How much does it cost to set up a digital eCommerce site? Part one of a two-part blog series
Creating a website is a lot like buying a house. Pricing varies greatly and is affected by numerous factors.
Aspects such as location, size, features, condition, and more contribute to the extremely complicated calculation which determines the final price. And even then, that price is subject to negotiations. If two houses end up costing the same, it is pure coincidence. A garage, a hot tub, granite countertops, and a finished basement will all have a measurable impact on the price of a house. Similarly, the addition of features such as renewals, shipping, taxes, sales reporting, licensing, cart recovery and more do to the price of an eCommerce site.
Another similarity is the existence of both initial and ongoing costs. When purchasing a house, it is important to consider not just the up-front purchase cost, but also the continuous expenses such as mortgage payments, property taxes, insurance, maintenance, homeowners association fees, utilities, and more. Websites work the same way.
Determining the cost of an eCommerce site is not simple these days. In this post I’ll provide some general guidelines which will help you set your expectations and budget appropriately before getting started with digital eCommerce.
Note that numbers shared are in U.S. dollars and are primarily applicable to businesses operating in the United States. However, the same rules apply internationally and while specific amounts may differ, most expenses affect total budget calculations similarly regardless of location or currency.
Since there are two very important types of costs to consider when figuring out how much you’ll be spending to create a digital eCommerce site, we’re going to separate them into two different posts. You can read about ongoing costs in the second part of this series, but for now let’s start with…
Up-front website costs
Most expenses related to a website will be ongoing, which we’ll cover in detail next week, however they will almost all require some initial payment. When calculating how much investment is needed to get a site up and running, both the one-time costs and the first payment of ongoing costs must be combined. Fees for domains, software, web hosting and so on will typically recur monthly or yearly, and these must be purchased up front in order to get the site created.
As for the costs which typically only apply initially, these are primarily service-based. Services relevant to the launch of an eCommerce site can include:
- Logo design
- Website design
- Theme development
- Plugin development
- Content migration
- Site configuration
- Development of integrations with other services or data sources
- Development of the actual product(s)
These are just a few examples of services rendered by professionals which can be paid for and apply most frequently during the early stages of a project.
Of course, the majority of new eCommerce site owners won’t be hiring unique professionals for each of these services. Some services will not be urgently needed, some service providers can take care of multiple tasks, and some to-dos can be handled by the site’s owner or team.
Building a website yourself
If you’re the DIY type and believe your project could be better off if you handled a lot of the setup work yourself, that’s awesome! You’ll be able to save some money, learn new skills, and become intimately familiar with how your eCommerce site works. All good things. However, I do strongly recommend carefully considering two important principles:
1. Opportunity costs
Imagine you’re a software developer. You make software products for a living and want to start selling them. So you set out to create an eCommerce website. You spend two weeks figuring out and setting up your hosting account, domain, SSL certificate, and email. You spend another two weeks learning WordPress, choosing a theme, tweaking your theme, adding some plugins, and configuring everything the way you like it. Then you spend another two weeks creating a logo, tweaking your branding, writing the content for your site, creating demo videos for your software, writing documentation, setting up a support system for customers, and dealing with the legal necessities for starting a new business.
At the end of these very busy six weeks, you’re ready to start selling! You’re proud of yourself because, other than the costs of filing paperwork with the government and purchasing web hosting, you’ve spent no money at all. If you imagine that x is the amount of dollars you would have spent hiring professionals to do all that, then you have saved x dollars by doing it all yourself.
The only problem is there’s one thing you didn’t do during those six weeks: build software. During all that time creating your website, you didn’t do what you’re best at, which is writing code. No new apps or programs were created, no features were added, no bugs were fixed. What would all that work have been worth if you’d spent the six weeks on it instead? If you imagine y is the value of six productive weeks writing software, then y is money lost by doing something else. This is your opportunity cost.
Putting these numbers together can reveal whether hiring professionals or doing everything yourself is the wiser investment. Take x, the amount you could save by doing it yourself, and then subtract y, the amount you’d gain by working on your product instead, to see what the difference is. This almost always requires some rough estimation and there are definitely other factors, but it is still a valuable exercise for all entrepreneurs.
