For those who have the relevant technical knowledge (I really mean education/experience) and already own the software applications necessary to run a business and you have the time and energy to dedicate to the building and operation of your online store, then your cost will likely only be a small percentage of what your time is really worth. If on the other hand you have little technical knowledge or graphic skills, then you need to consider the building and setup of your online store as a substantial part of your business plan. How much will it cost to have professional graphics? How much will the programming cost? What about the daily operations costs? Merely owning a free open source application provides a false sense of the true cost involved in operating any online store. Of course, if you want the rock bottom up front investment, you should consider seeking out and getting setup with one of the many companies who provide drop ship services.

The majority of users will need to pay for or locate the following: Software and Customization, Template or Custom Design, Domain Names, Web Hosting, Technical Support, Credit Card Processing, Security and SSL Certificate, Other Computer Programs and Upgrades, Education and Training and Operations Labor.

Let’s take a look at each of these items in turn so we can get a better picture of the true costs.

Software and Customization
(Typical expense incurred for this step - $0 to unlimited)
It is generally uncommon for an online store/shopping cart to contain all of the features in the exact configuration that a business requires. Once you have developed your business idea, you will likely need to do a lot of research to find the program or programs best suited for your industry or business plan, and then have the program(s) customized for you. One option that tends to reduce this expense is to select a program that is loaded with as many features as you can find, hoping that it will contain most or all of the features or capabilities that you need.

Generally the web store software will need to be installed and set up by a web programmer/developer to meet your custom needs. You may also already use a program such as Quickbooks, and have a desire to download your sales directly into that program for financial reporting or tracking purposes. As is the case with most open source shopping cart software, even when a "contribution" or plug-in is available for free, programs such as Quickbooks require special customization or integration to make everything work within your particular configuration and business rules.

Template or Custom Design
(Typical expense incurred for this step - $50 to unlimited)
This is where a great many new shop owners have difficulty when it really shouldn’t be that way, but if you don’t understand the concept of multi-channel marketing to include Corporate Branding, Product Branding in certain cases, SEO Optimization and simple design rules, your online store will fall short in not only its ability to get noticed, but also in its ability to generate sales. You also need to consider that while you can successfully utilize a stock template, you need to make sure that your web store incorporates your unique company identity in some substantial way and that you have at least explored optimizing your store for conversion. Most stock templates that we have found over the years completely ignore this aspect of online marketing and conversion practices and in many cases actually break all of the proven rules for converting your visitors into buying customers. In many cases, the most successful web stores have a unique appearance or template which incorporates all or most of these elements but they can easily run into the thousands and even tens of thousands of dollars to design and program. This is where an experienced, well versed professional web designer will be worth their weight in gold. If you start with a clean template and develop it from there, you can do many things to substantially increase your return on investment for this aspect of opening your new web store or even renovating an existing store to increase sales.

Many times a web designer/developer will create a picture of what your store will look like, called a "mock-up" so that you can more easily change it before investing in the programming necessary to make that vision work on the web. It is rare for a web programmer to also be a graphic designer, but these two are a crucial part of developing the web store and often work together to give you a seamless project. Asking how much a custom web store design will cost is somewhat like asking how much it costs to design a house. The answer varies greatly and for the web store specifically it depends upon how much customization, branding and optimization that you want or need and whether you are willing to work from an existing stock template (or plans for a house). A custom web store design can run from several hundred dollars for a very simple design, to several thousand. There are so many places on the internet for a person to choose from now that merely hanging out your shingle, moniker for opening your doors, is quickly becoming a sure path to failure.

If you choose not, or cannot afford to hire a graphics designer to do a custom design for you, the option still remains to select a pre-made template as there are many available for a large selection of open source e-commerce systems. You can find the template most similar to what you had in mind, and begin building your store from there with simple changes in the beginning. As stated above, the quality of these templates varies widely and generally starts at around $50 for a non-exclusive design that is licensed to a handful of other stores, generally fewer than a dozen; to around $2,500 for a template that has never been used on another web store and which would never be resold again. The customization charges from this point are generally based on hourly rates.

Remember, your web store is a virtual symbol of your real world store, even if you don’t have a real world store you should view it that way. If a customer walking into your retail shop wouldn’t make a purchase because the shop was cluttered, messy, and had too many obstacles for the customer to overcome before making the purchase, they would likely walk out without any intention of ever returning let alone giving up any of their hard earned cash. It’s not good enough to get the traffic – you have to get and keep the customer too!

