various eCommerce platforms and is a very precise way of optimizing your business.
The total cost of ownership in eCommerce encompasses all direct and indirect expenses connected to starting the website and its maintenance. Examples of direct costs can be software costs, website design, or employee salaries. Indirect costs, on the other hand, can include fees for hosting or payment processing.
Implementation process
- Firstly, the main factor is how advanced the project would be (for example, how many functionalities and integrations are needed).
- The second most important factor is the business model and its size, whether it is, for example, SMB or Enterprise. The size of a company already gives a lot of information on how it can benefit from rom eCommerce businesses.
- The third aspect is how crucial the online store will be for a client. Naturally, there will be a difference in needs and goals when the company relies only on selling online and when a company already has some stationery stores and a customer base. If the company is already developed and well-known, the online store is an aid to scaling rather than the pillar of the company. The more important an eCommerce store will be, the more stress will be put on its functionalities and performance. This will obviously affect the price of a project and further expenses.
The importance of gathering requirements before the eCommerce site development
Gathering the requirements enables to plan the whole project more wisely, as it is known what features are desirable and what other elements are redundant. A precise project plan helps to achieve better results while saving time and money.
This operation can be compared to designing an apartment: the more details we know, the better we can realize the project and avoid mistakes – every little detail matters. Pre-launch requirements help trim the project scope to such a level that it is sufficient for future users and not necessarily time-consuming and expensive.
Worth mentioning here is the MoSCoW method, which can be a great help in prioritizing needs. The acronym stands for Must have, Should have, Could have, and Won’t have. This method allows business owners to establish priorities by assigning each aspect of the eCommerce store to one of the four categories.
- “Must have” elements are those that are essential in the project
- “Should have” elements are desirable but not necessary
- “Could have” elements are nice to have but not essential
- “Won’t have” are ones that are irrelevant to the project
What’s next?
After the requirements and ideas about the projects are gathered, the next step is matching the technology to the business needs and core values of the company. It is a common situation when a client has a lot of substantive knowledge about how the business works and how the eCommerce website should look but not as much knowledge about technology, which is absolutely understandable. In turn, a software house has the necessary knowledge about technology and how to apply it but not as much of it about the bclient’s business, for instance, what makes people buy particular products or how the business stands out from the competition.
Exchanging this information takes place in the ‘workshops.’ This is the time when a client describes his/her business and the aforementioned issues. After that, the software house gives suggestions to match the client’s needs and clarifies the concerns. The workshop is usually paid for, but remember that for every 1 euro spent on planning, 100 euros are saved during development.
It is crucial to find out what the USP is, as it is the part that will be customized as much as possible. USP (Unique Selling Proposition) is the aspect of a business that sets it apart from its competitors and gives customers a reason to choose it over others. This could be a unique product offering, a more convenient shopping experience, or even a more attractive price point.
The last step is an estimation. A good estimation process will factor in the budget, timeline, and scope of the project. With a thorough estimation process, an eCommerce site can be created on time and without going over budget.
How is an eCommerce website price calculated?
In order to calculate the eCommerce website costs, the MVP version of a website’s project is created. MVP stands for „Minimum Viable Product,” and it’s the first version of a website with sufficient features and functionality to allow customers to buy services or products from a particular business.
Such a website often includes a simple website design, an online shopping cart, a limited selection of products, and a payment gateway. The MVP version of the online store is quickly launched with the intention of testing the market, gathering feedback, etc. It is a great way to see how the website looks and works.
To launch the MVP version of a website, clients are asked by the software house to share their ideas and requirements/needs for a project.
Can I create an eCommerce store for free?
Creating a website for free is theoretically possible by using open-source solutions; other license options would require payment. It is worth mentioning that it could be hard to make, as those types of solutions require technical knowledge to implement. Some money would also be required to run a marketing campaign and purchase particular systems and plugins. Last but not least, launching an online store involves hosting and maintenance fees.
What to consider when assessing the cost of an eCommerce website?
It is certainly worth thinking about the solutions proposed by the software house. Are they really useful, or maybe they are just hype-driven and won’t do much for the business? Try to think about each solution individually and check what value it carries in order to avoid spending money on something redundant (for instance, other online stores have it, so I will take it too). A good option is to implement the necessary functionalities at the beginning and then develop them and implement new ones over time. Moreover, remember about the cost of hosting and website maintenance.
