How Much Does It Cost to Build an ecommerce startup?

How Much Does It Cost to Build an ecommerce startup?

E-commerce is a trend, and from the entrepreneurs point of view, online sales is a very promising area, especially given that the number of online buyers is huge today and will only increase in the future.

Confirmation of this trend can be found on the chart from the Statista service below.

Information technology spending

In 2014, global e-commerce sales totaled about $ 1.3 trillion. Today they are estimated at $ 2.8 trillion, and by 2021, according to experts, sales will be up to $ 4.5 trillion. Such consistent growth is largely driven by consumer demand and a change in consumer habits. Nearly two-thirds of US purchasers with Internet access now buy products on the online market at least once a month, and the number of people regularly using e-commerce sites is constantly increasing.

So how much does it cost to create an e-commerce startup? It is safe to assume that a universal answer simply doesn’t exist. Usually, costs may vary from 5 thousand to more than 5 million dollars, depending on the nature of the platform and requirements. Ultimately, the cost will depend on your overall sales and traffic goals, the features you need and the type of e-commerce startup.

However, it is still possible to get a general idea of ​​e-commerce startup cost. Below we will present the general scheme for creating an e-commerce startup with key points, as well as the approximate cost of each. So, let's start!

Planning

It is impossible to predict even the approximate application price without a clear understanding of what exactly it is. Therefore, the first thing you should do is write a clear business plan.

Writing a business plan

There are several key topics that you must include in your business plan. The most important element of a business plan is financial forecasting. As the owner of the future business, you will need to study in detail the financing requirements, the projected operating costs and the projected profit of your startup. This information should be based on thorough modern research and should be specially adapted for your business niche, provided that you have already decided which particular niche you are going to occupy.

After the estimated income and expenses are calculated, it is time to start calculating the cost of the projects technical part. It will be reasonable to turn to professionals with this question, so you won’t miss anything important. At the same time, good IT consulting costs money. What does it include?

IT consulting

Any road begins with the first step and the development of custom software is no exception. In case of developing an e-commerce startup, this step will be IT consulting - perhaps the most important service that will help you plan your next steps wisely. As a rule, IT consulting consists of two stages.

Strategic consulting

At this stage, you will receive recommendations on issues related to your overall IT strategy. Strategic IT-planning helps your business create a business strategy that meets your goals. Moreover, it also creates a roadmap for technology investments and IT budgeting.

Tactical Consulting

Tactical consulting is a type of planning, during which a detailed step by step plan for creation of your e-commerce startup is developed. At this stage, the IT company transfers to the startup all its experience and expertise, answers customer questions in planning and makes the project truly effective.

The approximate cost of this stage for an e-commerce startup:

  • with a small number of features: from $700 to $1400
  • with an average number of features: from $2800 to $5600
  • with a large number of features: from $5600 to $11200

2. Designing

Some share of the cost of an e-commerce startup is determined even before work on a full-fledged product is started.

Methodology Choice

At this stage, you have to decide on the methodology that will be used during the development. You need to choose wisely, as this can directly affect the number of hours spent. To be precise, the most common are the Agile approaches, which suggest that the project doesn’t need to rely only on the previously created detailed plans and Waterfall approaches, in which the development process looks like a stream going through different phases in succession, and the developer moves from one stage to another strictly sequentially.

MVP Development

The development of MVP (minimum viable product) is very important and necessary. MVP will give you a clearer picture of your application and how it can be developed in the future.

Keep in mind that an MVP or proof of concept (PoC) code will have limited functionality, features, and design, but will help you get started in the right direction without spending significant amount of money.

The attractiveness of MVP is also increased by the fact that it makes much easier for you to get financing from external investors if you decide to develop your idea.

The approximate cost of this stage for an e-commerce startup:

  • with a small number of features: from $7500 to $22500
  • with an average number of features: from $22500 to $45000
  • with a large number of features: from $45000 to $90000

3. Product development

This stage is perhaps the most important, since the bulk of the cost of e-commerce startup creation is formed here. Mostly the price of any software depends on two key factors - developer rates per hour of work and features that you want to have in the arsenal of your product. We will analyze each of the factors in more detail.

Rates

There are no guarantees that a company with high price tags for an hour of developers work will provide you with an e-commerce start-up that can recoup your investments. In fact, cheaper programmers can provide results no worse, or even better. High price does not always mean high quality. There are many factors that influence pricing. Geography is one of the most important.

