How to create a feasibility study for a successful online store

Whatever commercial project idea you have in mind and wish to implement to turn the project into a tangible reality, you need a feasibility study to evaluate the potential and predict the probabilities of success or failure upon launching the commercial activity online.

The feasibility study for your commercial project is like a compass that helps you determine your destination and avoid obstacles and challenges along the way. The importance of feasibility studies is not limited to huge projects only, but is also essential for small projects with limited budgets.

By accurately assessing your project's potential, you will be able to make wise decisions, avoid wasting resources, and thus achieve the desired successes.

In this guide, we will review with you, step by step, how to prepare a professional feasibility study for launching a profitable e-commerce project.

What is meant by a feasibility study for online stores?

A feasibility study is an intensive and comprehensive analytical process to evaluate all factors affecting the probabilities of success and profitability of the proposed project, such as the size of the target market and its ability to absorb the new product or service, projections of revenue, sales, and profits over specific time periods, in addition to identifying the strengths, weaknesses, opportunities, and threats that the project may face. The feasibility study helps to scientifically and realistically evaluate the possibility of achieving profit goals and return on investment before starting to implement the project.

Follow these steps to conduct a feasibility study for a profitable e-commerce project

Suppose you want to launch an online store for selling tea, this will require you to prepare a feasibility study for this commercial project according to these steps:

First: Conducting a preliminary analysis of the project idea:

A comprehensive feasibility study is a powerful tool for evaluating the possibility of implementing commercial projects, but it consumes a lot of time and resources necessary to analyze the project from all angles and come up with accurate results.

Therefore, it is wise to conduct a preliminary and quick analysis before embarking on a comprehensive feasibility study to launch an online store project for selling tea online to determine whether it is worth investing in conducting the feasibility study or not. This will require you to:

• Create a detailed plan for the project idea including sub-goals represented in providing a distinctive shopping experience for customers through ease of use and fast delivery, and providing rare and unique types of tea, in addition to other goals that serve the main objective of launching the store, which is achieving profitability.

• Determine the products that the store will specialize in and intends to offer to customers. For example, will you sell basic tea leaves, healthy tea products such as organic green tea and herbal tea, or all of these types together?

• Evaluate the intensity of market competition for this project by finding examples of online stores that sell tea products and determining their success and position in the competition.

• Compare your project's competitive advantages with competitors in the market to determine whether you will offer something new to customers or not. For example, if your competitors do not offer fast delivery of tea products at competitive prices, while you do offer this service, this means you will offer something new to potential customers.

• Study the levels of supply and demand in the market regarding the idea of selling tea products online. For example, preliminary data may show that there is an increasing demand for herbal tea types online with a shortage of online stores offering these types of products, which indicates an opportunity to sell these types of tea products online and achieve profitability from them, focusing on providing high-quality products and excellent customer service.

• Identify potential risks and challenges to know the things that will pose a threat to your success in launching an online tea store. For example, you may face issues related to logistics, fluctuations in tea prices, or increases in marketing costs, etc.

Once you have completed the preliminary analysis of your project, you will have a better idea about continuing to explore the feasibility of starting an online tea business from all aspects or not, to be ready to move to the next step.

Second: Analyzing the financial feasibility of your project:

This important step in conducting a feasibility study to launch an online tea store project aims to evaluate the viability of launching your commercial project and the products or services it offers by analyzing production cost and expected revenue flows.

This analysis is based on the preliminary analysis you conducted on the project idea to explore market demand and appropriate price points. This analysis provides a lot of information such as:

• The investment requirements necessary to launch the online store for selling tea products.

• The project's cash flow features, including inputs and outputs.

• The expected profits from this project.

To achieve the maximum possible benefit from the financial analysis, you can use these tips:

• Evaluate all expenses associated with launching the online store, including the cost of website design, products, labor, leasing, maintenance, marketing, and any other related costs.

• Try to determine the potential demand for the tea products to be sold and the expected sales over specific time periods, using market research and previous studies to estimate potential demand and revenue forecasts.

• Determine the expected cash flows for your project, including expected revenues and expenses over a specific time period, and estimate the net cash flows for each period and analyze them to understand the times when there may be a shortage or surplus of financial liquidity.

• Evaluate the potential risks that may affect your project, cash flows, and profits, and try to define strategies to deal with these risks and limit their negative impact.