To give a better picture of what encompasses the total price of an eCommerce website, these aspects are thoroughly described below.
Cost of eCommerce website design
The magic of first impression. The design of the website affects the customer’s experience and behavior. Due to that, even a memorable logo can change much. The cost of a website’s design strongly depends on whether you decide to do it yourself, using, for example, built-in themes and images, or hiring a professional web designer to help you to help you to create a custom design for you. The question that needs to be answered is: “How much do the customers’ value design?”. For some people, the most basic design will be enough, as they are just focused on buying a necessary product (for example, electronics), and in some cases, the sophisticated interface and themes are necessary to satisfy even the most demanding customers (for instance, in the fashion industry). So, the costs can be higher if you need custom development and designs. However, having a functional, visually appealing eCommerce website or an app helps to encourage customers to choose your services and products, no matter the branch. Balancing your design needs with your budget is key to creating a cost-effective, successful eCommerce website.
Payment processing costs for your eCommerce site
If you’re looking to start an eCommerce website project, one of the most important decisions you will have to make is which payment processing software to use. Although it’s possible to run an eCommerce website without payment gateways, it is a poor choice as most online stores have it, and it has become something that clients expect from the start. The price related to payment processing depends on a chosen PSP (payment service provider). What’s more, it depends on factors like in what countries you are selling the product and what currencies can be used to purchase your products on the website. This price can change based on the traffic on the website or be negotiated in order to pay the same amount each month. Moreover, there is a payment processing fee that needs to be paid for every transaction made.
What is a payment processing fee?
Every time a transaction is made with a credit or debit card on the website, a business must pay a processing fee, which divides into three types:
- Interchange free -this fee goes to the banks that issued credit cards for consumers. Taking as an example PKO Bank Polski and Bank of America.
- Assessment fee – this fee goes to the bank networks, for instance, Mastercard and American Express.
- Payment processor fee – this fee goes to the company that is responsible for getting card payments processed for your business, e.g., during PayPal transactions on the website.
Hosting
As previously mentioned, payment for web hosting is inevitable. It is an essential component of an eCommerce website, as they provide the infrastructure and technology necessary to run the site and store data. There are several hosting options available for eCommerce sites, including shared hosting, VPS and dedicated server, self hosted ecommerce website, public and private cloud hosting, and PaaS hosting. Each of these options has its own advantages and disadvantages, and choosing the right one for your eCommerce website will depend on various factors such as budget, website traffic, and performance requirements.
Hosting costs vary depending on factors such as the type of server needed (shared or dedicated), bandwidth requirements, storage space, and more. Furthermore, businesses must ensure that their hosting provider is reliable and secure so that customers’ information is always safe and secure. Hosting providers are also able to provide technical support when issues arise with the website or its associated applications. Overall, investing in a good hosting service is essential for any business looking to launch or grow an eCommerce website.
Shared hosting
Shared hosting is a cost-effective solution for small to medium-sized eCommerce sites as the costs revolve around 10 € due to sharing a single server and its resource by multiple websites. However, this can result in slow performance during periods of high traffic.
VPS and dedicated server
VPS (Virtual Private Server), in contrast to shared hosting, does not limit your customization options and provides better performance. Nonetheless, in this option, you still share a physical server with other customers which may cause some issues with performance. A dedicated server, on the other hand, is a single physical server that is dedicated solely to the needs of a single customer. Dedicated servers offer more performance, security, and control than VPS but at a higher cost.
PaaS
PaaS, or Platform as a Service, is a cloud computing model that provides businesses with a platform to develop, run, and manage their applications and services without having to invest in the underlying infrastructure and its management. Such a hosting platform is even more automated than shared hosting and provides you with everything needed to establish your website. However, in this solution, one machine is shared among many users, which may impact performance. The only difference between PaaS and shared web hosting is that most part of the processes is automated.
Public and private cloud hosting
Cloud hosting is a newer option that provides scalable resources on demand, making it an ideal choice for eCommerce websites that experience fluctuations in traffic. Public cloud providers such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform offer a variety of services, including storage, computing, and databases, which can be used to build and host eCommerce websites. Private clouds, in turn, can be built on-premises or hosted by a third-party provider. The difference between them and public clouds is an individual disc and individual resources available only to one customer which results in great security in performance. Nonetheless, the difference is also in the pricing.