Domain Names
(Typically costs $8 to $35 a year for each variation)
This actually may be one of the smallest expenses in establishing a web store online, but it can be vital to the success of your store. If you can include "keywords" in your domain name that customers will use to search for you, such as the name of your product, or the category of items you carry, then your search engine work later on will generally cost less, because most search engines list the site with the search term in the domain name higher than those that do not.

For example: if you choose the domain name for your store AcmeChainsaws.com, your later search engine work will likely be cheaper and easier because it will "organically" catch searches for saws, chainsaws and Acme chainsaws. A tip: if you cannot fit the search words into your domain name, or if they are all taken, it is next-best to put them in your file names or more precisely the URL (Uniform Resource Locator) of your web pages.

There is a debate over how many domain names to have for your website and how to structure them, but the simple answer is go for a domain name ending in .com first and then if you feel the need to protect the domain, include the .net, .us, or even .biz variants. A different strategy is to take up all of the .com variants that you can afford. However, let’s take a look at reality here also. The more domain names you have, the higher the renewal costs, redirect issues can become a problem if you can’t or don’t configure things correctly and you need to realize that without some common sense restraint, this strategy can quickly get out of hand. Our recommendation is to stick with no more than 3 name variants of your primary domain name and register them for at least a couple of years each. This will also tell search engines that you really are in business for the long haul and you will likely get a bonus for it in the rankings. You may also want to consider putting your domain(s) on auto-renew so that you don’t forget to renew it/them. Just make sure that the credit card you use has an expiration date several years into the future and that you keep enough of the credit line free to pay for all of your renewals when they occur. (A good idea here is to pay off the credit card each month and never charge more than 70% of your available credit – but that’s a whole different subject.)

Web Hosting
(Typically found from $5.95 for virtual hosting to $300 a month or more for dedicated hosting)
Web hosting is one of the most crucial aspects of your online store, and one that all but the most techno-elite must purchase. All other things being equal, if you have a good web host, it will go a long way to providing you with a smooth and trouble free online operation. An unsupportive web host, or one that performs poorly, or changes configurations or upgrades often will make running your store a living nightmare, as you will never know if your store is online, being backed up properly, responding slowly for customers and worst of all, if the security of your store is being compromised. This makes a cheap host very expensive when you consider the collateral costs and repercussions.

In general, the cheaper the Web host, the less technical support you will receive. To summarize, the cheapest web hosting operations will generally include no support, moderately-priced web hosting operations will provide some level of support and the balance of hosting operations will provide decent or even exceptional support. The hosting providers who generally offer decent or better support will cost you in the $35 per month or more range. At $35 per month for support, you are actually getting a pretty good deal and the hosting provider is really banking on the fact that you are likely to have less than one support question per month. A hosting provider that offers telephone support or 24 hour support is actually pretty darn good and should be treasured as your most critical business partner. Make sure that the provider specializes in e-commerce hosting, and even better if they specialize in the e-commerce program that you use. By selecting a provider that meets this requirement, you will save yourself untold support costs and frustration over the long term.

Technical Support
(Typically ranges from $0 to $100/hr or more)
No matter where you personally rank on the technical knowledge scale, there is always someone who knows more than you, and someone who knows less. Even the technical guru types know someone they can call on in a pinch when a question has stumped them. This may surprise non-technical folks, who often feel that if they just tried harder they could find the answer themselves.

In addition to the sometimes overly sensitive forums, there are also e-mail support groups that can be found on Yahoo Groups or other mailing lists. Each e-mail group will have a different audience and a different charter, but in almost all cases they are free. Members of the e-mail group can post their questions to the group, and those members who respond also post their replies to everyone. In this way, everyone learns at once, and for free.

When you absolutely, positively cannot wait for free e-mail support from your group, a sympathetic techie is good to have lined up. You may want to just surf the bulletin boards or e-mail groups until you find someone who’s posted responses you trust, and contact them off-list. If necessary, and if the bulletin board or e-mail group allows it, post a message asking for a recommendation regarding a technical support person.

Your web host may also provide technical support either as part of your package, on an hourly basis, or at least be willing to recommend someone who does.

