Are you looking to diversify your nonprofit's revenue streams?
Creating an online store is a great way to diversify your organization's fundraising approach and secure more financial support.
In this guide, we’ll walk you through the benefits of e-commerce for nonprofits and provide a roadmap to building a successful online store in 2024.
Create Your Nonprofit Online Store in 7 Steps
- Understand Tax Implications
- Choose Products
- Price Selling Items
- Choose Ecommerce Platform
- Build Website
- Establish Shipping Strategies
- Publish and Promote
How Creating an Online Store Can Help Your Nonprofit
Creating an online store offers nonprofits a valuable chance to diversify and stabilize their funding sources. A nonprofit can reach a global audience by selling branded merchandise or services, enhancing visibility and supporter engagement beyond traditional geographic limits.
Let's take a look at some more positives of opening an online store for your nonprofit:
- Grows Visibility:
Branded merchandise serves as a walking advertisement for your organization. When supporters wear and showcase your clothes or other products, they improve your brand visibility and recognition.
- Offers Incentives to Donors:
Merchandising can be a compelling incentive fors, convincing them to contribute and offering you a tangible way to acknowledge their support.
- Provides Insights:
Online sales offer essential information about donors’ preferences and buying habits. This helps you adjust your fundraising strategies accordingly to attract and engage more supporters.
- Provides Continuous Cash Flow:
Unlike other fundraising initiatives, an online store operates continuously throughout the year, providing a consistent stream of revenue.
- No End-Use Restriction:
Many funding sources, like nonprofit grants, have restrictions on how money can be used. An online store rarely has these restrictions as long as the revenue earned is directed toward your mission.
Creating an Online Store for Nonprofits in 7 Steps
1. Understand Tax Implications
The first step to creating your online store is understanding the legal aspects surrounding this revenue stream.
A clear understanding of Internal Revenue Service (IRS) stipulations for 501(c)(3) organization income will ensure that your store operates on the right side of the law. It will also help maintain your tax-exempt status, which can be revoked if the income generated is not being used correctly.
While nonprofits are permitted to sell products to generate revenue or earn profit, there are certain tax implications to be aware of:
- Unrelated Business Income Tax (UBIT):
If a nonprofit sells products or services that aren't directly related to its mission, it will have to file for the Unrelated Business Income Tax. - Sales Tax:
Depending on the state laws, nonprofits will have to collect and pay sales tax. - Product Liability:
Nonprofits must ensure their products are safe and high-quality to comply with the product liability tax laws.
It's important for you to ensure that all the items sold are closely aligned with your nonprofit mission and that the money earned is directed to support your organization and initiatives only.
2. Choose Your Products
Once you're clear about the tax laws, it's time to choose products that align with your organization's mission and values. The products you decide to sell in your nonprofit's online store will go beyond just generating revenue.
When you choose the right products, you achieve financial sustainability and establish brand identity.
Selling branded merchandise with your nonprofit's slogan or logo is one of the easiest ways to accomplish this. Your donors will be more than enthusiastic to purchase products that allow them to share the cause they support.
Here's a list of branded merch that you can sell:
- Custom designed t-shirts
- Mugs
- Bookmarks
- Tote bags
- Water bottles
- Stickers and enamel pins
- Stationery items
There is no limit to what you can offer - sell both physical and digital products on your online store.
Here are a few things to consider when deciding:
- Target Donors:
Understand your donor base and their preferences. Select products that appeal to them and nurture a stronger connection with your cause. - Quality and Sustainability:
Prioritize high-quality items that reflect positively on your nonprofit. Consider picking sustainable and environmentally friendly options to align with contemporary values. - Practicality and Usability:
Choose items your donors will find practical and usable in everyday life. This will enhance the chances of repeat purchases and support a consistent revenue stream.
3. Price the Selling Items Right
Unlike for-profit businesses, your purpose for starting an online store should be to cover expenses associated with running your nonprofit. Excessive revenue from online sales can push you toward tax liabilities and potential legal issues that could impact your tax-free status and reputation.
Ensure your price is accessible for the target market while covering your costs.
Here’s how to determine the right price for your items:
- Market Research
Research the market price of similar merchandise to learn about your target donor's pricing expectations. Check-in with other nonprofit organizations to see how they are pricing the items and their target profit margins.
- Collect Feedback From Supporters
Sell or display the products at different prices during other fundraising initiatives, like trivia nights or auctions, to collect supporter feedback on pricing and gain valuable insights into their perceived value and willingness to buy.
- Evaluate Production and Shipping Cost
Calculate your manufacturing and shipping costs and decide a reasonable profit level you wish to accomplish.
- Consider Fundraising Goals
Know how much revenue you require from merchandise sales to support your fundraising programs and activities. Clearly articulate how your online sales will contribute to your overall fundraising strategy.
4. Choose an E-commerce Platform
Selecting the right ecommerce platform is basis to creating an online store. The platform should be robust and scalable and match your organization’s specific needs.