2. Doing it right the first time
My father always used to tell me that the easiest way to do something was to do it right the first time. He worked in construction and home repair and knew from experience just how costly it can be to take shortcuts. Entire projects can fall apart and need to be rebuilt because they were built on flimsy foundations or without vision or precision. Websites are no different.
When considering whether to hire or tackle a project yourself, it’s important to recognize that without years of learning and practice, you may be unable to produce something quite as polished as an experienced professional. How important is quality to your project? Can you afford to risk going live with something subpar? And what happens if you end up needing to completely redo everything later on because it was not developed properly? This happens all the time. I’ve witnessed firsthand how often this happens, with numerous clients having come my way due to disastrous attempts at self-built sites or cheap projects gone wrong.
Paying someone else to build a website for you
Service related costs vary tremendously. You can hire someone to design your new logo for $5 or $5,000. That said, it’s possible to get an idea of what your costs may be. In the interest of keeping this post concise, let’s focus on website development.
The first factor to consider when estimating cost and choosing a provider is the provider’s status. Web professionals can typically be grouped into three tiers.
Hobbyists are individuals who build websites as a side project and not as their full time profession. These can be people in the early stages of learning, or just doing it as a way to earn a little extra cash, or both. They may have aspirations of transitioning to doing the work full time, or they may look forward to not having to hustle on the side to make ends meet. The key identifier is that the service you are hiring them to perform is secondary to them.
Hiring hobbyists can easily be a huge win or an epic fail. This tier of professionals is the least predictable. You may end up engaging with a budding expert who is just beginning to flex their development muscles, but who has not yet started charging expensive rates. Or you may end up working with someone who doesn’t know what they are doing, is learning everything on the fly, and doesn’t take your project very seriously.
The benefits of working with hobbyists are:
- You can potentially hire them for steeply discounted rates
- It is possible sometimes to form fruitful, long-term relationships as their skills and commitment increases
The cons are the risk that projects will…
- Be abandoned
- Be implemented poorly
- Take much longer than estimated
It’s important to remember that someone inexperienced in developing websites is likely also inexperienced with accurately estimating timeframes and cost; both of which can come back to hurt you.
The middle tier of web professionals consists of individuals who are building websites full-time but are not a part of a larger organization. This is their focus and how they pay their bills but they do it, at least mostly, alone.
Working with freelancers is much less risky than working with hobbyists simply because they are more committed and often more experienced. However, they will typically charge higher rates, though still less than agencies as they have far less overhead.
The pros of working with freelancers are:
- The ability to work directly with the web professional, which may not be the case with an agency
- Usually lower rates than agencies
- Often greater flexibility is possible when it comes to project specifications and timelines, compared to with agencies which may be more restrictive
- Typically more skilled, experienced and reliable than hobbyists
However, there are a few downsides:
- Since they operate solo, they may not be able to provide the same level of guarantee that an agency with fallback resources can
- Their expertise may be narrower which means it may be necessary to employ other parties for other parts of the project
The most reliable, predictable, and reputable provider for website development is also often the most expensive and rigid. Agencies are larger businesses with teams of people. They will have specialized staff assigned to different aspects of the project, such as design, development, and project management. They may have a well defined process which you will be required to follow.
Bringing on an agency to create your eCommerce site will more often than not be the least risky of these options in terms of production quality, accuracy, finishing on time and within budget. Agencies will usually have a proven track record and a reputation to uphold. They will be less likely to encounter surprises along the way which impact you negatively.
Contracting with an agency is a great choice because:
- Risk of failure and project abandonment is low
- They are better equipped to handle unexpected events (like a change in circumstances for those working on your project, or a last minute change in tack from your business)
- They are the most likely to still be around when you come back with other needs a year or two later
But there are a few reasons to consider otherwise:
- They’ll cost the most
- They may impose their own process vs. adapting to your preferences
- You may be interacting only with an account or project manager rather than the actual production team
It is important to note that these observations are generalizations and not strict rules. There are hobbyists who charge more than some freelancers, and some freelancers who charge more than some agencies. They key when making a choice between providers is to compare apples to apples. Your needs may be best suited to working with an agency. If that is the case it would be prudent to look at a variety of agencies and compare them against each other. It is not constructive to evaluate them against a reputable freelancer you’ve heard of or your niece who just learned how to build websites in a college class.