Credit Card Processing
(Typically starts at $20-$30/month plus per-transaction fees and what is referred to as a “discount rate”)
Of course the point of selling online is to get paid for the products and/or services that you offer. The most convenient method to accomplish this function is to accept payments via credit cards. This system is not setup to be advantageous to the seller no matter what they tell you as the banks make money regardless of whether you are the buyer or seller. Most credit card processors have upfront fees such as application fees (you do have to apply for a credit card processing account, just like applying for credit), setup fees, monthly fees and statement fees. In addition, for each transaction you will pay a fee ranging from the low two to five percent or more, though the most common fees are in the two-and-a-half-to-three percent range, this is called the “discount rate”. The safest choice is usually to go through the bank where you have your business checking account. Though some other processors do offer better deals – they are hard to locate and it is even harder to know whether you truly are getting a good deal unless you have shopped around. I would recommend a processor handling transactions through the Nova Network, Your Bank Processor, or Authorize.net. (Authorize.net is setup for online transactions with real time processing.)

Once you have decided on which online store program you want to use, find out what credit card processors they support and select one from that list. Note that many credit card processors will waive some or all of the upfront fees, and the only way to know for sure is to ask them to do it. Another aspect to consider, based upon your business model, is whether to process the transactions live in real time via a gateway such as Authorize.net or to process the transactions on the back-end via a retail type terminal or Processing Software for your PC. The biggest disadvantage in real time processing is that if you don’t have a good inventory of everything and/or you have difficulties sometimes getting certain items, you may end up processing refunds on a frequent basis, which is usually not the preferred way of doing things since the customers will likely see this as a reminder that you couldn’t fill all of their order up front.

If all these fees and issues have your head spinning, you may want to start with a simple, third-party off-site processor like PayPal. With no up-front or monthly fees, their per-transaction fee is a bit heftier, but you have no monthly overhead. Once your sales volume starts getting above say $1,000 a month or more, you will want to research other vendors to see where you can save on the processing costs.

A bonus of using the third-party off-site processor is that they provide all the security you need to complete the transaction, as no financial information is gathered on your Web site. This could mean that you can skip the next annual expense, the Secure SSL Certificate. The only caution here is that most people purchasing on the internet know only to look for a secure link of some kind while on your site and if you gather any personal information, you will most likely lose the potential customer at that point if they see no sign of a secure connection when they are on the page to submit their information. If your shopping cart can be configured to collect no personal information and the purchases and data gathering are handled by a third-party such as PayPal, you may be able to skip the Secure SSL Certificate on your site, providing that you make this aspect of the visitors shopping experience well know up front.

Security - SSL Secure Certificate
(May be obtained for $35-$300 per year)
I really didn’t want to refer anyone to a specific provider when starting out on this article, however I have to stop and put in a word for Godaddy.com since I did so for PayPal. After having operated my own hosting service for years and building some very high profile sites and quite a few e-commerce sites, it just came down to finding an economical solution that would work for others as well as it works for me. The result of this experience is that I now host ALL of my own personal websites on GoDaddy.com and purchase all of my Secure SSL Certificates from them as well. They have an excellent hosting package and the services included, especially SSL Certificates, are pretty seamless and easy to work with – not to mention that they have been very reliable for the past three years that I have been hosting with them. We typically end up paying about $150 per year for everything using either the Economy Hosting Plan or the Deluxe Hosting Plan. We like their support and their service so much so now that they are our only preferred provider at this point.

If you accept credit cards in your store as opposed to going through a third-party provider such as PayPal, you will need the files that store that credit card information to be encrypted to prevent hackers from stealing it from you. An SSL or Secure Socket Layer Certificate, indicated by the "S" in the httpS:// that precedes your store's address, tells visitors that the information they enter on that page will be encrypted by the server during transit. What most people don’t understand is that this is only HALF of the security equation. You MUST also store this information in your store’s database in an encrypted format using an appropriate encryption protocol AND you MUST NEVER transmit the information via email, except possibly during one transmission with only a small part of the information. The osCommerce Phoenix Edition web store software allows this configuration in its split email option by sending only the middle digits of the credit card, order number and the CVV number (if configured) in an email. An option also prevents sending the CVV for added security.

Please note that some web hosts claim to have a free shared certificate. However, shared certificates will pop up a warning saying the name on the certificate does not match the name of the store, and this is of course because the web host's domain name is different from your domain name. This ominous warning, which appears when customers go to check out, will cause most of your customers to abandon their shopping cart. You will need to renew your SSL on a regular basis, but you would be best served to purchase it for a minimum of 2 years regardless of your expectations or budget.