• Infer the expected profits from the online tea selling project by comparing costs and revenues to estimate the potential profits of your project, and use this information to evaluate the feasibility of the project and make a decision on whether or not it is worth investing in.

Third: Comprehensive analysis of the target market and competitors:

This step is also one of the important steps that must be taken when preparing a feasibility study to launch a commercial project for selling tea online to understand the nature of the target market and the nature of competitors, and thus identify growth opportunities and challenges that you may face. This will require you to:

• Evaluate the targeted geographical areas.

• Study population trends, demographic data, cultures, and their willingness to purchase.

• Analyze competitors in the target market by identifying companies or commercial projects that offer products or services similar to your project idea to assess the strength of competition, learn about competitors' advantages and disadvantages, the pricing and marketing strategies they use, and the strengths and weaknesses of each competitor. You can gather information from websites, industry reports, surveys, and news, to identify competitive advantages and seize available growth and superiority opportunities.

• Determine the total market size and roughly calculate the market share and estimate the possibility of expansion by assessing customer response to new services or products.

And do not forget to analyze industrial trends related to your commercial project and review new innovations, future technology, and changes in laws and regulations that may affect your target market. Understanding these trends helps you ensure the sustainability of your project in the future and discover new opportunities that can be leveraged to ensure growth and expansion.

Fourth: Study your project from a technical perspective:

This step relates to studying and evaluating your commercial project from a technical perspective, including raw materials, required human resources, necessary tools and equipment, and the specific place for the project.

The goal of this step in conducting the feasibility study is to identify the most important tools and equipment that can be used in the online tea selling project, define the technical specifications of the products and services offered, and know the necessary and essential expertise to manage the project efficiently and effectively.

You can use these tips to help study your commercial project from a technical perspective:

• Accurately define the specifications and features of the product or service offered, including the quality of the products to be sold, the expected appearance, functions, and performance. Evaluate the future customizability and development potential of the product or service.

• Determine the technology and infrastructure required to implement the project effectively, including identifying the equipment, devices, software, and technical systems you will need.

• Analyze the operational processes necessary to implement the project to evaluate the production capabilities, including identifying the required human resources, labor, and skills necessary to successfully operate the project, in addition to evaluating the operational space and physical equipment required for production and distribution.

• Evaluate the technical feasibility of the project, i.e., whether the technology used is sufficient to achieve the project's commercial goals and meet the increasing market needs for tea products or not.

• Explore potential technical risks for the project, including equipment failure, technical compatibility issues, unsustainable technologies, and other risks that must be analyzed and evaluated to know their impact on the feasibility of launching the project to develop solutions and strategies to deal with them.

Fifth: Evaluate your commercial project from a legal perspective:

This step aims to define the legal aspects related to establishing and operating an online tea store and ensuring compliance with local and international laws and regulations. This requires you to:

• Choose the appropriate legal structure for the company, whether it is a limited liability company or a joint stock company.

• Register the commercial activity and obtain the necessary licenses, such as issuing a commercial register and complying with tax and regulatory authority requirements.

• Comply with occupational safety and health requirements, consumer protection, intellectual property rights, data protection, taxes, social insurance, and any other relevant laws.

• Verify that the commercial project does not violate the intellectual property rights of others and that it possesses the necessary property rights to market the products or services.

Sixth: Develop a clear vision of potential risks and solutions to overcome them:

Upon completion of the previously mentioned steps and ensuring the feasibility of your project from all aspects, it is essential to work on developing a comprehensive vision of the potential risks related to launching an online tea store as an important part of preparing a comprehensive feasibility study. To do this professionally, the following tips should be followed:

• Analyze all potential risks that could affect the project, including internal risks such as poor management or lack of financial resources, and external risks such as changes in the market, legal legislation, or intense competition.

• Use the SWOT analysis tool to identify and evaluate the strengths, weaknesses, opportunities, and threats that may affect your project, and also rely on PESTEL analysis to identify influencing factors, potential risks, classify them, and evaluate them.

• Identify proposed solutions to overcome risks and challenges. For example, these solutions may include: diversifying products or services, improving inventory management, improving marketing operations, establishing strategic partnerships, improving technology, improving internal operations, strengthening competitive capabilities, and others.

• Evaluate risks based on potential changes in the internal and external circumstances surrounding the project and apply risk mitigation and management strategies based on new needs.

