It’s no secret that budgeting is one of the most important pieces of any website redesign.
There’s a wide range of prices for an ecommerce website. A website that’s too cheap might underperform at key moments, but overspending isn’t ideal either.
How do you find your Goldilocks price—the one that’s just right?
We’ll show you how in this article.
Factors Influencing an Ecommerce Website Budget
Fixed-cost website budgets don’t work. You know, stuff like...
"Design costs $X
SEO costs $Y
Product assets are $Z for product"
Fixed-cost ecommerce budgeting assumes your needs are the same as someone else’s. That's not true.
In this chapter, we'll show you a smarter way to break down ecommerce website costs.
Prioritize Business Needs
There are 2 faults to the fixed-cost ecommerce pricing model:
- It assumes predictable and cookie-cutter answers for each business problem you want to address.
- It prioritizes technological considerations over business needs.
You should avoid both of these pitfalls.
- Instead, prioritize what your business needs. Your business isn't the same as someone else's and certain elements will make a bigger impact for you than for someone else.
You should reflect those priorities in your budget.
Still a little unsure about your brand needs? You might want to pop over to our guide about planning for a website redesign instead.
Budget by Value
Websites—particularly ecommerce websites—need to drive sales.
Ecommerce demands a high-performing website.
Think about it...
While a normal website just has to sit there and look pretty, you have to run a piece of software.
You have your product database, your tracking code, all kinds of forms, payment capture and a checkout portal...you get the idea.
A typical website just won't cut it.
Think of your website as an investment in your business. The long-term dividends will dwarf the upfront cost.
When you think of your website this way, a quality redesign suddenly seems like a bargain.
Ecommerce Budget Calculator
Calculating stuff by hand isn't our idea of a good time.
That's why we created a calculator that’ll give you an ecommerce website cost estimate.
The number you’ll get represents all your costs—from assets to development.
Click the button below to try it out.
The Ecommerce Website Cost Formula
Now that you know what to consider as you budget...how do you find your number?
In this chapter, you'll learn about the Ecommerce Website Cost Formula we developed and how to use it to anticipate your costs.
Ecommerce Website Cost Formula Overview
What exactly *is* the Ecommerce Website Cost Formula?
It's a function we developed that assesses what you should budget for a redesign based on how your website performs right now.
So the smaller your business, the less money you should expect the budget.
The factors we use in the ecommerce website design and development cost formula are:
- Annual ecommerce revenue (BASE)
- Average product value (product_mult)
- Total product library (library_mult)
- Total order history (order_mult)
- Total customers (cust_mult)
- Number/difficulty of third-party integrations (size_mult)
The formula is:
COST = BASE + (BASE x product_mult) + (BASE x library_mult) + (BASE x order_mult) + (BASE x cust_mult) + (BASE x size_mult).
Look intimidating? Don’t worry—we’ll walk you through all of it.
It doesn't make sense for a startup to make a big investment in an ecommerce website.
If that's you, we suggest going the minimum viable product (MVP) route to test the market and your positioning with relatively low risk.
Base level Shopify plans are a great opportunity to get a store up and running quickly. Their base platform without customization is pretty simple to work with, even if you’re not a developer you can get a few product category and product page designs up. Try Shopify out yourself with a trial subscription.
Annual Ecommerce Revenue (BASE cost)
Annual ecommerce revenue is the revenue you can directly attribute to your ecommerce store. Brick-and-mortar not included.
If you’re an established business with steady sales, you should average your ecommerce revenue from the past few years and use that number.
Otherwise, go with what last year’s revenue or whatever your projected revenue for this year is.
Now that you have that number, let’s calculate the base.
Your BASE is equal to 3% of your annual ecommerce revenue (AER).
In this example, our AER is $750,000.
BASE = 3% of AER = 0.03 x $750,000 = $22,500.
Average Product Value
As a general rule, it takes more time and effort to sell a high-ticket product. Look at this:
Notice the prices. The spinner costs $4.90 but the desk costs $1,599.
Second, notice the disparity in the number of photos. The widget spinner has two photos but the adjustable desk has more than 5 photos (and at different angles).
...what should you take away from this?
Simple: Your customer needs more information about the high-ticket item before they feel comfortable buying.
Therefore, high-ticket items cost more during your redesign because they need more attention.