Other Computer Programs and Upgrades
(Typically ranges from $0 to well over $1,000 a year)
If you are a technically-minded person, you may be able to get by using Microsoft's Notepad program for editing the HTML and PHP files in your store. You probably should also consider other free editor programs such as Mozilla Seamonkey - which includes the Netscape Composer package or EditPad Lite – which can display program line numbers with multiple documents open in tabs. There are also a number of free and Open Source PHP editor programs for serious programmers. But quite a few moderately techno-capable store owners will choose an HTML editing program such as Adobe Dreamweaver, which runs hundreds of dollars and must be upgraded every few years, because these programs usually have so many useful and time-saving features that it minimizes the time required to develop or update the site. (There is a learning curve here and since everyone is different we can make no recommendation on where you should start except to say that you should start at free and work your way up from their until you find a solution that works best for you.)

If you will create and/or edit graphics or photos, you will also need a photo editing program. While there are also a number of free graphics editing programs, as well as many low-cost graphics editing programs, most moderately tech-savvy store owners will choose to learn the standard Adobe PhotoShop package, which also runs into the hundreds of dollars and likewise has so many useful and time-saving features that once you learn it, you will likely never want to work on graphics again without it. Note that Corel's Paint Shop Pro is priced proportionately less and has nearly the same features as PhotoShop.

There are also many smaller programs you can use, ranging from free file transfer programs such as SmartFTP or FileZilla, to code comparison programs such as Beyond Compare ($30), to password management programs for the many passwords you will likely (or should) have. Most have a free trial period which can reduce the risk of trying them out, but beware as uninstalling from a windows platform is not all it is hyped up to be, remnants usually stick around after the uninstall and in some cases may adversely affect the performance of your computer.

Education and Training
(Typically costs $100s to well over $1,000s – sometimes every year)
In order to measure the true costs of running your online store, you must include the cost of your own education and that of any employees you may assign to this task. You may consider your previous education a zero cost, in other words something that you invested in long before you decided to get into your web store venture, in which case you might say that the education or training component of your online store costs you zero.

However, for most folks, you will need to budget in the cost of purchasing user manuals, tutorials or training manuals if available, and occasional technical manuals such as books on HTML, PHP, e-commerce and/or the Internet to help give you background information. You may also need books on online advertising and/or marketing, Search Engine Optimization, security, and books to help you understand the computer programs you use, the digital camera you use to take photos of your products, photo or graphics editing software, and books on subjects such as video or audio editing if that is part of your store.

The simpler you make your store; the less you will likely need of these tools. Though there are a number of items that you really shouldn’t go cheap on or you will be constantly asking yourself what you have missed until you either get it right or you outright give up. Operating a successful online web store these days is not as simple as it once was and it continues to get more complicated and more demanding over time. There are simply too many choices for consumers these days with regards to where to shop and in many cases they never find the store that they are really happy with because of the rush of the masses to open a web store due to the hype that has surrounded the dot com successes and because of the disconnect that most people perceive in how simple and low cost it is to start a virtual store over those costs in establishing a real life brick and mortar shop.

Operations Labor
(Priceless and wildly varied)
Last but not least is the value of your labor and that of potential employees/contractors in running your store. Will you spend one hour every day, five days a week? Will this become your full-time career? How much should your hourly rate be worth? Will you need help shipping, ordering, maintaining the online catalog or store? Your job satisfaction may also be hard to quantify, but investing in the proper software and tools listed above will actually minimize the cost of your labor and that of potential employees, and over time labor will ultimately become your largest single expense.

The Bottom Line
When we consider the actual full costs of running an online web store regardless of whether it be an open source e-commerce store or a commercially packaged web store, only a few, highly technical people can run a store that could be categorized as nearly free ( the value of their own labor notwithstanding). The rest of us need to be realistic about the true, actual costs, because we will invest a good deal of cash into developing the online store of our dreams regardless of whether it is open source or not. Hopefully the information provided above will help those considering this venture in developing a more realistic budget and for those who really can’t afford it, it will prevent them from wasting current and future resources on an endeavor that they just aren’t ready for. In the pre-tech days of brick and mortar shops, people used to save for years before opening their businesses, in some cases it really hasn’t changed in the virtual world – it still takes real cash and real effort to be successful.