Important tips for writing a professional feasibility study plan

• Be sure to prepare an Executive Summary for the project that includes a complete summary of your commercial project, its objectives, the feasibility study process, and the agreed scope of the study, written in an attractive and smooth manner that is easy to understand.

• Ensure that the feasibility study plan is well-ordered and organized and free of spelling and grammatical errors, and use a professional format and design that makes the document easy to read and understand. Rely on titles, paragraphs, graphs, tables, and explanatory texts to organize information systematically and attractively.

• Ensure that the project idea is explained, the industry it belongs to, and the products or services it will offer clearly.

• Be sure to include operational considerations related to the facilities and resources required to complete the project, what is currently available, and what must be provided.

• Also consider the necessity of including a market analysis for the product or service offered, identifying the target demographics, competitors, growth potential, and existing presence that can be leveraged.

• Provide a timeline explaining the different phases of implementation, required activities, and shared resources by using a Gantt chart to illustrate the timeline for each phase of your project.

• Present your main conclusions from the feasibility study and provide your recommendations on whether or not the project should proceed. Be sure to summarize the key points that support the decision-making.

• Ensure the inclusion of a list of sources you used in preparing the feasibility study plan, including economic journals, books, reports, and previous studies and research.

Why should you conduct a feasibility study for launching your commercial activity?

A feasibility study is a comprehensive evaluation of the possibility of successfully implementing a project or idea, and this study includes a precise analysis of the different factors that may affect the course of the project to determine whether it is feasible and to know its sustainability and achievement of success and possible returns on investment. The goal of conducting a feasibility study for various projects is to answer these questions:

• Does the project idea meet market needs?

• Do you have the necessary resources to implement the project?

• What are the estimated costs of the project?

• What are the expected revenues?

• What are the risks and challenges you may face?

• How can you overcome them?

• What are the chances of the project succeeding?

• What factors might affect its success?

There are many reasons that make it necessary to prepare a feasibility study for your commercial project, summarized in:

• Helping to analyze and evaluate the financial aspects of your proposed commercial activity, including estimating operating and investment costs, and defining financial forecasts for potential revenues and profits, and then making an informed decision about the feasibility of continuing the commercial activity and expectations of financial returns.

• Understanding the needs of the target market through detailed study and analysis to understand customer needs, market trends, and the level of potential competition, and thus identify the strengths and weaknesses of your commercial project to innovate solutions and develop necessary strategies.

• Identifying and evaluating the potential risks you may face in your commercial work to develop different scenarios and analyze external factors that may affect the commercial activity and know the potential opportunities that can be exploited to achieve success and growth.

• Providing information and analysis that help you convince investors and financial entities of the feasibility of investing in your commercial project and that it is sustainable and worth the investment.

The most important components of a feasibility study

Relying on the different components of feasibility studies helps evaluate your commercial project from multiple angles to determine its viability from all aspects. The most important components of a feasibility study include the following:

• Technical Feasibility:

This is an aspect of feasibility studies that focuses on evaluating the technical aspects of the commercial project such as infrastructure, technology used, required equipment, and the ability to successfully execute the project. This component in the feasibility study aims to determine the availability of the necessary resources and technologies to implement the project effectively.

• Financial Feasibility:

It is concerned with evaluating the financial aspects of the project, such as expected costs and revenues and potential profits, and aims to determine the profitability of the commercial project financially and whether it is worth the investment.

• Commercial Feasibility:

The task of this component of feasibility studies is manifested in analyzing the commercial aspects of the commercial project, including the target market, the nature of the competition, marketing, and distribution. This aspect of feasibility studies aims to determine whether there is sufficient demand for the product or service offered by the project and whether there is an opportunity for growth and expansion in the market or not.

• Legal Feasibility:

Its task is summarized in examining the legal aspects, such as compliance with local and international laws, regulations, and permits to uncover any potential legal obstacles that could hinder the commercial activity.

These are some of the components of feasibility studies that reveal the different aspects of the project to be launched and predict the possibility of its success and achievement of the desired profits.

The main differences between a business plan and a feasibility study

A business plan and a feasibility study differ in several aspects, including:

• Purpose and Goal:

A business plan aims to set the necessary steps and procedures to achieve the specified commercial objectives and focuses on describing the vision and goals and defining the operational, marketing, and financial plans for the company. While the feasibility study aims to evaluate the viability and suitability of the project idea from an economic and commercial perspective by focusing on market and competition analysis and the financial and technical aspects of the project.