We represent this as Average Product Value (APV), which determines the product multiplier in the ecommerce website cost formula. Use this table to find it:
Say your average product value is $300.
According to the table, that means your product multiplier is 50% of your BASE value.
Assuming a base of $22,500, here's the math:
Product Costs = 50% of BASE = 0.5 x $22,500 = $11,250.
If you’re creating a new look on your existing platform, then you don’t need to worry about migrations. You’re not moving anything around.
But if you’re changing platforms—for example, moving from Magento to Shopify—then data handling will be a big factor in the overall cost.
The bigger your product library, the more data that needs moving. (It takes less time to migrate 50 products than 2,000.)
Here are the average costs we see with data migration:
We have 1,000 products.
That means our costs for product data are 3% of BASE.
Product Data Cost = 3% of BASE = 0.03 x $22,500 = $675.
Orders are data. Like with product data, migrating tens of thousands of order data is a significant time investment. You know the drill by now—here’s how to find your order history multiplier:
We have 7,500 orders.
Our estimated order data costs are 5% of BASE.
Order Data Cost = 5% of BASE = 0.05 x $22,500 = $1,125.
The total number of ecommerce customers you had last year.
Again, remember not to count any brick-and-mortar customers in this number. This is online customers only.
We have 12,000 customers.
Our estimated customer data costs are 10% of BASE.
Customer Data Costs = 10% of BASE = 0.10 x $22,500 = $2,250.
Logistics + Integrations
Almost all ecommerce websites require some level of third-party support to run.
...Those can complicate your costs. By a lot.
Many popular shipping, fulfillment, payment, POS, and 3PL integrations have pre-built connectors with leading ecommerce platforms. If that’s the case, your overall investment in integrations should be pretty low.
That said, we often need to create custom APIs for our customers. It’s good to budget for this just in case.
You should understand all of your website's technological requirements before you hire a web development agency.
That’ll help both of you make smart decisions about whether or not to create custom integrations.
We have 750 different products.
Our size multiplier, according to the table, is 10%.
Integration Costs = 10% of BASE = $22,500 x 0.10 = $2,250.
The Ecommerce Website Cost Formula in Action
Now that you’ve broken down each of the numbers you need, it’s time to walk through the formula itself.
Let's assume some bases:
Annual Ecommerce Sales: $750,000
Average Product Value: $300
Total Products (including S/M/L size variations): 1,000
Total Orders: 7,500
Total Customers: 12,000
Now, let’s look at our function table to grab the right formulas.
Now all you have to do is plug in your numbers and add everything together.
BASE = AER x 3% = $750,000 x 3% = $22,500.00
Now let’s look at product multiplier. Our average product value is between $251 and $300, so we use 50% in our calculations.
Product Multiplier = BASE x 50% = $22,500.00 x 0.50 = $11,250.00
Then Product Data Migration cost. We have 1,000 total products, so we use 3% in our calculations.
Product Data Migration Cost = BASE x 3% = $22,500 x 0.03 = $675.00.
Next up is Order Data Migration Cost. We have 7,500 total orders, so the table says we should use the 5% multiplier.
Order Data Migration Cost = BASE x 5% = $22,500= x 0.05 = $1,125.00.
Customer Data Migration Cost—You know the deal by now.
Customer Order Data Migration Cost = BASE x 10% = $22,500 x 0.10 = $2,250.00.
Finally, let’s look at integration costs. We have 1,000 products, so to be safe, we’re going to use the 20% multiplier.
Integration Cost = BASE x 20% = $22,500 x 0.20 = $4,500.00.
Now comes the easiest part: add everything together.
Total Cost = BASE + Product Multiplier + Product Data Migration Cost + Order Data Migration Cost + Customer Order Data Migration Cost + Integration Cost
= $22,500 + $11,250 + $675 + $1,125 + $2,250 + $4,500
Remember: this number includes everything—web design, web development, data migration, integrations, etc.
If you wanted to do this by hand, now you know how.
But we’d guess you’d rather something do the math for you.
That’s the ecommerce website development cost formula we use at Huemor to give our clients an estimate of how much they should spend on a redesign.
Now we’d like to hear from you. What did you think of this post? Will you use this formula for your own website redesign?Let us know in the comments.