Here’s how to select one:
- Assess Your Needs
Consider what you need from an e-commerce website. How much customization do you require? Do you prefer something easy to set up and manage, or do you have the skills to develop a more complex site?
- Compare Platforms
Investigate popular paid and free e-commerce platforms such as Zeffy, Shopify, WooCommerce, Wix, and Square Online. Look at their features, ease of use, support options, and scalability.
- Consider Costs
Examine each platform's pricing structure and see whether it suits your budget (that you must set aside) for creating an online store. In addition to monthly fees, consider the costs of themes, plugins, and other integrations.
- Test Your Top Choices
Most platforms offer free trials. Take advantage of these to explore how well each online store builder meets your needs and its usability and features.
5. Build Your Ecommerce Website
With products and prices ready, it's time to start building your e-commerce store!
Depending on the platform you pick, you'll either build your e-commerce website or integrate the store onto your current website. The second is an excellent choice if your nonprofit already has an online presence. It will help you save time, effort, and resources spent on creating your website.
Your online store is part of your fundraising strategy, not your organization's main focus. Spending too much on it would impact other aspects.
With the Zeffy ecommerce store builder, you can create an online store at zero cost and embed it on your website. You can also generate a QR code to share your e-store on your communication channels, like emails, to drive more sales.
Best practices to focus on when creating a store are:
- Be Consistent with the Nonprofit's Branding
Your online store should reflect your nonprofit's values and identity. This will help develop trust with the donor base and make you instantly recognizable. Consistent colors, fonts, and logos will make your nonprofit ecommerce store more legitimate and cultivate a sense of brand identity.
- Include Add-Ons
To boost your fundraising, add an "Add to Cart" donation option or one to sign up for an annual membership. The latter will help turn potential donors into members at the moment of purchase. Add an option to inform visitors about early bird prices to ensure more items sell.
- Optimize Your Product Pages
Ensure each product page is informative and enticing. Include high-quality images, detailed descriptions, and clear pricing. To encourage more sales, try to create a sense of urgency by informing donors about the number of products available for sale on the page below pricing details.
- Set Up Simple Navigation
Your site’s navigation should be intuitive and simple. Categorize your products and make sure all important pages are easy to find.
6. Complete Shipping Strategies and Policies
Efficient and transparent shipping policies are essential for supporter satisfaction, which can significantly impact your store's success. Well-planned logistics set clear expectations and help manage donor relations regarding product delivery.
Steps to follow to set your shipping policies:
- Determine Shipping Methods and Pricing
Decide whether you will offer free, flat-rate, or variable rates based on local delivery or other shipping zones. Consider incorporating the shipping cost into your product listings if offering free shipping.
- Outline Your Shipping Policies
State proper delivery times, costs, tracking information availability, and return policies. Transparent policies reduce donor concerns and disputes.
- Select Reliable Shipping Partners
Choose logistics partners with a good reputation for reliability and service. They should offer services that align with your needs (e.g., international shipping, expedited delivery).
- Package Products Well
Invest in quality packaging that protects your products while in transit. Consider branded packaging to enhance the donor experience. Ensure the shipping labels are clear and straightforward to reduce delivery errors.
7. Publish and Promote Your Online Store
Now that your store is up and running, it's time to promote it to generate awareness and enhance fundraising. Effective promotion will boost sales and expand your donor base, fostering long-term relationships with those aligned with your cause.
A multifaceted approach using various marketing channels can broaden your reach and enhance your online store website visibility.
Here's what you can do to promote your online store:
- Engage with Supporters on Social Media
Use your organization's social channels, like Facebook and Instagram, to enhance your sales by publishing visually appealing posts about your merchandise. Focus on posting user-generated content, such as photos of volunteers wearing your branded t-shirts, to persuade other supporters to make purchases.
Use this guide to understand social media for nonprofits and learn some effective tips for using the platform to promote your store!
- Try Email Marketing
Send out emails announcing your store launch or share promotional messages with discount codes. Show items that your donors will prefer and are more likely to buy.
You can learn about their preferences by tapping into your past fundraising and donor engagement data. Tell recipients how their sales benefit your organization and the impact they will bring.
- Use Paid Advertising
Apply for Google Ad Grants to use advertising for free to promote your online store to specific demographics. This will help drive relevant traffic to your website and promote your merch to those who would meet your ideal supporter profile.
- Leverage Other Fundraising Initiatives
While organizing a family fun night, trivia night, cooking competition, or other fundraising events, inform donors about your online store by displaying product catalogs or even a few physical items to direct their attention toward the e-store.
Use Zeffy to create a store and get a QR code to share with the tickets or display at events to secure higher sales!
What to Consider When Setting Up an Online Store
Creating an online store for your nonprofit will require some groundwork, but it is a profitable step for your organization.
The most important thing to consider when selling goods is whether the income generated falls under Related or Unrelated Business Income. You'll be able to maintain your tax-exempt status and raise funds within laws.