Also worth noting for each of these types of professionals, but especially for agencies, is the local market really matters. Equivalent professionals may charge very different prices simply because of their location. For example, an agency based in New York City will very likely charge higher rates than one based in Boise, Idaho.
One of the most important factors contributing to the final cost of creating your digital eCommerce website is the feature set. In the good old days of web design, prices were often very simply calculated based on the number of pages needed. For better or worse, it just doesn’t work that way anymore. Today, much greater emphasis is placed on the features a website needs.
Here is a short list of eCommerce features which a website developer or agency would need to know about before they could provide a cost estimate:
- Product reviews
- Multiple payment gateways
- An affiliate tracking system
- Discount codes
- Specialized reports
- Product variations
- Transaction fees
- Pricing tables
- Refund processing
- Customizable purchase receipts and new sale notifications
These are only a few of hundreds, if not thousands, of potential features which will affect the final cost of a website built by a professional. What each developer charges for each feature will vary, but the general rule is that more features will always result in a more expensive project.
Deadlines are a big deal when planning a project. For starters, when hiring a professional, availability can be an issue. Most web developers are not able to start new projects at the drop of a hat and some may even be booked well into the future. But more pertinent to this post’s topic is the schedule’s impact on pricing.
Scheduling does not always directly affect project pricing. Often though, web developers are willing to consider accelerated timelines for a premium price, and occasionally may be willing to negotiate a discounted rate for a more relaxed deadline. After almost six years of building websites for other businesses, I learned the average time to completion was three months. Periodically we would consider requests from clients to speed up the process which always necessitated compromises such as higher pricing or a reduced feature set. Web developers often quote the old adage: “Good, Fast or Cheap. You can pick no more than two.”
Website creation cost estimates
The fact that pricing is far from standardized and every project is totally unique makes providing accurate numbers difficult, if not impossible. However, through experience with pricing projects, studying pricing strategies, and learning from peers in the industry, I’m able to offer some insight and rough guidelines.
Here’s a breakdown of what you should expect to get based on various budgeted amounts:
For a budget of less than $1,000 you can expect to be able to put together a very basic website, possibly with the help of a hobbyist. A freelancer may be available who can take on a portion of the project but not likely an entire site. Don’t expect anything beyond some consulting from established agencies.
$1,000 – $5,000
This range is where experienced hobbyists and beginner freelancers will be be pricing projects most often. At this level you can hire either a semi-experienced freelancer from a small market or an inexperienced freelancer from a large market to complete a project for less than five thousand dollars. Some agencies may be willing to provide limited services in this range but rarely complete projects.
$5,000 – $10,000
Crossing the $5k threshold is where more experienced, reputable freelancers will become interested. Expect to be taken seriously by experienced freelancers and some small agencies if your feature set is not huge.
$10,000 – $25,000
With a budget in the low five figures, you will be able to work with middle to top tier freelancers and small to mid sized agencies for complete projects.
If you have a budget above $25,000, you should expect to be working with established, reputable agencies. Top tier agencies may consider this a starting budget for very small projects, but many boutique, capable agencies will be able to complete feature rich websites at this level.
Once again, these estimates are based on experience and will help you set reasonable expectations. It is also worth noting that eCommerce sites can absolutely get far, far more expensive than $25k but at that point, these guidelines break down and are less helpful. Six- and even seven-figure projects do exist, however they are typically bespoke, enterprise level projects, delivered over extended time periods by the upper echelon of industry professionals.
The bottom line
Upon reflection and conversations with contacts in the industry, a common sentiment is that much of the initial cost of setting up a new digital eCommerce site, is paid in time rather than money. Between the research it takes to determine which tools are appropriate, hiring and working with a professional, learning how to use the site, branding, developing content, and everything else that goes into launching a new venture, it is important to recognize that some effort will always be necessary. The dollars and cents may vary but the commitment needed to make any new business truly successful remains constant.
What have your experiences been regarding the costs (both time and money) to build digital eCommerce sites? Did we forget anything that you believe is important for new store owners to remember when first setting up their website? Leave a comment below!
Also check out the second part of this series where we look closely at the many ongoing costs incurred by digital store owners.