In conclusion, the hosting option you choose for your eCommerce website will have a significant impact on its performance, security, and scalability, so it’s important to choose carefully and do research in order to avoid any mistakes.
Marketing – being visible on the market
Marketing is one of the most important factors in running an eCommerce store. When a business is not well recognizable, implementation without marketing won’t bring any customers to the store. In other words, no one will buy at our website if no one knows about it. Therefore, it is worth taking care of search engine optimization (SEO) to ensure a high position in the search engine and be visible to potential customers.
It is also worth spending some money on advertising your store, e.g. using a social media campaign. Even if a company already has some brand recognition, it’s still worth doing it and attracting more customers as a result.
What is marketing automation?
Marketing automation refers to the use of technology to streamline and simplify marketing tasks and processes. It involves using software tools to automate repetitive marketing tasks such as sending emails, lead generation, lead scoring, customer segmentation, and social media management. The goal of marketing automation is to help marketers increase efficiency, boost productivity, and improve the customer experience.
To give an example, one of the marketing automation tools is SALESmanago. This is an easy-to-use software designed for email marketing. It is used for sending newsletters and advertisements to a particular customer base, which results in increasing the reach and saving valuable time.
Maintenance – taking care of your store
Maintenance is another important aspect of an eCommerce website as it ensures that it runs smoothly, quickly, and securely. Regular maintenance tasks such as software updates, backups, and security checks help prevent downtime and ensure the website provides a positive user experience. Maintenance also helps address any potential problems that may arise, such as website crashes or security breaches, and helps prevent them from becoming bigger issues.
There are 4 types of maintenance strategies that can be distinguished:
- Corrective maintenance – detecting and correcting any errors
- Preventive maintenance – performing regularly scheduled maintenance activities
- Risk-based maintenance – maintenance that addresses risk-sensitive elements
- Condition-based maintenance – keeping the high performance of a website by monitoring its conditions
By investing in regular maintenance of your eCommerce website, you can make sure that your store runs smoothly and functions optimally for your customers. The best way to ensure the success of your eCommerce store is to establish a maintenance plan that takes into consideration the different maintenance strategies and the specific needs of your business. Taking the time to ensure that the website is regularly maintained will certainly pay off in the long run.
What is SLA?
SLA stands for Service Level Agreement, which is a contract between a service provider and a customer that defines the level of service that the service provider will deliver. In the context of eCommerce, an SLA is a legally binding agreement between an eCommerce website and its hosting provider that outlines the level of performance, reliability, and uptime that the hosting provider will deliver.
An SLA typically includes specific guarantees, such as a guaranteed uptime percentage (e.g. 99.99%), response time for support requests, and compensation for service outages. The agreement also defines the responsibilities of both the hosting provider and the customer, and provides a clear understanding of the level of service that the customer can expect from the hosting provider.
Third-party tools
Third-party tools are software applications or services that can be integrated into an eCommerce website to improve its functionality and user experience. There are a variety of third-party tools available to improve various aspects of your store, such as accounting, logistics, customer service, marketing, and more. Choosing a particular system depends on the factual needs, size of a store, budget, etc. By leveraging these tools, businesses can differentiate themselves from their competitors and provide a superior service to their customers.
An example of the 3rd party software is PIM system or CRM. PIM (Product Information Management) is a software that helps to locate and classify product information in the system and enrich the content on a website, positively affecting productivity and data management. CRM is a customer relationship management software. This is a database that organizes and stores all of your customer information. It can help improve your marketing efforts through personalization.
Pricing models
While discussing the costs of implementing an eCommerce platform, it is also worth presenting payment models. The two main models are Time and Material and Fixed Price.
The first model, Time and Material (T&M), involves charging the client based on the time spent on the project and the materials used. This approach offers flexibility to adjust the project scope, features, and functionalities as it progresses, ensuring the final product meets the client’s needs. The client receives regular updates on work progress and incurred costs, providing transparency and the ability to control the budget. This model is ideal for projects where requirements are not fully defined or expected to evolve.