Related Business Income
This source of income refers to revenue generated by activities that are clearly related to the nonprofit's tax-exempt purpose.
For instance, if an environmental charity sells eco-friendly merchandise to promote sustainability; or an organization dedicated to making education accessible by selling books, materials or training courses.
As long as these activities resonate with the nonprofit's cause and further its mission, the income generated will be considered related business income, which is not taxable.
Unrelated Business Income
Any activity, including selling goods and services substantially unrelated to the nonprofit's organization tax-exempt purpose, falls under this category. For most organizations, an activity is unrelated business and subjected to UBIT tax if it meets these three requirements:
- It is a trade or business.
- It is conducted regularly.
- It is not substantially connected to enhancing the tax-exempt purpose of the nonprofit.
There are a few exclusions, modifications, or exceptions to these stated UBIT requirements. For nonprofit online stores, selling in-kind gifts or donated merchandise is excluded from unrelated business income tax.
Nonprofits are not completely prohibited from earning unrelated business income, but they have to pay taxes on them. Depending on the goods you're selling, if you receive income that's $1000 or more, you need to submit the IRS Form 990-T and pay the required taxes.
Be mindful that if the IRS determines the percentage of the unrelated income generated through online stores is too high, you can lose your tax-exempt status.
There is no clearly defined threshold that nonprofits have to stay under. IRS considers various factors and circumstances surrounding the organization's unrelated business income before deciding. It is best to consult with a tax advisory or financial officer before opening an online store.
What to Sell in Your Online Store: 5 Types of Products to Consider
One of the best ways to maximize revenue from your nonprofit's online store is to provide a variety of ways to give, from branded products to rewards and perks. Here are some examples:
Branded merchandise
Items directly related to the nonprofit's mission and purpose are a great way to raise funds, spread awareness, and reinforce brand identity. There are several merchandise options to choose from - like mugs, t-shirts, caps - on which you can put your organization's logo or mission statement.
Donated items
Some charities receive certain items from their supporters instead of monetary donations. Plus, they might be left with few items after a charity event, such as an auction or in-kind donation drive. If you're unable to find a use for these items within your organization, you can sell them on your online store.
Item donations
Give your supporters and donors the chance to purchase something from your nonprofit online store not for themselves but to help someone else. For instance, a child-centered charity offering toys or stationery supplies for children can allow its supporters to purchase these items for the kids they sponsor.
Volunteer-produced items
If the goods are produced or created by your volunteers, you can sell them via the nonprofit online store. Make sure it is aligned with your nonprofit's mission and purpose.
Sponsorship packages
A sponsorship package is when a donor contributes a certain amount to the nonprofit and receives specific rewards in return. The reward can comprise signage at the event, advertising in your periodical, or meet and greets with nonprofit board and VIP members. Try to offer different levels of sponsorship packages on your store and mention the perks each unlocks.
Case study - How Southeast Seattle Education Coalition raised +$50,000 by creating on online store with Zeffy
In 2024, the Southeast Seattle Education Coalition (SESEC) launched an online store to sell flowers for a Mother's Day weekend fundraiser. By using Zeffy's free e-commerce platform, they raised over $50,000 while saving $2,500 in fees.
SESEC created an online store on Zeffy to sell bouquets for Mother's Day, with options for both walk-up sales and pre-orders. The store allowed customers to choose a school to receive a portion of their purchase price as a donation. SESEC promoted the store through their website, social media, and to their existing donor base.
Wrapping Up on How to Create an Online Store
Beyond being a source of income, online stores serve as a strategic avenue for expanding your reach, engaging your supporters and ensuring a sustained impact throughout the year.
Experience the ease of creating an online store with Zeffy, which is designed to streamline your ecommerce operations and effortlessly create an online store.
Customize your shop, offer pre-sale options, and incorporate a donation feature to expand your offerings. Accept all payment methods for convenience and set up email reminders to keep your operations smooth.
Get started with Zeffy’s online store builder today to boost your online presence and fundraising!
Create Online Store FAQs
How much does it cost to create an online store?
The cost of creating an online store varies depending on your chosen platform. Popular e-commerce platforms can charge anywhere from $20 to $300 per month, plus additional fees for transactions, plugins, and themes.
With Zeffy, you can create an online store for your nonprofit absolutely free. Zeffy is the only fundraising platform that offers a 100% free plan with no hidden costs or transaction fees when compared with other e-commerce platforms.
Can you build an online store for free?
Yes, you can build an online store for free using Zeffy.
With Zeffy's user-friendly platform, you can easily set up a functional and attractive storefront, customize your shop's appearance, add products, and configure settings without any coding knowledge. You can enhance your store with features like donation options, pre-sale functionalities, and discount codes to boost supporter engagement and sales.
Why is an ecommerce store important?
An ecommerce store offers the ability to reach a broader audience. It operates around the clock, providing supporters with constant access to your products.
Moreover, an online store can provide valuable insights into donor behavior through data analytics. These factors make ecommerce a powerful tool for nonprofit organization growth and donor engagement.