• Timing:

A business plan is prepared after conducting a comprehensive feasibility study for the project and confirming the feasibility of its implementation. The business plan is like a roadmap that specifies the practical steps and resources required to achieve the desired goals. While the feasibility study is an initial phase that assesses the viability and profitability of the project and helps in making a decision about whether to continue or abandon the idea.

• Content:

The business plan includes specific details about objectives, strategies, operational, marketing, and financial plans, resource allocation, project scheduling, and defining responsibilities and tasks. While the project feasibility study includes an analysis of the market, target customers, competition, financial forecasts, and expected costs and revenues.

In general, the feasibility study focuses on evaluating the viability of the project from financial, economic, environmental, social, and technical aspects, and forms the basis for making a decision on whether or not to launch the commercial project, while the business plan focuses on defining the necessary steps to implement the project based on the results of the feasibility study.

It can be said that the feasibility study is the fundamental basis and the first stage in the framework of establishing a successful project, while the business plan comes in a later stage to implement the project in an organized and effective manner.

The most important frequently asked questions about the feasibility study:

How much does it cost to set up an online store in Saudi Arabia?

The cost of setting up an online store in Saudi Arabia varies depending on the size of the project and its technical and marketing needs, but it can be said that the average cost ranges between 3,000 to 20,000 Saudi Riyals. This cost usually includes website design and development, domain name purchase, hosting, platform or content management system costs, in addition to electronic payment gateway fees and linking with shipping companies, and ongoing operational costs such as technical maintenance, technical support, and digital marketing should not be overlooked. Since the Saudi market is witnessing rapid growth in e-commerce, investing in a professional online store is no longer a luxury, but a competitive necessity for entrepreneurs who wish to reach a wider audience and enhance the reliability and digital presence of their brands.

Are online stores profitable in Saudi Arabia?

Yes, online stores are profitable in Saudi Arabia, especially given the rapid growth in the e-commerce sector at the local level. Digital transformation and government support for Saudi Vision 2030 have contributed to creating a conducive environment for investment in this area, with an increasing number of online shoppers, growing confidence in electronic payments, and the development of delivery and logistical support services. The profitability of the online store depends on several factors, most notably:

• Choosing a suitable field.

• Having an effective marketing plan.

• Quality of products or services.

• User experience within the store.

With smart management and periodic data analysis, store owners can achieve sustainable profits and expand their business locally and regionally.

What is the necessary duration to create a feasibility study for an online store?

On average, the necessary duration to prepare a comprehensive feasibility study for an online store ranges between 7 to 21 working days, depending on the size of the project, the details of the target market, and the availability of data. This period usually includes research and analysis phases, such as:

• Market and competitor analysis.

• Defining the target audience.

• Cost estimation (establishment and operational).

• Financial feasibility study (expected revenues, break-even point, return on investment).

• Evaluating legal and technical aspects.

• Drafting the marketing plan.

The duration may be longer if the project targets several countries, or requires complex operational models (such as integration with ERP systems or multiple platforms). Conversely, the duration can be shortened using ready-made templates or artificial intelligence tools, but it is important that the study is accurate and comprehensive to ensure the success of the project.

What are the most prominent elements in a feasibility study for an online store?

A feasibility study for an online store includes a number of essential elements that constitute the analytical, financial, and operational framework for the project. The most prominent of these elements are:

• Executive Summary.

• Market study and competitor analysis (strengths, weaknesses, prices, and services).

• Technical and operational description.

• Marketing plan.

• Financial study.

• Legal and regulatory study.

• Risk analysis and emergency plan.

• Recommendations and final decision.

Conclusion

Conducting a feasibility study is the cornerstone of any successful commercial project, as it provides a clear roadmap for implementing your project and helps you avoid risks and obstacles. Therefore, do not overlook the importance of the feasibility study, and do not proceed with launching your commercial project without preparing it, and be sure to:

• Review and update the results of the feasibility study periodically to help keep pace with changes in the market and the surrounding environment.

• Do not hesitate to seek help from experts, as sharing knowledge enhances your chances of success.

• Be confident in yourself and your abilities to overcome various challenges and achieve all the goals you seek.