The second model, Fixed Price, involves agreeing on a set price for the complete project before the work begins. This approach is suitable for projects with well-defined scopes, timelines, and deliverables, as it provides a clear budget and reduces financial uncertainty for the client. The client pays a predetermined amount regardless of the time and resources the service provider expends, ensuring budget stability. However, this model offers less flexibility for scope adjustments and requires detailed upfront planning to define the project’s requirements and outcomes accurately.
Which one is the better choice? It depends, but the Time and Material (T&M) model offers unparalleled flexibility, allowing for adjustments and changes without the need to renegotiate the entire contract. This model promotes a more collaborative partnership between the client and service provider, as it accommodates the natural development of the project, ensuring the final outcome more accurately reflects the client’s needs and expectations. Moreover, the transparency of ongoing costs allows clients to make informed decisions about the project’s direction and budget.
What eCommerce platform is the best?
Unfortunately, there is no simple answer to this question. Everything depends on what you most care about. What’s more, the choice most likely depends on the size of a company. For small businesses, it will be rather solutions with many “out of the box” functionalities (for instance, Shopify or Presta), where the implementation cost is relatively low and enables a quick launch of the website. For larger ones, in turn, it will most likely be dedicated and complex solutions to provide the best possible digital experience no matter the cost. Make sure to consider the features and functionality offered, ease of use, scalability, and cost. Ultimately, the best eCommerce software for your business is the one that best meets your eCommerce needs.
Common mistakes made in the context of eCommerce implementation costs
- The desire to have a large store with advanced functionalities on a limited budget
This is a mistake usually made by people who are just entering the world of eCommerce and want to build their first platform and are unaware of the real costs of building systems and applications. A good solution to this problem is prior education and research of available technologies and functionalities. This will allow you to pre-select solutions that fit your budget.
- Selecting an agency with little experience for a strategically key project, guided mainly by a low hourly rate
Typically, this situation applies to companies that rely on stationary sales and want to enter the world of eCommerce. When a decision is made to implement a platform, the management board is often guided by the cost aspect of the entire project. Finally, a situation arises where, for example, a „worse” technology is selected, cheaper to maintain, implement, etc., but carries limitations and a high risk of technological debt, resulting in migration after a few years. In another case, an agency that offers lower rates is chosen, which is not necessarily accompanied by a well-executed project, often resulting in a change of agency, spending time and money. Overall it is much more expensive.
- Choosing closed technology or out-of-the-box solutions because they are cheaper when implementing MVP
In some cases, this is a good solution, e.g., when we just want to test a business concept, or we have a limited budget. However, when we manage a development project, this may be a big mistake. An out-of-the-box solution may be more financially advantageous at the beginning, but in the long run, it may turn out that the costs will be higher, especially if we want to develop and scale the business.
- Estimation of platform costs based solely on MVP
As mentioned earlier, many factors influence the cost of an eCommerce platform, and you should consider them all to avoid any surprises regarding the total cost of implementing an eCommerce platform.
- Conducting superficial research on available technologies and their benefits
We often do not wonder why some solutions are more expensive to implement and what is behind the higher implementation cost. We usually reject these solutions and focus on the cheaper ones. However, in order to make a fully informed decision that is not based only on price, it is also worth carefully analyzing the more expensive ones. Despite the average or high initial implementation cost, will these solutions bring benefits in the long term, e.g., greater customization options, lower maintenance costs, better developer experience, better performance, the possibility of unlimited scaling, ease of learning the solution, ease of building new components, etc.
Summary
The overall cost of the eCommerce website development may vary based on its size, features, eCommerce functionality, business requirements (custom features) and customer. Some basic eCommerce websites can cost anywhere from a few thousand to tens of thousands of euros, while more complex sites can cost hundreds of thousands or even millions.
The final price depends on the chosen platform, as well as the complexity of the store. Additionally, the cost of ongoing maintenance and updates should also be taken into consideration when calculating the total eCommerce website pricing. Furthermore, the cost of marketing, web design, and advertising the website should be included in the total budget for the website too.
As you can see, it is important for businesses to have a clear understanding of their budget and requirements before starting the development process. If you want to discuss your eCommerce needs and goals, contact us today. Our experienced team of experts is ready to help you create the perfect eCommerce experience for your business. With our comprehensive eCommerce workshops, we will make sure you have the knowledge and tools you need to succeed in the ever-evolving digital world.