For a better understanding of the situation, we have prepared a map for you.

software development rates

So, we can observe the following picture:

  • American and Canadian companies charge between $50 and $250 per hour.
  • Australian firms offer their services for $50-$150 per hour.
  • Western European and British developers have rates from $35 to $170 per hour.
  • Eastern European companies sell their services from $20 to $150 per hour.
  • Prices for developers from Asia range from $10 to $80 dollars per hour.

You decide which region to choose to hire developers, and we only reserve the right to hint that at relatively low prices, developers from Eastern Europe have an excellent reputation as true professionals in their area of knowledge.

Functionality and Features

Although there are many pricing models, which can be found in more detail in this article, often the cost of creating an e-commerce startup directly correlates with the number of hours that will be spent on developing the project. To put is simple, the more complex the functionality, the more time it will take to put it into practice. Conventionally, applications for e-commerce can be divided into 3 categories - simple, medium and complex, depending on the number of features.

Simple applications include some basic functions, do not require integration with any third-party APIs, and may not need a server infrastructure. The functionality of such applications can embody a non-standard idea with standard user interface components, a list of channels, simple filter sorting and more. The development of a simple application takes about 1000 hours.

Applications of medium complexity can include, in addition to the above, special user interface functions and logic that is embedded in a non-standard business model, as well as real-time chat, payment functions, adaptation for mobile devices, integration with APIs and a simple internal server. Creating such applications takes about 1800 hours.

Complex applications include advanced functionality, such as audio/video processing, Big Data processing, blockchain implementation, real-time synchronization, custom animations, integration with third-party services, complex server parts with several types of communication and databases, and much more. The term for creating complex applications is more than 2400 hours.

The approximate cost of this stage for an e-commerce startup:

  • with a small number of features: from $25000 to $50000
  • with an average number of features: from $45000 to $90000
  • with a large number of features: from $60000 to $120000

4. Post-release maintenance

Beginning startup owners tend to mistakenly believe that with the release of the first fully working version of the product v 1.0, their expenses end. Needless to say that this statement is completely wrong? Moreover, the average cost of servicing an e-commerce startup in some cases is about 20% of the development cost.

Moreover, depending on the type of product and the presence of certain features in it, the cost of service can grow even more. This may be due to the need for powerful servers, the operation of payment services (do not forget about the commission for each transaction), emergency repair of the application, the availability of third-party APIs, as well as fixing bugs, if any. At the same time, some companies may provide a warranty for the code written, which somewhat reduces the financial burden.

The approximate cost of this stage for an e-commerce startup:

  • with a small number of features: from $1000 to $2000
  • with an average number of features: from $3000 to $6000
  • with a large number of features: from $4000 to $8000

5. Marketing

Only a few customers will accidentally discover your store online. Marketing costs may vary, but on average e-commerce companies spend from 7% to 12% of their total marketing revenue. This money goes to advertising campaigns, social media campaigns and mailing lists, which are designed to increase brand awareness and attract customers.

The approximate cost of this stage for an e-commerce startup:

  • with any number of features: from $10 to infinity

Taking into consideration all the variables above, there is no strict answer to the question about the cost of developing an e-commerce startup, since the specifics of such an enterprise is that everything is individual and depends on the complexity of implementing the idea and concept. However, the chart below can give you a rough idea of ​​the total costs:

 

 

Small number of features

Average number of features

Large number of feature

IT Consulting

$700-$1400

$2800-$5600

$5600-$11200

MVP Development

$7500-$22500

$22500-$45000

$45000-$90000

Software development and testing

$25000-$50000

$45000-$90000

$60000-$120000

Maintenance

$1000-$2000

$3000-$6000

$4000-$8000

Hosting (monthly)

$350

$500

$1500

Licensing

$500

$5000

$50000

Marketing

$1000

$10000

$100000

 

Good luck in your endeavors, and if you have any additional questions - do not hesitate to write to us! Our managers and developers will conduct a comprehensive analysis of your project and will not only be able to tell you the price, but also use all their experience to suggest and improve options for your future E-commerce product.

 Andrii Kuranov, Content Manager

Andrii Kuranov

Content Manager

Andrii is a content manager at MassMedia Group software development company. He is an expert at business running processes and methodologies,
software solutions and is in charge of most crazy creative ideas concerning the content and targeted marketing.